Launch of Video IPod Shines Light on Jobs, Disney Drama

San Jose–Before he took over this month as Walt Disney Co.’s chief executive, Robert Iger made clear that he wanted two things: to explore new ways to distribute the media giant’s entertainment content and to thaw his company’s icy relationship with Steve Jobs.

Iger moved forward on both fronts Wednesday when he and Jobs, the co-founder of Apple Computer Inc., announced that Disney-owned ABC would offer some of its most popular television shows for download at iTunes Music Store.

Appearing together here to introduce Apple’s much-anticipated video iPod, both executives stressed that the agreement was between Disney and Apple — and not with another Jobs company, Pixar Animation Studios, which last year said it would not renew the distribution deal it signed with the Burbank company in 1991.

But the broader implication seemed obvious: Iger and Jobs have forged a good working relationship that bodes well for renewing the agreement, which is due to expire next year with the release of “Cars.”

The two have been talking for months about extending the relationship through which Disney has released such Pixar hits as “Toy Story,” “Finding Nemo” and “The Incredibles.”

“We think it is imminent that you will get a new Pixar-Disney deal,” said Laura Martin, senior media analyst at Soleil-Media Metrics.

She predicted that the two sides would announce a pact within a month and credited Iger’s “people skills” for patching things up with Jobs.

[inline:1]”This is an example of his excellent management of Steve Jobs, and finding common ground between Disney’s objectives and Jobs’ objectives,” Martin said.

Under the partnership unveiled Wednesday, consumers will be able to download episodes of ABC’s most popular shows as well as some Disney Channel programs. For $1.99 a pop, the downloads, which also will include some Pixar short films, can be played back on personal computers as well as the new video iPods.

The offerings include ABC’s “Desperate Housewives,” “Lost” and “Night Stalker,” as well as Disney Channel’s “That’s So Raven” and “The Suite Life of Zack and Cody.” Current episodes of the ABC shows will be available the day after broadcast, while past shows can be downloaded anytime.

“We think this is a real breakthrough,” Jobs said. “It’s never before been done, where you can buy hit prime-time TV shows the day after they’re broadcast.”

Iger said the Apple arrangement “offers great opportunities for consumers to stay connected to their favorite shows,” or watch them again whenever they wish.

“This is the first giant step in terms of making content available to more people in more places,” he said. “This is just the beginning of what we believe will be a long and prosperous relationship between Apple and Disney.”

Whether that translates into a renewed bond between Pixar and Disney is an open question. Some analysts were wary of predicting a quick resolution to the rift, which opened after Jobs clashed with Iger’s predecessor, Michael Eisner. But they said Wednesday’s announcement was an encouraging sign.

“There was a lot of bad blood in the past between Disney and Jobs,” Anthony Valencia of TCW Group said. “The fact that Disney is the first network to step up and offer its content on the Apple device is very interesting, at the least.”

Iger and Jobs certainly looked to be on good terms Wednesday, shaking hands on stage at the California Theatre and jokingly alluding to the Disney-Pixar agreement.

Jobs, by way of acknowledging that ABC is owned by Disney, got a laugh when he said, “I know these guys.”

Iger also took a stab at humor.

“We’ve enjoyed a great relationship with Steve through Pixar and it’s great to announce an extension through Apple — not Pixar,” he said. “That’ll be for another time.”

Industry and Wall Street analysts had expressed skepticism that consumers would go for a video iPod. But on Wednesday, some described Apple’s agreement with Disney as a coup for both companies.

Lowell Singer, media analyst at SG Cowen & Co., said Iger’s interest in new technology had put Disney “a little bit ahead of his competitors” in finding new revenue channels.

“Disney has been a little more aggressive, up to this time, talking about and exploiting new distribution for their content,” he said.

Van Baker, a media analyst with Gartner Inc., a technology market researcher, said Pixar benefited as well.

“The fact that they’re able to pull off a deal with Disney and ABC, to download shows a day after they’ve aired, is astounding,” he said. “I didn’t think they’d be able to line up the content, and without the content, they’re useless.”

The latest version of the iPod sports a larger, 2.5-inch diagonal screen that plays videos in crisp color. The 30-gigabyte version, which can hold 7,500 songs, 25,000 photos or 75 hours of video, will cost $299 and a 60-gigabyte model will be $399 when they go on sale in about a week.

Both are thinner than the 20-gigabyte model they replace, and both will be available in traditional white or all-black versions.

The screen is still too small for people to watch comfortably for more than an hour, said Ben Bajarin, a digital media analyst with Creative Strategies, a consulting firm in Campbell, Calif.

“The hardware is not there yet for full-length movies,” Bajarin said. “But the X and Y Generations are going to eat this up. They’re used to consuming media on small screens,” such as hand-held gaming devices and mobile phones.

Although Microsoft Corp. has launched its own music download service, Apple’s iTunes Music Store is the overwhelmingly dominant player, with an 84% share of the legal music download market in the U.S., according to Nielsen SoundScan.

With its Disney deal, Apple has positioned itself as “a digital distribution pioneer for content providers to make money where they’ve never made money before,” Bajarin said.

“Obviously other networks are going to watch very closely whether people will buy videos under this model,” he said.

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