In a private meeting this week with a leading Wall Street analyst, Walt Disney Co. CEO Michael Eisner confirmed earlier company statements that the studio has several sequels in the works to the blockbuster films Pixar has created for the company.
While analyst Jessica Reif Cohen of Merrill Lynch apparently regards that as a positive for Disney, she cautions that such sequels could have an "adverse impact" on Pixar, which called off contract extension talks with Disney in January, ending a partnership that resulted in such hits as "Toy Story," "Finding Nemo" and "Monsters, Inc."
"The unproven writing and graphics quality of Disney's work with computer-guided-image animation may have an unintentional 'contagion' impact since consumers may subconsciously associate these films as Pixar product," Reif Cohen said in a report issued Thursday. "In addition, too many releases may fatigue CGI's scarcity value, which has created consumer intrigue for this 'event' animation format."
Reif Cohen's comments mirror those made by Pixar CEO Steve Jobs in recent months. Addressing the issue of Disney-produced sequels during his company's fourth-quarter earnings call in February, Jobs was blunt about his feelings on the subject.
"We feel sick about Disney doing sequels because if you look at the quality of their sequels ... it's been pretty embarrassing," Jobs said, citing such examples as Disney's recent sequels to "Peter Pan" and "The Lion King."
As much as Jobs dislikes them, such sequels have been major hits for Disney, which has generated more than $1 billion in cash flow to date from direct-to-video releases. Reif Cohen estimates that Pixar would receive an 8% royalty fee from Disney on such releases, while Disney would keep the lion's share of the profits.
Reif Cohen said Disney is looking to turn out these sequels in hopes to in some degree replicate the 'Shrek 2' phenomenon. The DreamWorks-produced sequel to "Shrek" has broken several box office records since being released last week.
By Marla Matzer Rose
