Merrill Lynch London Media Conference JUNE 8, 2006 Disney Speaker: Andy Mooney Chairman, Disney Consumer Products PRESENTATION Jessica Reif-Cohen – Analyst, Merrill Lynch The focus of Disney's presentation today will be Consumer Products. In recent years, Disney has sold nearly all of its physical stores, developed exclusive products for key retailers, is overseeing a new leg of growth with a well laid-out strategy in China, and is focusing on building up its games capability internally. It is a pleasure to introduce Andy Mooney, Chairman, Disney Consumer Products Worldwide. Andy Mooney – Chairman, Disney Consumer Products Good afternoon, everyone. Thank you, Jessica, for the introduction and for the opportunity to speak here today. Increasingly, The Walt Disney Company sees itself as being in the branded content business with three strong brands in Disney, ABC and ESPN. Today I want to focus on the Disney brand in general and Disney Consumer Products - I’ll just use DCP for short - in particular. I would like to begin by briefly showing a couple of perspectives on the power of the Disney brands. First is an external perspective from the Landa Company's most recent brand asset valuator ranking Disney in third place behind Coca-Cola and J&J. Second is an internal perspective of the time measured in hours that consumers spend immersed in the Disney brand, which last year accumulated to a pretty extraordinary 9.3 billion hours. So for example, consumers spent 7 billion hours watching Disney Channel around the world, 800 Page 1 Merrill Lynch London Media Conference June 8, 2006 million hours at our parks and resorts, 300 million hours watching Disney movies in theaters, and another 350 million watching them at home. Kids fortunately still spend 350 million hours reading our books and magazines, though video gaming is catching up fast at 250 million. The immersive quality of the Disney brand experience differentiates Disney from other brands. No amount of paid media dollars can really substitute for the time a guest enjoys at a Disney theme park or resort and the emotional connection that that creates between the brand and the consumer. Brand strength is very important to DCP because brands with high unaided awareness and the strength of Disney or say Coca-Cola or Nike invariably command high market shares in core demographics and in core categories. This is an important point to bear in mind when we review DCP market shares later in the presentation. Despite the fact that DCP retail sales have nearly doubled in six years from $12 billion in 2000 to $21 billion in 2005, we believe we are just scratching the surface in terms of tapping the potential of the Disney brand from a market share perspective. DCP is comprised of four lines of business: merchandise licensing, publishing, interactive gaming and retail. Before I focus on the individual business segments I want to cover just a few strategies that are umbrella strategies affecting DCP overall. We organize our strategic thinking at DCP into four areas. I would like to highlight the key strategies for the divisions and talk today within the context of these four areas, beginning with brands and properties. A key long-term strategy has been to diversify our property portfolio to appeal to a broader range of consumer demographics. We have made a lot of progress against this initiative. The company now has a franchise management process that is led by Bob Iger, with division heads working together to create content in support of the Company's key properties. DCP also segments consumers into five groups. In the infant segment DCP creates Baby Einstein DVD content and then taps into Buena Vista home entertainment scale and infrastructure to distribute Baby Einstein DVDs worldwide. For preschool children Disney Channel has created Little Einsteins and Mickey Mouse Clubhouse. The new Mickey Mouse show premiered on every Disney Channel in the world in early May and has quickly become the most watched show on the U.S. and other Disney Channel Playhouse blocks with ratings that now rival the wildly popular SpongeBob SquarePants. The launch of Mickey Mouse Clubhouse follows on the heels of last fall's impressive launch of Little Einsteins, which has similar ratings in the markets in which it airs. A third show, My Friends Tigger & Pooh, joins them on Playhouse Disney in just a few months. For boys, Power Rangers is annually updated by Disney Channel to support this evergreen boy's franchise. But the potential now exists with the acquisition of Pixar for a Cars sequel - which for me would be personal nirvana - as well as Toy Story 3. We also have the certainty of a second installment of The Chronicles of Narnia and a second and third