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Pixar, with a string of blockbusters to its credit, including "Monsters, Inc." and "Finding Nemo," broke off negotiations Thursday to extend its partnership with Disney and said it would seek a more favorable deal with another studio.
Under Pixar's current agreement with Disney, the two companies share box office receipts and licensing revenues while Disney retains the right to make sequels to movies like "Monsters, Inc."
"After 10 months of trying to strike a deal with Disney, we're moving on," Pixar CEO Steve Jobs said in a statement. "We've had a great run together - one of the most successful in Hollywood history - and it's a shame that Disney won't be participating in Pixar's future successes."
Pixar has two movies yet to deliver under its current Disney deal, including "The Incredibles," due in November, and "Cars," which will be released next year.
"Although we would have enjoyed continuing our successful collaboration under mutually acceptable terms, Pixar understandably has chosen to go its own way to grow as an independent company," Disney chief executive Michael Eisner said in a statement.
Disney chief financial officer Thomas Staggs said the company rejected Pixar's final offer because it would have cost Disney hundreds of millions of dollars it is entitled to under the existing agreement.
A person familiar with the talks, speaking on condition of anonymity, told The Associated Press that negotiations broke down because Pixar wanted to reclaim the copyrights to the five films it has produced with Disney so far, plus the two left in the deal. Such an accommodation would have presumably denied Disney the right to make sequels and potentially denied the company millions of dollars in future profits.
Pixar also has made "A Bug's Life," and "Toy Story 2."
The five films produced under the partnership have grossed more than $2.5 billion at the box office. Disney has kept varying amounts of the profits and will pocket 60 percent from the final two films covered by the existing agreement.
Disney also retains the right to Pixar characters and can make unlimited theatrical or direct-to-video sequels, including a long-expected "Toy Story 3."
For Pixar, the break from Disney will allow it to keep more profit from future films while increasing the risks should those movies underperform.
Disney has struggled in recent years to turn a profit on such animated flops as "Treasure Planet." The studio will now face more pressure to produce hits.
On Thursday, Disney said it will release its first in-house computer-animated film, "Chicken Little," in 2005 and had other computer-animated films in production with partners and on its own.
(Copyright 2004 by The Associated Press. All Rights Reserved.)