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Pixar Looks to Future

8 Nov, 2005 By: Holly J. Wagner

Pixar Animation Studios has sold 125,000 short film downloads in the month since it began offering the films on Apple's iTunes download service, CEO Steve Jobs said today.

"With very little effort and with no possibility of any returns like you have with physical media, we delighted at this new source of income and with the ability to directly reach our audience," Jobs said.

Unexpectedly high returns of The Incredibles earlier this year triggered a drop in Pixar's stock price, followed by an investor lawsuit. But Jobs doesn't think downloading will replace movie theaters or discs any time soon.

"The biggest problem with digitally downloading movies … is the fact that most people's bandwidth to their homes is slow enough that it takes hours. To download a movie takes hours," Jobs said. "I don't think that is going to change any time soon because I believe that stepping up the resolution to high-def will be successful, that adds more data and therefore a lot more time to download movies.

“As we become accustomed to higher and higher resolutions going from VHS to DVD and from DVD to high-def DVD over the next few years, the amount of information involved that needs to be downloaded keeps going up and our download speeds don't. We'll see how that all works itself out in the next few years but there is no obvious breakthrough."

Jobs also thinks Pixar films aren't targets for "superrelease" across all platforms day and date.

"All of Hollywood is thinking deep thoughts about this and I think there's people who know a lot more about it than us," Jobs said. "One of the things we're already seeing today is people with busy lives opting to not go see the middle market movies in a theater because they would rather wait and buy them on DVD … I know I have. However, Pixar's movies don't tend to fall into that category. We have a pretty terrific audience who trust us to deliver a certain level of entertainment based on their experience with our last films. When we release a film, it's definitely a theatrical moviegoing event. Our films are going to be somewhat insulated from people waiting to buy them on DVD and forsaking the theater."

Pixar executives are also loathe to tinker with a successful release strategy, he said.

"We're very excited about the early summer theatrical release and the holiday DVD release [pattern]" Jobs said. "We've had experience doing that with Finding Nemo and it was very satisfying for us."

Jobs stopped short of endorsing a high-definition format, but seemed to lean toward blu-ray.

"We'd like to be wherever all of our audience's players are," he said. "Right now it certainly looks like Blu-ray has taken the lead, but nothing is set."

TV revenue from Finding Nemo and home video revenue from the domestic re-release of Toy Story 2, set for Dec. 26, are expected to be primary drivers for the fourth quarter.

"Dec. 26 is one of the major shopping days of the year. We are really trying to take advantage of the phenomenon of gift-card giving," EVP and CFO Simon Bax said. He said unit sales of Toy Story: 10th Anniversary Edition "met expectations."

"The Disney home video marketing guys think this is a really good idea so we're going to find out," Jobs said.

Pixar should have a distribution deal by the end of the year, but executives won't discuss the status of the negotiations.

"We are in deep discussions with Disney and I cannot comment on them except to say we will know if we are going to continue our relationship with them by the end of the year," Jobs said. "It's worth a few extra months of effort if we can continue our relationship with Disney, and our discussions right now are very productive."

Jobs said he likes what he's hearing from new Disney CEO Robert Iger, but Pixar will not roll out the next three titles after Cars until after the distribution deal is done.

Pixar earned $27.4 million on revenues of $45.8 million in its fiscal third quarter ended Oct. 1, mostly on the strength of The Incredibles and ongoing TV and consumer products revenue from Finding Nemo.

"Our performance this quarter highlights the ongoing value of our growing film library," said Pixar CEO Steve Jobs. "Looking forward, the marketing campaign for Cars, our studio's seventh feature film, is revving up as we prepare for its release next June. It is going to take your breath away."

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