Good day, ladies and gentlemen, and welcome to the 4th Quarter 2010 Walt Disney Company Earnings Conference Call. My name is Maj, and I will be your coordinator for today. Panopo Neto will be happy to assist you. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr.
Lowell Binger, Senior Vice President of Investor Relations. Please proceed.
Okay. Thank you, operator. Good afternoon, everyone, and welcome to The Walt Disney Company's 4th quarter 2010 earnings call. Let me begin by saying that we are aware that information regarding Q4 earnings became available ahead of its formal release, and we are investigating how this occurred. We do regret any confusion caused by this incident.
Our press release is now available on our website. Today's call is also being webcast and that webcast will be available on our website. And after the call, we will post a replay and a transcript of today's remarks to the website. Joining me in New York for today's call are Bob Iger, Disney's President and Chief and Jay Rizzullo, Senior Executive Vice President and Chief Financial Officer. Bob will lead off, followed by Jay, and then we will of course be happy to take your questions.
So with that, let me turn the call over Thank you, Lal.
Good afternoon, everyone. The 2010 fiscal year was a good Good one financially and strategically. Performance was driven by strong branded content and the effective use of it across our businesses, resulting in a 20 We also made 2 significant acquisitions, Marvel Entertainment and the social game publisher, Playdum. Marvel and Playdum strengthen The range of quality entertainment we offer and provide us new and innovative ways to deliver that entertainment to consumers. They fit strategically with our brands and with our global marketing and distribution networks, benefit a wide range of our existing There's no better example of what a successful acquisition can and our ability to maximize the value of great creative content across a broad range of markets.
We're incredibly excited about the release next summer of Cars 2, another great Pixar adventure, whose characters already constitute one of our biggest and most robust consumer products franchises. With the film to be followed by the 2012 opening of our largest ever new attraction, Cars Our creative pipeline is strong and our media I'm sorry, at our movie studios, Tangled, Tron Legacy and the latest chapter of our highly successful Pirates franchise are coming in fiscal 2011 as experiences. Since it opened last summer, World of Color, an amazing nighttime spectacular California Adventure, has double digit returns and has enhanced our reputation for delivering unparalleled family travel experiences. It's notable that Disney Cruise Line was just named the best in the world by the readers of Conde Nast Traveler. And that's before the first of our 2 magnificent new ships, The Disney Dream makes its maiden voyage in January, taking our cruise offering to a whole new level and new exciting destinations.
ESPN is another great example of our strategic commitment to create quality branded content and use technology to enhance that content and deliver it to consumers Baseball, soccer, football, NASCAR, you name it, is gold standard and has taken full advantage of technological change to its highest television ratings ever in 20 10 fiscal year. The same holds true for ABC Family and Disney channel, both of which also recorded their highest ever ratings in the last fiscal year. The overall quality and innovation shown by our media networks, ESPN, Disney Channel, ABC Family and ABC was recognized through the multi year agreement we signed earlier this year with Time Warner Cable. The deal acknowledges the great value of our programs and brands, while at the same time creating new products and services to the benefit of Disney, Time Warner and When we bought Club Penguin in 2007, Disney acquired new skills in delivering compelling brand appropriate stories in an entirely new to our core audience of kids. We expect the acquisition to generate significant value to Disney, well in excess of the price we paid.
And since to Disney, while we provide them the well known content and brands to compete even more effectively. With the acquisition Our Our first game with Playdum, ESPNU, College Town is off to a good start. Marvel provides our company with a rich portfolio of to come and is developing several series for ABC and ABC Family. We bought back the marketing and distribution rights for Iron Man 3 and the Avengers and helps bolster Disney in important ways. They have given us great stories to work with and the right technology and analytical skills to bring those stories to consumers in 2 ways.
The acquisitions fortify the Disney brand portfolio and our ranks of talented artists, engineers and business people. And they give us new ways to build upon our unique capacity to leverage hip properties across many businesses quickly and effectively. The The brand and franchise portfolio of The Walt Disney Company is stronger than it has ever been, and I'm confident of our direction and of our ability to deliver superior returns. And with that, I'll turn things over
to Jay. Jay? Thanks, Bob. Good afternoon, everybody. I'd like to briefly review the key drivers for results in our Q4 fiscal 2010 reflect 1 less week of operations than our Q4 fiscal 2019 results.