installment of Pirates of the Caribbean to look forward to from our live-action studio. All of this gives us the luxury of multiple property options for boys really for the first time. For girls we expect the platinum release of Little Mermaid later this year to continue to fuel growth in Disney Princess, and we have the next phase of the development of the Disney series franchise in direct-to-video format next year. We now also have a number of ‘tween girls Page 2 Merrill Lynch London Media Conference June 8, 2006 properties to draw from, from the live-action block on Disney Channel. It started with Lizzie McGuire and continued with Raven. We already have retail interests in Hannah Montana, and we are scrambling to keep pace with the High School Musical sensation. And, we continue to have a high-end boutique business targeting young adults in apparel and accessories and contemporary renditions of Vintage Disney art. The second key strategy was to fuel publishing and Buena Vista Games, DCP's interactive gaming division, to create new properties that can be leveraged across the entire Walt Disney Company. An important point to make here is that DCP is now independently able to create new intellectual property within the publishing, licensing and video gaming divisions. The phenomenal success of Disney Princess has been well-documented. This franchise surpassed $3 billion in retail sales in 2005 and is continuing to grow. Disney Publishing created W.I.T.C.H. in comic book format in Milan in 2001. We've sold 20 million copies of W.I.T.C.H. magazines to date. W.I.T.C.H. is now also a successful TV show broadcast on our Jetix platform here in the U.S. and already a $200 million retail franchise. DCP's most recent creation is Disney Fairies. The idea for Disney Fairies emanated from DCP's toy division. Disney Publishing built on the idea and retained renowned author Gail Carson Levine, who penned the critically acclaimed Fairy Dust and the Quest for the Egg. Gail's novel lingered on the New York Times bestseller list for twenty weeks and introduced a bevy of new characters supporting Tinker Bell. It is interesting to note that Tinker Bell already has a pre- existing fan base and that 4% of all products bought at Disney's parks and resorts are Tinker Bell products. At 4% of DCP's retail sales from Tinker Bell products, the series would already be an $800 million retail program before the first piece of new content even airs. So imagine if you can, what the potential for Tinker Bell and Disney Fairies will be over time. Disney feature animation is further building on the idea and has greenlit a series of four CGI animated video premiers to further develop the franchise. In these videos Tinker Bell will speak for the first time as a character. Here is a very brief look at some early footage. [Video Clip] Disney Fairies actually represents an expanded definition of synergy at The Walt Disney Company. Synergy used to be one dimensional at the Company in that we all worked together to ensure box office success for our animated movie suite. We still do that today better than any other company in the entertainment industry. Synergy under Bob Iger has been expanded to embrace companywide support properties created not just by Disney film studios, but also by Disney Channel and, increasingly, Disney Consumer Products. This new definition of synergies is serving to redefine Disney as a branded content company. In 2000 Mickey and Pooh accounted for 80% of DCP revenues. Both properties were stretched across a broad range of demographics out of pure necessity as this was all that we had to work with. Today in 2006 Mickey and Pooh are larger in absolute dollars than in 2000 and now account for a healthier 53% of total. They are also more focused toward the preschool segment. And, along with Disney's Little Einstein and Baby Einstein, they will become increasingly more focused on the preschool, toddler and infant segments as we move forward. Page 3 Merrill Lynch London Media Conference June 8, 2006 Our girl properties, led by Princess, have grown to 17% of total. Our boys properties, led by Power Rangers, now represent 10%. Film merchandise this year is particularly strong at 16%. Looking forward we see our mix becoming increasingly balanced with Mickey and Pooh still growing in absolute dollars, but representing less than half of total in relative terms. Our girls business will continue to flourish with a combination of Princess and Fairies surpassing 20% of total. And with the acquisition of Pixar we anticipate film merchandising growing in absolute dollars but holding at roughly 15% on a relative basis. In terms of merchandise and properties, Disney Consumer Products has never had it this good.