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Finding Pixar's Nemo

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By Rick Aristotle Munarriz (TMF Edible)
May 8, 2003

In yet another case of life imitating computer-rendered art, Pixar (Nasdaq: PIXR) has an awful lot in common with its latest full-length feature. Finding Nemo, which opens in theaters later this month, is a tale about a fish who fears the open sea but is forced to navigate uncharted waters in pursuit of his son.

Pixar's ready to walk a nautical mile in those fins. The company has always played it safe until now, with Disney's (NYSE: DIS) contractual bind keeping it inside Mickey Mouse's fish bowl. It was a great deal at first, as Disney partnered with the upstart animation studio when it released Toy Story, and then warmed up to what is essentially an even split of the profits after that. While Pixar has two more features to deliver under the contract, now that Finding Nemo has been delivered, it is free to negotiate a new deal.

What is Pixar about to find out? Well, like Nemo's dad Marlin, the company is about to discover that there are a whole lot more fish in the sea.

Its next deal will be for something far sweeter than a 50-50 split. The studio's first four animated features have averaged $214 million domestically at the box office. While it came to Disney for financing and tutelage under the animation master, the tables have turned. Pixar is now the one standing on firm financial footing and, let's be frank, the student has surpassed the master in terms of consumer appeal.

So, maybe Pixar sticks with Disney, only making sure that it reaps the lion's share of future profits. Or maybe DreamWorks comes in and offers to let Pixar keep all of the booty in exchange for film distribution costs. From Fox (NYSE: FOX) to Viacom's (NYSE: VIA) Paramount and Nickelodeon, cutting a deal with Pixar makes sense. Disney's lack of in-house success lately does not make sticking with it as compelling as it once was. Meanwhile, Disney would be smart to keep Pixar close, if only to make sure that there is no overlap between theatrical release dates.

Last night, it was Pixar's turn to report on its first-quarter results and they were down sharply with revenue and profits roughly halved. However, that was expected as the company hasn't put out a movie since 2001. Pixar expects a weak second quarter before the second half of the year kicks in with the Finding Nemo catch.

By then, Nemo won't be the only thing found. The company should have a new deal in place for its 2006 theatrical release with thicker slices of profits on the hook as bait. 

Will Finding Nemo be another winner for Pixar, or is it time for the company to learn a lesson in mortality at the box office? Should Pixar stick with Disney or find a better deal somewhere else? All this and more -- in the Pixar discussion board. Only on Fool.com.

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