• by Wayne Friedman , October 13, 2005

Apple Computer's new video-enabled iPod and its content deal with Disney-ABC television shows have stirred rumors that Disney will patch up relations and make a deal with Pixar Animation Studios.

Apple announced yesterday that three top ABC shows--"Desperate Housewives," "Lost," and "Night Stalker"--will be available for purchase from the Apple iTunes store for $1.99 an episode a day after airing on television. Two Disney Channel series, "That's So Raven" and "The Suite Life of Zack & Cody," will also be available.

The video iPod will be available in two versions, one with 30GB of memory ($299) and one with 60GB of memory ($399). A 2.5-inch screen will display video content.

For ABC, it gives the high-flying broadcast network even more marketing and promotion support for its big shows from one of the hottest entertainment consumer products, the iPod.

But for Disney and Bob Iger--just one month on the job as the company's chairman--there are bigger fish to fry. That is a new theatrical film deal with Pixar Animation Studios. Steve Jobs is chief executive of both Apple Computer and the successful computer-generated animation films from Pixar.

Pixar has provided Walt Disney with some of its biggest movies in recent years--"Toy Story," "Monsters, Inc.," "Finding Nemo," "The Incredibles," and others.

Pixar made a long-term Disney deal in the mid 1990s--which will conclude next summer, with "Cars"--that it now regrets. Pixar and Disney have been 50-50 partners in all these films. Disney share is actually better than that, because it also includes reimbursement of print and marketing costs.

"So it is like Disney has a 65 percent piece of these films," said Dennis McAlpine, managing director of McAlpine Associates. Pixar is rumored to want a deal like the one Fox Filmed Entertainment has with Lucasfilm--a straight distribution pact. Typically, theatrical producers pay studios around 12 percent for the distribution and marketing of their movies.

Lucasfilm, because of "Star Wars" and other top films' franchise, is rumored to have a 7 percent or 8 percent deal with Fox. Pixar is looking for a sub 10 percent distribution deal from Disney.

Pixar also wants to restructure the current Disney deal in order to gain more control over the library of product--films it would use to build for other TV and new media businesses.

But getting Pixar back into Disney's camp may not necessarily be nirvana. "Everyone is jumping to that conclusion," said McAlpine. "It depends on what happens with 'Chicken Little.'"

The upcoming "Chicken Little'" movie is Disney's first CGI-film without Pixar, and analysts believe that if it's successful, Disney might need Pixar a lot less.