Will Jobs' new Disney role cause conflict?

When Steve Jobs announced the $7.4bn merger of his Pixar Animation Studios with Disney on Tuesday, he said the two companies could finally move beyond their "two separate sets of shareholders and two different agendas."

But in fact, there are three companies in that equation. Left mostly unsaid throughout the merger celebrations was exactly how Jobs would balance his new role as board member at Disney and his job as chief executive of Apple.

As Apple has moved into video distribution -- using Disney content as its first centrepiece -- those two companies' fates have become increasingly entwined. Some corporate governance experts say that puts Jobs in a deeply uncomfortable position, particularly as Apple and its rivals seek to distribute Disney and Pixar films online.

"It's like sitting on both sides of the table when negotiating," said B. Espen Eckbo, the director of the Center for Corporate Governance at Dartmouth University's business school. "The only issue is whether the degree of conflict of interest is large enough to raise a red flag."

This kind of interlocking board of directors is far from rare, but the phenomenon remains a serious concern for the advocates of corporate reform who have gained influence since the costly collapse of companies such as Enron and Worldcom in the early part of the decade.

No one argues that Jobs, Disney or Apple fall in the same category as companies whose executives have been indicted for fraud. But the worry is that Jobs -- soon to be the largest Disney shareholder, along with his 1 per cent share of Apple as chief executive -- is taking on the difficult task of representing two separate sets of shareholders whose interests may not always be identical.

The most obvious flash point will be the development of Apple's iTunes video business. Jobs and Disney CEO Bob Iger launched this new service together late last year, with Disney-owned ABC Television content such as Desperate Housewives and Lost.

Though Apple has not disclosed its future plans for the service, it is widely expected to seek an expansion of the video service to provide feature films as well as television shows and music videos. The ability to distribute classic Disney and Pixar films to the video iPod or other future Apple devices would represent a coup for the computer company.

"The big picture is that obviously Apple is going to try and make an assault on the living room in 2007 and they need to increase the amount of content they are selling in order to make it work," said Piper Jaffray analyst Gene Munster.

Indeed, in a press conference on Tuesday, Jobs was optimistic about the ability of the new Pixar-Disney match to distribute its content increasingly to new devices, although he stopped short of mentioning Apple or the iPod by name.

"The opportunity for viewing these films, both on televisions and other types of devices, is huge," Jobs said. "If we can make great animated films that really affect the culture, there is going to be a strong demand from younger family members to watch them many, many times in many places, on probably many devices."

Jobs may also be in a position to gain knowledge about his competitors such as Microsoft, with which Disney has intermittently had a close working relationship on issues such as digital rights management and digital content delivery.

Disney also has a long-term technology agreement with HP, in which the computer maker provides the studio with a wide range of hardware. The two have done extensive marketing work as part of the pact, which HP inherited as part of its Compaq Computer buyout. In 2003, HP extended the Disney deal for an additional ten years.

For now, Disney says Jobs may take himself out of the stream of discussion for this kind of sensitive issue.

"If there are occasions when the board deals with company business with Apple, appropriate steps, which may include recuse, will be taken to ensure that conflicts of interest are avoided," said Disney spokesman David Caouette.

An Apple representative had no immediate comment on the issue.