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When Disney (NYSE: DIS) acquired film animation company Pixar (Nasdaq: PIXR) in early 2006, it did much more than simply buy up an important competitor. It also formed a link with new media pioneer Apple (Nasdaq: AAPL) and gained access to a key online distribution channel, iTunes.
How has the Disney-Apple relationship fared post-Pixar? So far, the acquisition has primarily benefited Apple, Rob Enderle, principal analyst with the Enderle Group, told MacNewsWorld.
"There is the potential of the collaboration flowing into the creation side to make better movies," he noted, "but that hasn't happened yet." The big boon, he added, has been mainly on the distribution side of the deal.
Handshaking and Backslapping
Apple founder Steve Jobs sits on the Disney board, pointed out Mike Goodman, director with Yankee Group's consumer research group. However, that fact hasn't created the magic influence that some initially thought it would.
"I don't think the Pixar acquisition has brought the companies particularly closer," Goodman told MacNewsWorld. "But it helped to grease the negotiations between [Disney division] ABC and iTunes. I think there was a little handshaking and backslapping there."
Disney has done the most to open up its online distribution among major media companies so far, and that's with or without Pixar, Goodman said. In fact, he asserted, "too often people give Jobs too much credit for sitting on the Disney board. He's not sitting over there running the Disney empire; that's [Robert] Iger's job; that's why you have a CEO."
Aggressive Distribution
Even before Apple got into the video and television markets, "Disney was very aggressive in terms of digital distribution," Goodman noted. Thus, while Pixar content is a very important part of movie downloading on iTunes, other Disney divisions are very active in the online world. Disney's ABC subsidiary alone holds such properties as ESPN, E! Networks and A&E Television Networks.
"ABC.com has been the most aggressive broadcast network in terms of making programming available online," asserted Goodman. "They were the first network to roll it out, and now about 16 of its total prime-time programs are available for download."
The Disney.com redesign has resulted in a dramatic uptick in downloads of TV shows through that channel -- 91 million episodes of shows were viewed through Disney.com in 2006, he added.
More Games in Town
Disney also stresses that iTunes and even its own sites are only a few of its many distribution channels for films and TV content.
"Cinema Now was our first e-distributor," Eric Mayhara, Disney Home Entertainment's vice president of communications, told MacNewsWorld. "We had a relationship with Movielink before we signed on with iTunes, and after iTunes we struck a deal with WalMart.com."
Success on iTunes is key, though, noted Mayhara, observing that "iTunes is pretty much the biggest player in that pond at the moment."
From the time the deal was inked with iTunes -- late summer 2006 -- to Disney's shareholders meeting earlier this year, Disney had sold 2 million movies through iTunes alone, he said. Now, six months later "we have a whole bunch of different models in a brand-new landscape," he said.
Still, Apple's iTunes also is not singing a one-deal song. Since the Disney relationship was formed, iTunes also has garnered more partners in the movie business, Lions Gate, for example. Still, Disney movies represent just under half of the films downloaded through iTunes, and ABC shows accounted for another big chunk. iTunes would benefit greatly, said Enderle, from adding another major studio such as Fox.
Where From Here?
The popularity of iTunes as a distribution channel for Disney content is "an indication of closeness" between the two companies, said Enderle. However, the relationship has more potential than has been brought to fruition so far.
For example, the animation technology developed by Pixar on such ground-breaking films as "Toy Story," "Monsters Inc." and "The Incredibles" can only benefit an already leading company in the animated film arena, Enderle said. Disney, after all, nearly single-handedly created the popularity of animation as we know it today through pioneering work on films such as "Sleeping Beauty" and "Fantasia."
The question is whether or not collaboration on animation methods will indeed flow in both directions between Pixar and its new parent company. The "strength of the partners" involved in the relationship indicates that there is much benefit to be gained by all, Enderle speculated, and in the meantime, "both groups are watching each other."
For now, the advantage remains Apple's, said Enderle.
"One of the few benefits that Apple TV has is the unique access to Disney and Pixar movies," he explained. "Disney remains the only studio that people actually ask for by name. If you had to pick one to start with, this is the best."
