Were you surprised to learn that Disney
Yes, part of the deal that Pixar struck and eventually renegotiated with Disney called for the House of Mouse to own the right to all of the characters developed during the contract's tenure. While Pixar has first dibs on working with Disney on any sequels, Pixar and Apple Computer
That's why Jobs based any negotiations to extend Pixar's lucrative deal with Disney beyond 2005 on Pixar being handed over the rights to its earlier creations. But with Disney floundering creatively on the animation front, it was pretty obvious that it wasn't going to give away the right to milk Pixar's cows. That leads us to revisit the ultimate victor in the 1997 renegotiations.
After the runaway success of 1995's Toy Story -- which Disney bankrolled, distributed, and received the lion's share of the profits from -- the companies sat down to extend a deal that had originally called for no more than three films. When Pixar was able to rework the deal to feature its name prominently alongside Disney's and share equally in the earnings (minus Disney's distribution cut), it was generally seen as a victory for Pixar.
The fact that the contract extended the production slate from two to five flicks seemed almost inconsequential at the time, as Disney was still near the top of its game as the feature animation leader. In retrospect, it has meant everything.
If Pixar had bit its lip and worked through the original deal, its profits and financial profile would have been hamstrung in the near term, but things would have likely been far better for the company today. Pixar's earnings for last year's Finding Nemo and its current smash hitThe Incredibles would have doubled given the same returns. Can you imagine buying Motley Fool Stock Advisor stock recommendation Pixar at just 15 times earnings?
It's all theoretical, of course, but Disney hasn't done its credibility any favors as its in-house animation has been spotty lately and its distribution steak suspect after it failed to muster stateside excitement for the critically acclaimed and ultimately Oscar-worthy Spirited Away. DreamWorks Animation
With or without the 1997 extension, Disney would still have gone through with as many Toy Story sequels as the public would stomach. We would probably be gearing up for a direct-to-video Toy Story Babies 5: The Seed of Woody by now. So Pixar's folly wasn't walking away from Disney when it did: It was not walking away sooner.
Should Pixar sign on for the next Woody and Buzz installment? If DreamWorks is putting out two new features a year, why can't Pixar? All this and more -- in the Pixar discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz owns all of the Pixar releases on DVD. He owns shares of Pixar too, and of Disney. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.