Exclusive - Finding CMO: Pixar seeks independence

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As it revamps its crucial film-distribution deal with Walt Disney Co., high-flying Pixar Animation Studios is searching for its first chief marketing officer.

With the move, Pixar, which co-produced the summer blockbuster "Finding Nemo" with Disney, is seeking to bring marketing in-house, according to executives close to the company. Pixar would still have Disney, or some other studio, handle marketing for theatrical and home video, but in other areas such as video games, consumer products and TV distribution, Pixar wants full marketing control. Right now that is handled by Disney.

"Pixar would like to have more control over the marketing functions of their product," said Andrew Slabin, stock market analyst for Merrill Lynch. "It would seem right [to hire a marketing executive] if they want more control and want to build out their staff." Pixar executives did not return phone calls for comment.

Pixar could reap financial savings as a result. Mr. Slabin said it cost Pixar, for example, 20ยข in earnings per share for "Monsters, Inc." to have Disney market the movie's television window. This works out to a 13% distribution fee for Disney on every film. Disney also gets a similar distribution fee for other windows, such as home video.


For Disney, which has had its own financial troubles, Pixar has been a savior. Pixar has an unbelievable record as a film producer, with five consecutive smash hits-"Toy Story" (1995); "A Bug's Life" (1998); "Toy Story 2" (1999); "Monsters, Inc." (2001); and "Finding Nemo" (2003). Through July 6, "Finding Nemo" reeled in $274.9 million in box office revenue, according to ACNielsen EDI. Collectively, all five Pixar movies have generated more than $2 billion in box office revenue worldwide.

Pixar and Walt Disney currently have a 50/50 partnership, which ends in 2006 after two more movies are released-"The Incredibles" (holiday 2004) and "Cars" (holiday 2005). Initially, Disney had an 80/20 split with Pixar for the first three movies. But after "Toy Story" the deal was amended to 50/50 for the next five flicks.

Pixar now wants a more favorable split or a deal similar to what George Lucas' Lucasfilm Ltd. has with 20th Century Fox. In that deal, Lucasfilm pays a theatrical distribution fee to Fox on the order of 5% to 7% per movie, according to industry executives.

Fox implements all marketing for theatrical and home video for Lucasfilm under Jim Ward, VP-marketing. He makes all marketing decisions for films such as the current "Star Wars" trilogy. In other entertainment areas, Lucasfilm handles video games and consumer products, as well as TV sales, marketing and distribution for its movies.

Analysts say Pixar has no intention of building its own distribution system and becoming a full-fledged studio. "It's inefficient," said Mr. Slabin. "You need a global system and they only do one movie a year."

two more pixars

For its renegotiation with Pixar, Disney has the leverage of two more Pixar movies to distribute, and it owns the rights to future sequels of Pixar movies that have been released by Disney. A Disney spokeswoman had no comment.

Pixar's agreement with Disney allowed it to negotiate with other studios after the release of "Finding Nemo." Virtually all studios have made contact with Pixar. Fox has been willing to give Pixar a Lucas-like deal with a low distribution fee, according to one marketing executive, although a Fox spokeswoman had no comment.

All this has forced Disney to come to the table. "They would like to pre-empt Pixar leaving," said Mr. Slabin. "Disney is the best partner. There is no other company that has a well-known family brand. You have The Disney Channel, the theme parks, the stores, a global reinforcement of your franchise."

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