Overall, we're encouraged by many of the trends we're seeing in our businesses. At our Media segment, results at Cable Networks decreased year over year due to the timing of affiliate revenue recognition at ESPN, the impact of having one less week of operations programming commitments in Q3 this year versus Q4 last year. As a result, ESPN recognized 3 That ESPN's ad revenue was up by 22%. Operating income at Cable Networks was also impacted up strongly driven by improved ratings. Network scatter pricing came in 23% above upfront levels.
Thus far in Q1, ABC Network's scatter pricing is running 22% above upfront levels. Ad sales The success of Toy Story 3 in international markets drove impressive growth for the segment in the 4th quarter. Studio results were impacted in the quarter by a write off of approximately $100,000,000 related to our film inventory at our retirement medical expenses. Lower revenue at Disney Vacation Club reflected lower sales as well as percentage of completion accounting. Results were also impacted by having one less week of operations compared to last year's Q4.
Q4 attendance Our domestic parks came in 6% lower than prior year. But when adjusting for the impact of the extra week, we estimate that the attendance was up 1%. Per capita guest spending was up 6% driven by higher admissions pricing and with a solid increase at Walt Disney World and a slight decrease at Disneyland. Occupancy at our Orlando hotels came in 1 percentage point domestic hotel reservations on the books are pacing 5% ahead of prior year. Results at Our international parks benefited from higher attendance and guest spending at both Hong Kong Disneyland and Disneyland Paris.
Attendance was up 3% in tariffs and up 26% in Hong Kong. At Consumer Products, our licensing business performed well on the strength of our Increase in the segment operating income was also driven by improved performance at our Disney Stores in North America and Europe, as well as by publishing and licensing revenue from Marvel Properties. We believe that our core franchises, including Toy Story and Cars, position us well for growth in our licensing business in fiscal 2011. At the Interactive Media segment, results benefited from higher revenue for purchase accounting arising from the inclusion of Playdum. We're pleased with the results we delivered in fiscal 2010.
The Strength of our businesses and our continued focus on managing with financial discipline enable us to deliver strong cash flow even as we invest in initiatives that position us for the long term. Turning to fiscal 2011, I'd like to highlight a few things will increase by at least $1,000,000,000 as several of our expansion initiatives at Parks and Resorts We'll meet key milestones in fiscal 2011. These include the launch of our first new cruise ship, the Disney Dream, in late January, along with a variety of projects in our different parks and resorts across the globe. We are excited about these new assets and believe they will help position shareholders through dividend and share repurchase. During fiscal 2010, we repurchased almost 80,000,000 shares for approximately 2,700,000,000 dollars.
Thus far in fiscal 2011, we've repurchased a little over 11,000,000 shares for about $392,000,000 As you've seen in our results, the current trends in our businesses are encouraging. We're also optimistic about our creative pipeline. Thus, we believe we are well positioned to deliver strong results in 2011. With that, I'll turn the call back to Lowell for Q Q and A.
Okay. Thanks, Jay. Operator, we're ready for the first question. Thanks.
And your first question comes from the line of Doug Mitchelson from Deutsche Bank. Please proceed.
Oh, Thanks so much. For Dhirubhai, based on our
tracking, we do not see a lot of
sports programming renewals or new sports hitting for ESPN in fiscal Just BCS and Rose Bowl, which have a substantial amount of ad revenue attached to them, easy compares against the World Cup. Bob, you've mentioned in the past that ESPN should Be able to continue to grow its margins. Is this one of those years where ESPN should continue to grow its margins?
Well, we're not Your statement about sports costs is accurate. It's primarily BCS and Rose Bowl driven. And then as you mentioned, the Marketplace is incredibly strong for ESPN, as Jay referenced, and we're off to a flying start on that side of the revenue equation. Obviously, our ability to raise revenue from a subscription fee standpoint is subject to whatever deals were expiring or have been Renewed and the only significant one is the one that we announced, which was Time Warner.
