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Apple to benefit from Disney's Pixar buy

Should strengthen ties between firms

Disney's $7.4bn (about £4.1bn) purchase of Pixar could strengthen the firm's ties with another company headed by Steve Jobs, according to analysts surveyed by Macworld. Potential benefits to Apple from the Disney-Pixar union include everything from more content on the iTunes Music Store to increased visibility for the computer maker.

"Disney is already an early supporter of Apple's video efforts," said Ross Rubin, director of analysis at the NPD Group. And he notes that the two companies already have a good working relationship – at least when it comes to making content available to users.

Disney's ABC television network and Disney Channel cable network have provided programming at Apple's iTunes Music Store ever since it began offering paid-for videos in October 2005. ESPN content was added to the store earlier this year.

"It's a new way of reaching viewers and an opportunity to drive incremental revenue that networks wouldn't have had otherwise," Rubin added.

"For the short term they're already on target with a good relationship," agreed Michael Gartenberg, vice-president and research director at JupiterResearch. "Apple has already reaped a lot of benefits."

Disney's absorption of Pixar puts Steve Jobs on the company's board of directors, while Pixar's John Lasseter has been appointed as Disney's new chief creative officer. Parallels have been drawn between this transaction and Apple's acquisition of NeXT in the mid-90s, which brought about Steve Jobs' return to Apple and his eventual elevation as then-CEO Gil Amelio's replacement.

To this day, NeXT's influence can still be felt at Apple's executive levels. Besides Jobs himself, NeXT alumni at Apple include Avie Tevanian, Apple's chief software technology officer, Bertrand Serlet, Apple's senior vice-president of software engineering and Jon Rubenstein, Apple's senior vice-president, iPod division.

Ultimately, NeXT's operating system served as the basis for Mac OS X. In some ways, Apple watchers argue, it was NeXT that took over Apple. Could the same thing happen to Disney?

"I don't think [Disney CEO] Bob Iger is Gil Amelio," Gartenberg said. "And I don't think the allure of running Disney is the same as running Apple for Steve Jobs. Having said that, Steve Jobs is now Disney's biggest shareholder. He'll want to protect his investment and grow the business. Disney would be wise to take his counsel."

Rubin thinks Pixar's influence will be key to Disney's success in the future.

"Pixar has had an uncanny string of success – not a single bomb in its history," he said. "It's clearly more than about the technology: it has been gathering writers and storytellers that are doing a better job of capturing the attention of the audience than Disney has."

Where do we go from here? Are full-length Disney feature films on the horizon for the iTunes Music Store?

For now, Apple's emphasis when selling videos online is still on short subjects and television programmes. Rubin thinks this has to do with the delivery medium.

"Much of the iTunes Music Store's purpose in life is to help support the iPod and make content conveniently available for that device," Rubin said. "The iPod has a relatively small screen and depends on relatively limited broadband capacity. That drove compromises such as limited resolution for videos that look fine on an iPod screen but tend to reveal some of their shortcomings on a plasma screen or something you might find today in your living room."

As internet bandwidth in North America ratchets up and as Apple develops more sophisticated video-capable iPods, however, Rubin sees a different picture emerging.

"We'll eventually see the resolution of the video increase and we'll see longer content," he predicted. But Rubin also expects that the audience for that kind of content won't match the size of the audience that just wants TV programmes and shorter videos. And that poses a different challenge for companies such as Apple and Disney.

"If you're going to be taking this out of the home, do most consumers have the time window in which to watch a feature-length movie? The longer the video is, the smaller the audience is that will have the luxury to watch it," he said.

Jobs' presence on Disney's board might push the two companies to tackle that challenge. "If Apple, for example, were to become more aggressive in its development of a computer system in the living room, the ability to add premium content from Disney would be a big win," Rubin said.

For his part, JupiterResearch's Gartenberg believes Apple and Disney complement each other very well. "Disney creates content, while Apple creates tools that make content," he said. "We'll surely see more ways for them to work together in the future."

This story first appeared on Macworld.com.


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