UBS Global Media and Communications Conference DECEMBER 5, 2012 Disney Speaker: Jay Rasulo Senior Executive Vice President and Chief Financial Officer PRESENTATION John Janedis – Analyst, UBS Thank you, everybody. Good afternoon. I'm very pleased to have Jay Rasulo, Senior Executive Vice President and CFO of The Walt Disney Company, here with us today. Jay, this is your first time with us, so thank you so much for your support. And by the way, your timing is impeccable. Thank you for Wednesday and not Monday, obviously, given the news last night. Why don't we start at a high level, Jay? You had another record year in fiscal 2012 at the company on nearly all metrics. You returned a lot of capital, bought Lucasfilm, more recently opened Art of Animation, expanded Hong Kong. So a lot of heavy lifting here. What are some of the key strategic priorities for fiscal 2013? Jay Rasulo – Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company Well, as I think is appropriate to strategic priorities, they really don't change very frequently. Obviously, the way that Bob Iger has been running the company, the way we've been managing our way, is really focused on the three main pillars --creation of great content, and in some cases, the acquisition of great IP to create great content around; looking for broad distribution Page 1 UBS Global Media and Communications Conference December 5, 2012 through all platforms, through all countries of the world; and embracing technology in a way that we can not only enhance that content, enhance the distribution of that content, enhance the value for the way consumers consume that content. And that is sort of the underlying way we manage the company. I would say in particular in fiscal 2013, obviously, we invested a lot of money in our theme parks and resorts business. We want to execute against delivering the returns that we've been promising all of you for the years that we've been making those investments. We really want to hunker down on it. We've got some big movies that we are making. You know, we've reverted to a very focused slate strategy for our studio in which we are creating future franchises for the company or enhancing current franchises. We have a lot of big movies coming out in fiscal 2013 that we really want to get behind and make sure they are successful. And of course on an ongoing basis, as we integrate things like Marvel and, in the future, the Lucas properties, Star Wars, we want to make sure that the company is running on all cylinders, that all parts of the company are utilizing those assets we buy in our ecosystem, which is kind of, in our minds, our unique competitive advantage and we want to make sure that we execute against that. John Janedis – Analyst, UBS All right, so we will get to the parks and the movies later. But ABC, to start out with, along with many other networks, has seen some ratings pressure this season. DVR usage hasn't increased dramatically year-over-year when we look at the numbers. Given your broad reach across demos, is it a content issue, do you think, an acceleration of viewer fragmentation? How do you handicap what is going on in the marketplace right now? Jay Rasulo – Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company Well, I guess I've got a couple of things perspective-wise on that. First off, if you look at the ratings of ABC, not very different from the trends that other networks are seeing out there. Our ratings are down this year, but so are others. There was one permutation in the market with the moving of a big show, The Voice, for one of the networks. But in general, most of the networks are down. And frankly, if you look at our primetime ratings, a lot of that had to do with a single show this year. We took a creative bet on our Dancing with the Stars show that has been very successful for us for a number of years. We decided to do kind of an all-star show. It didn't work out. It is 14% or 15% of our inventory, and its ratings were poor and subsequently we felt some downdraft. Page 2 UBS Global Media and Communications Conference December 5, 2012 If you look sort of more generally, ABC has been the number one network this year, ex-sports, in C3 ratings for 18 to 49-year-olds. So I would say that, yes, a piece of it is that content piece with ABC. We've also done well with some returning dramas and some new dramas that we are very happy with. But on the flip side, DVR penetration has increased, not hugely, but I would say dramatically, 6 or 7 percentage points in the last year. Now, interestingly, you would assume that that might hurt your C3 ratings. But along with that increase, the number of individuals that are fast forwarding through ads has actually declined in the last year. So that has kind of been a net benefit to ratings. But in general, I would say, like a lot of people, we are seeing viewing move out from C3, three days out to seven days out. We, like a lot of companies, are pushing advertisers to start buying that seven-day -- those seven-day ratings, because we see people are pushing them out. And the notion of binge consuming of television shows is increasing and that tends to be a little later out. So overall, I think there are a lot of factors that have contributed to what you see in ratings today. I don't think -- some are offsetting. I don't think they are of great concern, but obviously, at the end of the day, you need to have great programming to get good ratings. John Janedis – Analyst, UBS Some of your peers yesterday and Monday talked about C3 to C7. What is the impact for you? Is it kind of mid-single-digit percentages in terms of the increase of the lift? Jay Rasulo – Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company I think it is mid to low single digits. John Janedis – Analyst, UBS Just on the timing of that, when you go to this year's upfront, is that the view, to try to push C7 as a measurement, or is that maybe a 2014 event? Jay Rasulo – Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company Well, it is something we've been talking about. I'm not sure how quickly it is going to happen. But we would like to -- yea, we would like to see it as soon as it is possible, because we think there is value there, and we know consumers are watching ads in that time window. Page 3 UBS Global Media and Communications Conference December 5, 2012 John Janedis – Analyst, UBS Maybe we can move to the parks then. Last year, you had $500 million of revenue and expenses related to growth initiatives. You talked about it. You are also planning for, I think, similar sorts of numbers on the revenue and expense side in fiscal 2013 related to guest experiences in Shanghai. Is there a way you can help us think about the contributions from last year's initiatives for 2013 in terms of that contribution? Jay Rasulo – Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company Yes. You know, the new initiatives we've had over the last two or three years a lot of Park initiatives began, some of which are through the construction cycle, are open and are producing net income, are accretive to our earnings. Some of which are either very early stage or in fact are still in the pure expense side or not generating revenue. So in total, they kind of -- for fiscal 2013, they kind of balance out with that $500 million increase in revenue and $500 million increase in expense. The ones that are accretive -- obviously, the cruise ships that have been now on the water for about a year and a half, they are clearly contributing to our earnings. Disney's California Adventure, the fix there, Disneyland is doing extremely well as a result of that investment, and that is accretive to earnings. The things that are on the flip side and the downdraft are the Fantasyland Magic Kingdom, which should be -- are not accretive to earnings as of today, but should be accretive to earnings before this year is out. In total, will be earnings accretive. And that is a project, it is the first time we've been back in our most popular park, highest attendance of any park in the world. We've really not done a significant piece of work there in literally 40 years. So this is the first big step there. We expect big returns and we think that will be accretive this year as well. The things that are still on the other side of the ledger, we've talked about the investment we are doing in technology around enhancing guest experience at Walt Disney World, from the planning of the experience to the time when guests are there, a big technology project against which we have pretty significant expenses this year. We will be talking a lot more about that after the first of the year, and we will actually start to roll that product out in the course of this year.