Right. Thank you.
Okay, Doug. Thanks. Operator, next question please.
And your next question comes from the line of Jessica Rae from Cowen Bank of America Merrill Lynch. Please proceed.
There was very little details on Shanghai. I was hoping that you could elaborate a little bit more about timing and what the structure might look like and what impact that will have on your business overall in China. And
you didn't you talked about
the Time Warner Cable deal a few times, but Could you give
us some sense of what affiliate fee
growth will look like over the next year or so?
We're purposely going to save the details for Shanghai Hi for a time when we have full approval. We signed a long term agreement I'm sorry, a long government. It's been generally reported or estimated that it will take approximately 5 years to build, and that's about the only detail that I would firm is being correct. The details in terms of the nature of our ownership and other details about The project itself, we're going to save for the possibility of a formal announcement. On the Time Warner side, Jessica, We don't give details.
It was a deal that I think was very good not only for both sides, But also for consumers, we created a lot of compelling new products for subscribers of Time Warner Cable, including And also put into the marketplace a few specific new products for ESPN like the Red Zone, Which we think strengthened the relationship with Time Warner and strengthened the overall multichannel package that consumers will offer. Obviously, the deal reflects, as I said in my remarks, the considerable value that we provide not only to Time Warner Cable, but to its customers with ABC and ABC stations and retransmission consent, ABC Family, Disney Channel and the array of ESPN Networks, Many of which had record ratings in 2010.
Can I
just throw in one last one? The balance sheet is so strong. Is there anything else that you could say in terms of returning capital to shareholders or what you might do? And do you have a target leverage?
Well, obviously, I'll just reiterate what I said. We've repurchased 11,000,000 shares this fiscal year to date. And we continue to look for the opportunity to between our own opinion of the value of the company and what the stock is trading on in the market. So we continue to look at it as a tool for increasing And I don't really want to give you too much guidance beyond that for the future.
Okay. Thank you.
Thanks, Jessica. Operator, next question,
And your next question comes from the line of Ben Sorenburn from Morgan Stanley. Please proceed.
Thanks. Good afternoon. A couple of Just I wanted to go back to Marvel and Playdum on the dilution front, Jay. I think you guys gave some guidance on both when you announced deal. Just wanted to see, particularly on Marvel, now that we're a few quarters in, how that's tracking versus expectations?
I think Ironman too maybe was a little bit ahead of expectations. But just wanted to see if there's change to the dilution and then ultimate accretion estimate that you gave us back when you announced the transaction. And then, Bob, you've made a lot of changes at the studio from a management perspective, particularly collapsing a lot of the sort of And if there's anything you've learned from the Toy Story 3 release, good, bad or otherwise, about how you're doing far, I know it's early days with those changes, but just any update there would be helpful.
Yes.
On the dilution impacts, we really don't see any pretty much up to our When we made the acquisition in terms of the impact, primarily due to the difference The shares we issued, which we have already mentioned, we've repurchased last year as well as the, let's It's called acquisition accounting, on both that and that goes for both Marvel and Play Doh.
Great.
Ben, I'd like to think that the success of Toy with the fact that Pixar made a fantastic film and getting whatever we're over $1,000,000,000 $60,000,000 in global box office and doing nicely with issues, including the cost structure of the overall business. So if the changes that they made are to show up in results When we looked at the business carefully, we noted a lot of things that we thought that were no longer reflected the way that we were distributing our product into the global marketplace in all windows, theatrically, in what I'll call a home video window, which is now home video and digital, and then in subsequent television windows around the world. And We tried to create an organization both on the distribution side and the marketing side that reflected how buyers and distributors are platforms or windows that the product went into the marketplace and that seemed inefficient to us. We also felt that in creating one behavior changes and technology changes the way product is windowed and distributed to the world. And we did this on a global basis.
I just was in London and the changes that were made in the structure of the company in London are particularly reflective of changes that we're seeing in the overall marketplace and the opportunity to basically look at both Not only those changes, but each product in a much more holistic way rather than in a siloed way that the old structure allowed.
