The Buzz on Buzz
By
Rick Aristotle Munarriz (TMF Edible)
November 24, 1999
Today, Buzz and Woody return in computer-animated splendor for the eagerly anticipated Pixar (Nasdaq: PIXR) sequel, Toy Story 2. Expectations are running high. The five-day opening weekend record for an animated feature was broken by Pokemon earlier this month -- but now the Toys are back in town to reclaim the mark. The stock has gone "to infinity and beyond" this month, up 24.3%.
This is only Pixar's third full-length animated feature and the first two, Toy Story and A Bug's Life, each generated more than $350 million in global box office receipts. All three have made their theatrical debut over Thanksgiving week.
The original Buzz and Woody adventure remains one of the highest grossing in animation history. A lot has changed since then. Back then, Pixar teamed up with Disney (NYSE: DIS) for a three picture deal that found the upstart receiving a thin slice of the action. After Toy Story's success, Pixar's Steve Jobs renegotiated the deal to call for five more pictures with each company splitting the profits.
An even share is a lucrative take when one considers how well Disney maintains its library of characters. Buzz Lightyear has become a marketing icon as well as the basis of a Magic Kingdom attraction. Later today, new Pixar creations will begin vying for parental disposable income. Jessie the cowgirl, Wheezy the penguin and, much to Mr. Potato Head's delight, Mrs. Potato Head now join the colorful cast of animated toys on the big screen.
Because of Disney's merchandising acumen Pixar reported record quarterly results last month. Sales of $79.2 million and $32.3 million in profits for the third quarter are impressive even beyond the 40.8% it represents in net margins. While the lion's share of that sum came as royalties stemming from 1998's A Bug's Life, the 1995 feature has also remained a contributing factor.
A Bug's Life, while failing to surpass Toy Story domestically last year, was a huge international hit this year. The film topped the charts, taking in $160.7 million in overseas ticket sales. Its home video and DVD release, the first Disney distributed title to receive the DVD treatment, has been a stateside shot in the arm for Pixar and a hungry Disney. In a savvy move inspired by Disney collectors, the company offered four different VHS versions -- each with a different film character gracing the cover.
All is well now, but last year it appeared as if Pixar was going to get caught in the middle of a studio dispute. In a move of defiance after ex-Disney studio chief Jeffrey Katzenberg (the K in DreamWorks SKG, along with Spielberg and Geffen) tried to get Disney to move the release of A Bug's Life away from his own Prince of Egypt holiday debut. When Disney refused, DreamWorks struck back hard. Its computer-rendered Antz, scheduled for an early 1999 release got bumped up to October, six weeks before A Bug's Life. Would the movie-goer tire of animated ants?
A Bug's Life fared respectably, but it does not appear to have the shelf life of Toy Story. There is no mad rush for a sequel. Flik and Dot toys line the clearance bins. How well it would have performed if it had not been a casualty of the Katzenberg feud with Michael Eisner will never be known.
The feud won't play itself out this time -- DreamWorks will not sandwich the latest Disney release between animated features. Its holiday release will be the sci-fi comedy Galaxy Quest. However, the rift that first began when Eisner bypassed Katzenberg as a successor when President Frank Wells passed away remains. The court is already siding with Katzenberg on back pay and deferred royalties.
Inside Disney it appears that some of the animators are also in the Katzenberg camp. Disney's latest holiday release, Mickey's Once Upon a Christmas, contains what appears to be a subtle jab at Eisner. As Goofy takes to the mall he passes by an FAO Schwartz toy store that has been renamed CEO Shorts.
Is this payback for the time Eisner called Katzenberg a midget? Is this the work of disgruntled animators watching the value of their stock options tank as Disney shares continue to trade 36% off their last-year highs? Am I reading too much into this seemingly inside joke?
As for Pixar, it keeps galloping along -- like Woody on his new horse, Bullseye. It is working on its fourth feature, Monsters Inc., which is slated for a 2001 debut. The company expects to earn at least $0.85 per share this year. As more and more films and characters get into the royalty mix, look for earnings to work their way consistently higher. Pull a string on Woody and you might hear "reach for the sky." Pixar shareholders just might get what they reach for.
