Pixar Animation Studios
Looking Back / Looking Forward

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By Robear1020
August 5, 2005

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Looking Back

The Incredibles is currently the number one selling DVD of the year; selling over 27 million units worldwide

Unit sales from TI are following about 10% lower than Monsters Inc yet
Revenues from TI are following very close to Monsters Inc. because
Wholesale prices are about $2 higher
(Hmm, if they priced it right then perhaps they would have sold more units.)

The Incredibles versus Monsters Inc (from Steve Jobs)
Domestic box office for TI was 2% higher then MI
Domestic home video revenues are tracking near identical
International box office for TI was 27% higher than MI
International home video revenues are 10% higher than MI
Domestically, TI performed the same as MI
Internationally, TI performed better than MI
Internationally, home video sales performed "less better" than box office

The impact for the quarter was overblown by the media. This was a quarter without a film or a DVD release. Yes, their projects were off, yet their earnings for the first six months are ahead of first half guidance by 20%. All in all, The Incredibles is performing very well; in fact, it is currently the highest selling DVD of the year.

Simon and Steve talked a little about France and Japan, then the media jumped all over the issue. The sales for these two countries are very similar to the sales for Monsters Inc yet the sales have not met up to expectations. Their expectations were set higher because the box office numbers were greater than Monsters Inc. Sales from France tracked higher than Monsters yet lower than expected. Sales from Japan were similar to Monsters yet lower than expected partially due to a price reduction for all Disney DVDs within Japan.

Note: Units sold are very similar to Monsters, which did extremely well. Even though there a more DVD players in the world, unit numbers are not soaring because the people who used to buy videos are now buying DVDs instead of videos.

Interesting revenue sources: (Revenues from Finding Nemo for the second quarter were 7.7 million most from consumer products. Library titles generated revenues of 13.5 million. Software licensing revenues were approximately 3 million dollars.) In other words: Evergreen products added significantly to the quarter.

The Incredibles is Pixar's highest grossing holiday release to date.

Looking Forward

Third quarter diluted earnings per share are expected to be between 8 and 12 cents. Results will be driven by domestic pay TV debut of TI and the Tenth Anniversary release of Toy Story on September 6th. There will be a television advertising campaign for the Toy Story DVD but it won't be as big as a new release. (Note: Only 3 million copies of Toy Story on DVD were sold in prior releases. The new release will be the highest quality video and audio. This may be a great opportunity to up-sell everyone who has shelved the VCRs.)

Fourth quarter results will be driven by domestic network television licensing of Find Nemo, and by the Domestic re release of Toy Story 2 on December 26th, and by the International re release of Toy Story and Toy Story 2 in November and December.

There were a few questions about future guidance; apparently results from The Incredibles will not affect guidance for future films because each film is unique so guidance is not determined until after a film is completed

Cars is almost done. According to Steve Jobs it is a "very, very strong film" and it should be one of Pixar's strongest films to date. The Disney / Pixar marking machine is gearing up for the most comprehensive marketing campaign yet for a Pixar film.

Steve has not seen John Lasseter more excited heading into the final stretch of a film production. Anyone who knows John should know that this is a very good sign. John is the mastermind behind both Toy Stories and has been the executive creative talent behind every Pixar production.

On or before their next conference call they hope to announce their slate of upcoming films that they have given the green light for release post cars and post their current Disney deal. These films get them to their goal of one film per year. They are now engaged in discussions with Disney, trying to figure out if Cars will be their last film together or the beginning of a new, longer term partnership between the two studios. Discussions have been very good and professional; Steve Jobs likes both Bob Iger and Dick Cook "a lot".

IMHO, the time line is now set, a new distribution partner will be announced before the end of October. Steve indicated that a partner will be signed before the end of the year, yet he also indicated that they were not going to talk about the new films until a distribution partner is in place. By the way, when asked about the new films he said that they want to wait and present that information in a "theatrical way."

Long term sale projections ("Ultimates") for The Incredibles remain unchanged.

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