That's helpful. Thank you.
Thanks, Ben. Operator, next question please.
And your next question comes from the line of Spencer Ring from Credit Suisse. Please proceed.
Thanks and good afternoon. Just two questions. First for Bob, I was wondering if you could just talk about the Google TV and ABC situation and Do things like that maybe make you reassess your approach to how you experiment with new technology? And then Just for Jay, since you're talking about swing factors for 2011, you've kept the broadcasting operating cost flat in 2010. Could you just give us some of the things that would affect that in 2011?
Thank you.
Yes. There's obviously got a lot of attention paid to a variety of different subjects related to how video is brought into the marketplace, whether it's the impact or Potential impact of over the top TV, the impact of digital distribution in general, the future of the multi channel service, etcetera. So maybe I should just Put some of that in perspective, I don't think I'm going to address Google TV directly. We've not announced a deal with them at this point and I'm not going to say anything more specific We've been offering product into new services and new platforms and devices from almost the beginning, I guess, in a way we led the way because we feel We fell then and we still feel that it's important to serve consumers on these new platforms, primarily to grow revenue and to take advantage of what's some pretty exciting new technologies. We also think it's important to make legitimate product available in the marketplace on a well timed well priced basis to fight piracy, which we don't monetize at all.
So in essence, we've looked at these new opportunities as revenue as incremental to earlier about ESPN and best available screen. This is something that we're looking at more and more across our businesses. It's Essentially saying to consumers that they should be able to watch our product on the best available screen to them. And how we do that It's, I think, pretty important in terms of our potential to create more value for these properties, whether we're distributing it to multichannel like Time Warner or whether we're going directly to the consumer or whether we're doing it through services like Apple TV. On the multichannel front, we've had conversations with a few multichannel providers very Recently.
And we know that there are concerns about cord cutting and the impact of all this digital distribution And the sense that we get is that the trends that they've seen very recently, which is a slight decrease in subscription in subscribers is due mostly The economy and the fact they went to the marketplace a year ago with some pretty low priced offers, both to address to mostly address the economy and as those have expired, some of those consumers or subscribers have sort of fallen by the wayside. The sense that we get is that there's no no one has any evidence at least currently of cord cutting. But I still I think that it's in the best interest of this company to see to it that the multi channel business remain robust, continues to flourish because It creates so much value for us. So we're looking at basically the multichannel business in a bullish But we feel that we have to very carefully balance that business with our interest as a company to grow revenue on new platforms. And creating new product like the one I described for ESPN, an authenticated ESPN and these other services, like buzzer beater and RedZone There's one way to help the multi channel providers do that.
So we're going to continue to look for opportunities on new devices because we think it improves monetization, but we're also going to look for opportunities to strengthen our relationship with the multichannel providers and create product that is Beneficial to us, to them and to their consumers.
Thanks, Bob.
The second half of your question about 11 swing factors for ABC. Obviously, we will experience we've been talking about this year the restructuring of the news operation and some other efficiencies at ABC that happened in the course of the year. Obviously, we'll have a full year impact of some of those. I don't want to get into details as to the numbers And what else might happen in the year?
Next question.
And your next question comes from the line of Anthony DiClemente from Barclays Capital. Please proceed.
Hi, good afternoon. Thanks for taking my I just have one for Jay and one for Bob. Jay, you gave us a number of figures adjusting advertising revenue for the 53rd week and some of them were Better or materially better than they were for the reported quarter. So I'm just wondering, do you have any of the adjusted operating income figures for The Media Network segments when you adjust for the calendar shift, do you have those?
I don't think we're going to talk about those in detail. Every business has Different impact of 53rd week and the way you account for it, is it may be complicated. So I don't think it would I think in the interest of clarity, I don't really want to discuss what the impacts of any particular business are for the 53rd week effect.
