Walt Disney Co Earnings Call Nuggets: Lone Ranger Details and Hulu Decision
Lone Ranger Details
Douglas Mitchelson – Deutsche Bank: Jay, a clarification. I’m trying to figure out the math on the fiscal 4Q loss for Lone Ranger, what might help is could you give us a sense of the P&A expense that was in June in prior versus what might have been in the fiscal fourth quarter? And then either Jay or Bob, you talked about ESPN at length Bob, have you noticed any competitive impact on the upfront or in the current ad market related to the entry of FOX Sports 1?
Jay Rasulo – SEVP and CFO: So, the $160 million to $190 million range that I gave you is the impairment that we will take on the asset of the film and then the operating loss that we’ll experience in Q4. And you’ll get a very explicit breakout of those numbers in the Q. Basically it’s like $86 million on impairment then the rest, we don’t know of course, what the actual operating loss will be. The reason that we’re recognizing that in the fourth quarter just for all of your ratification is that the accounting rules for film cost impairments were amended by the Financial Accounting Standards Board and adopted by us, of course, right thereafter in Q1 of fiscal year ’13. Under the old rules, if a film was released at the end of the quarter, but prior to the Company’s filing its statements then the films performance – and the films performance resulted in impairment, the Company generally is required to report that impairment in the previous quarter, in this case would have been Q3. But under the new rules, the impairment analysis is limited to information that was available as of quarter-end, and therefore doesn’t incorporate the actual performance of the film after the balance sheet date. So, that number is a Q4 number. In the past, it would have been a Q3 number.
Robert A. Iger – President and CEO: To the second part of the question Doug, ESPN had strong upfront, both in terms of increases on the CPM front, and in terms of overall revenue. And did not detect any impact whatsoever for any new competitive forces, including FOX Sports 1.
Jessica Reif Cohen – Bank of America Merrill Lynch: I have two questions. One, now that you have decided to keep Hulu, just wondering if you could give us your vision for how it may change or evolve? The second thing is, obviously, the press for the last few days have been completely focused on retrans, I was just wondering if you could give us your take on how much longer these kind of battles can go on before you think the government will start to step in?
Robert A. Iger – President and CEO: On the Hulu, Jessica, we as you know with our co-owner FOX explored a sale for considerable amount of time and went free far down the road in terms of their process. During that time became more and more convinced that there was real strategic value to Hulu and there was value from a financial perspective, meaning we could grow it at a rate that would be overall positive for the shareholders of our Company. We also decided – when we decided to keep it to infuse Hulu with approximately $750 million of new capital, that is aimed at strengthening its team, strengthening its technology, because we believe we need to continue to invest in the technology platform and, of course, strengthening its content towards programming, which as you know, we’ve seen new entrants and there are other entrants in the marketplace do extremely well with. I won’t get specific in terms of a direction because we’re going to leave that to the management team of Hulu, but we think that there is considerable opportunity here and that opportunity will bode well for both Hulu itself, but also for content owners, who will have a robust platform to sell content to and for the creative side who will have another entity to sell programming to or to create for. On the retrans front, we never like to see battles like this obviously, because we think that sometimes they bring attention to the business that isn’t necessarily helpful. That said, maybe you’d expect this from a programmer, but we feel strongly about the need for broadcasters to be paid adequately for the value that they deliver, both to consumers or customers of multichannel services on to the distributors themselves. Even though these broadcast stations, can be, as you know, obtained for free, over the year, we know that distributors repackage these signals and in fact sell them as part of other services to consumers and thus we think we should get paid. We also believe that the combination of programming both national and network and local, particularly news is really compelling as evidenced by the ratings that these stations deliver compared with the ratings of numerous other channels and therefore we think that the stations should get paid accordingly. I don’t really have details about this negotiation. So, I don’t really want to weigh in specifically about it, but I don’t sense that the government is close to jumping into the fray on this one, look I think they probably prefer that we work this out or that owners of stations and distributors work this out themselves, but I don’t get a sense that there is government intervention that is eminent because of this.
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