Pixar and Disney broke off talks to extend their existingfive-film deal yesterday (29), leaving the animation cash-cow free to enterdiscussions with other studios competing to distribute its titles beginning in2006.

After completing the final two films under the current agreementwith Disney - The Incredibles in 2004 and Cars in 2005 - Pixar said in a statement that it intended to retainfull ownership of its future productions.

"After 10 months of trying to strike a deal with Disney, we'removing on," Pixar chief executive officer Steve Jobs said in a statementon the company's website.

"We've had a great run together - one of the most successful inHollywood history - and it's a shame that Disney won't be participating inPixar's future successes."

Under the terms of the existing agreement, Disney will retain therights to distribute Pixar's first seven films, with Pixar continuing toreceive its current share of the profits in perpetuity, and Disney will havethe rights to solely finance and produce sequels to the films if Pixar declinesto co-finance and produce them under the terms of the current agreement.

To date Pixar's five films - Toy Story, A Bug's Life, Toy Story2, Monsters Inc, FindingNemo - have earned morethan $2.5bn at the worldwide box office and sold more than 150 million DVDs andvideos.

"We have had a fantasticpartnership with Pixar and wish Steve Jobs and the wonderfully creative teamthere, led by John Lasseter, much success in the future," Disney chairman andchief executive officer Michael Eisner said in a statement.

"Although we would have enjoyed continuing our successfulcollaboration under mutually acceptable terms, Pixar understandably has chosento go its own way to grow as an independent company."

Combining Disney's global distribution know-how and Pixar'sanimation genius, the partnership was regarded a marriage made in heaven.

However Pixar has been seeking to change the existing financialarrangements, under which Disney puts up half the production costs in returnfor 50% ownership as well as a hefty 12.5% distribution fee.

It is understood that in recent months Jobs proposed reducing thefee to 8%, less than the 10% some competing distributors are believed to haveoffered.

Disney's senior executive vice president and chief financialofficer Tom Staggs said management could not accept Pixar's final offer as thiswould have cost the company hundreds of millions of dollars already owed itunder the existing agreement and insufficient remuneration for futurecollaborations.

The timing of the break-up will sting Disney, especially with therecord breaking $843.9m global grosses rung up by Finding Nemo, which also picked up four Academy Awardnominations earlier this week including one for best animated feature film.

Pixar is currently working on Jan Pinkava's Ratatouille, an animation project that existsoutside of the Disney distribution deal. No distributor has signed for theproject at time of writing.

Walt Disney Studios has relationships with other emerginganimation producing partners including Vanguard Films, which is currentlyproducing Valiant,and San Francisco-based Complete Pandemonium, producers of The Wild in conjunction with CORE Technologies ofToronto.

Walt DisneyFeature Animation is currently in production on Chicken Little, the studio's first all-CG effort thatis scheduled for release in summer 2005.