Okay. That was worth trying. Thanks anyway. And just For Bob, I wonder about the parks in terms of the amount of CapEx that the Company is choosing to put into the parks. I mean, we talked about the launch cost for the cruise lines in the World of Color impact in the quarter and then CapEx going up by $1,000,000,000 So how should we think about the timing of revenue that comes against those projects?
And how should we just in general About what the returns on those investments are going to be for Disney over time as we think about them in terms of What you otherwise could have been doing with that capital such as a buyback or an accretive acquisition? Thank you.
Well, each of the decisions in terms of Increased capital commitments is made discreetly meaning separate from the other one. And I think we've gone through a lot of the rationale, but I'll just quickly Talk about it a little bit more as it relates to return on invested capital, which is a metric that we follow very closely and in fact, is a key metric in determining compensation of the company as well. On the cruise ship side, you know that our returns on invested capital in that business have been stellar Additional costs leading up to launch, so for instance, but revenue doesn't start flowing until we set sail with paying passengers. I don't I don't know how much detail Jay went into, but the bookings for that ship have been extremely strong. And we feel it's A gorgeous ship, and we feel quite good about not only the potential of that ship to deliver strong capital return on invested capital in the Caribbean, but it's going to give us the ability and the flexibility for us to put the other ships eventually into new itineraries and new destinations, which we think will also be good.
California Adventure, I talk about it was a bit of a brand withdrawal, as I said in a recent There was a brand negative brand impact. So we're putting capital in to fix a problem that we've had for a long time and to help grow the overall The results so far have been great with World of Color, but we have a lot more to deliver between now and 2012. So the revenue We'll start will flow over time. It's already started, but we won't be seeing it in full until Basically, the latter part of 2012. Hawaii was an investment that we made primarily to support a And I think I pretty much have covered the larger expenses.
Jay and I have both talked about the fact
that this is somewhat of
a balloon in terms of capital expenses. There will be other projects. We're building Hong Kong out, Which is relatively modest in nature and of course, the one that will be sizable is Shanghai, but that's longer term and we will have a partner, So we will not bear all of the costs, but we don't see on the horizon anything of great significance that would cause our annual CapEx to go back up to a level that we're looking at for 2011 for quite a while.
Okay. Thank you so much.
All right, Anthony. Thanks.
And your next question comes from the line of Michael Nathanson from Nomura. Please proceed.
Thanks. I have a couple. Let me start with Jay, Just a math, if we just put this quarter aside and deferral issue aside for a second, people want to know what was the rate of growth in affiliate fees for the fiscal year 2010. So looking at the year over year change, how big was still a fee growth for 2010?
So I agree that it was a very messy quarter. But if you back out all the stuff,
the affiliate fee growth was
about 9%. Okay. Fee growth was about 9%.
Okay. That's for the year, right? Okay. And that's and I guess when I asked previously, looking the next year of 2011. Is there anything that suggests that growth rates will not be within that neighborhood, any deals coming up or anything unusual about that outlook.
Well, Bob talked about the only major deal renegotiation that we've done and And also mentioned that we can't give the details of that, but there's nothing else extraordinary that is happening In the ESPN affiliation, I want to clarify one thing you said, Michael, that 9% was for Q4, not for the years old.
Okay. That
was Q4 is the year where all the ins and outs are
for it.
And could you give me for the year? Because people are really scratching their heads just all these moving pieces On an annual basis, was it any different than that?
Yes, 10% for the year.
Okay, cool. And then, Jay, just given Your history in parks, now that domestic park bookings are running up in the Q4, have you found in your history that there is a positive correlation pricing since demand is firming. So talk a little bit about the pricing scenario this quarter versus what you saw previously?
Yes. I mentioned in my opening remarks that we saw our bookings for the Q1, up 5% over Daily rate up in the mid single digits in correlation with those increased bookings. As we've been saying for a number of quarters, our strategy is to continue to Climb back towards a more long term or normalized level of pricing and we are on that path.
I also think, Michael, I know we've said this before, but we've always had promotions in the marketplace For Parks and Resorts, primarily for what we call shoulder periods or the times of the year that you don't have peak travel. And we're going to continue to do that. What we're seeing in the marketplace today is that even those promotions are slightly shorter duration than they had been and slightly better pricing than they had been. And we hope that we continue to trend in more in that direction.
