Disney's gambit on Pixar

"Chicken Little" and "Steve Jobs."

Those are the two simplest ways, analysts say, to explain why Walt Disney Co. acquired Pixar Animation Studios for $7.4 billion this week - the latest mega-merger in Hollywood's digital revolution.

"Chicken Little" is Disney's first fully computer-animated film, but latest box-office flop, following other duds like "The Emperor's New Groove" and "Atlantis: The Lost Empire." By buying Pixar, which has turned computer-animated movies into box-office gold with titles like "Toy Story" and "Finding Nemo," once-dominant Disney could get the creative and technological savvy it has lacked.

Steve Jobs is Pixar's current CEO, and will become Disney's single largest shareholder in the deal. By nearly all accounts, Mr. Jobs is a risk-taker and creative dynamo with a strong background and interest in technology that could give Disney a giant boost in two ways. One is by keeping the company on the cutting edge of new developments in computers that can generate new kinds of cinematic effects. The other boost could come from his role as CEO of Apple Computer. The company's iPod technology could benefit in myriad ways from being connected to the vast reservoir of Disney content.

"Steve Jobs provides all kinds of options and talents and vision and drive that Disney currently doesn't have," says William Abrams, a Los Angeles attorney who represents corporations in mergers and acquisitions. "It's a converging of media that makes perfect sense. Jobs has the technology [iPod] that clearly saved Apple and that can give Disney another way to distribute their content and promote their product."

The buyout was announced Tuesday after months of negotiations. The two companies had a falling-out last summer under Michael Eisner, then chief of Disney. But new CEO Robert Iger has been working to continue the relationship since he took Disney's helm in October.

"This is going to be wonderful opportunity for Disney, which has been calcifying under Michael Eisner for years," says Dennis Maher, a film historian who monitors the economics of the film industry. "Here is a guy [Jobs] who wants to try new and different things and has the vision to carry it out. He could return Disney to the eminent place it once held."

Other analysts say the two companies might not mesh well because of different traditions, styles, and motivations. Animation pioneer Disney has long held the reputation of "old media" conservatism, while cowboy-style entrepreneurialism has characterized the cutting-edge work of Pixar.

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