Okay.
Also on the first question that you asked Jay about affiliate revenue, which ran he said ran 10% And for the year, obviously Time Warner is a large distributor and we did new deals for all of our services, including adding retransmissions. Now I don't know whether we we don't factor that in necessarily to affiliate fees, but you can expect that with ESPN's services in its entirety that there will be increases in those rates from a large distributor. And so from an affiliate fee perspective, you should expect growth in 2011.
Okay. Bob, there's just so much noise in this I'm saying that people the quarters whip around a lot and people always ask the question about what's the real rate of growth.
I know. Last year, we had I think the opposite last year where we ended up, I think from fiscal 'eight to 'nine, if I recall, we had to The other way around and I realize that it does create some confusion. This is all tied to covenants that ESPN has in terms of programming and we hit at different times. It's really just The timing issue has nothing to do with the quality of our business or the specific relationship other than the one contractual provision with the distributor. So Believe me, we have trouble following it ourselves.
And we get questions on it as well, Michael.
It takes
up a fair amount of time. Thanks, Michael. Operator, next question.
And your next question comes from the line of to Amran Khan from JPMorgan. Please proceed.
Yes. Hi. Thank you so much for taking my questions. I have 2 broad level questions. So Bob, I was trying to get a better update, maybe a new update on DVD sales trend.
I think as the economy was tougher, we saw weakness in the sales. And I think there are a lot of concerns. Is it secular versus cyclical? What kind of trends you are seeing as arguably economy is getting better? And secondly, a more of a philosophical level question.
Interactive business, revenues were up 20%, but you still lost $104,000,000 And I think for the year, you lost North of $250,000,000 And I think if you look at it as an industry, media industries are losing around $750,000,000 in the digital business. So the big Question is, how should we think about the profitability of the business? Does it really make sense for the creative companies to get into the Internet
And the overall question about DVD trends, I've been pretty vocal about that business suggesting While many believe that we are seeing cyclical trends that were due to the downturn that we thought that there were secular trends that were also impacting the Due largely to just more competition for people's time more than anything else. And I would say that while I don't know that we've necessarily That pattern worsen, I don't know we haven't seen anything that would reverse it or cause me to believe that I was wrong when I made that statement. It's a title driven business, no question about it. I mentioned Toy Story 3, which is out in the marketplace now. If ever there's a title that would do well, it would be Toy Kids watch it multiple times, to own versus rent for instance.
It will do quite well. I'm not going to make predictions as to what it will do, but if you were to look at the numbers The Toy Story 3, which will be extremely strong versus what films did just 3, 4, 5 years ago, you'd be sobered by those numbers. That said, there is a larger percentage of people with each title, a good title that's buying Blu Ray And in our case, what I'll call multiple copies, we're out in the marketplace with Toy Story 3 with a premium product that is a Blu Ray DVD, And that's doing quite well, actually represents about 80% of Blu Ray sales, meaning of the roughly 25 So we've seen some pricing leverage or improvement because we're out there offering more value to consumers. But it's a business that I think, meaning the movie business that we just have to watch very carefully because I don't think we're even with a shift in a positive direction with the economy, you're going to see a big bounce back to what we used to see in Pixar and Disney and Marvel as we think we stand a chance of doing better than the industry average provided we make good movies.
On the interactive front, obviously, we're Quite mindful of the losses that we've delivered in that business, which is basically a collection of businesses. And just about a month ago, we restructured from a management perspective So we're looking at it 2 ways. On one side, we've got a collection of games businesses and the other side, have a collection of largely dotcombusinesses. On the games front, we've seen a pretty big shift to profitability, but diversifying our presence in the business. So we're not reliant on one platform that's obviously facing challenges.
It's Our goal not only to be profitable, but obviously to get there by shifting on some of the newer platforms. Consumers are obviously spending time playing games from casual games online to mobile apps to social networking, the console. And we felt all along that we need to be where the consumers are, and we know that our games work And ultimately, in how we invest our money and how we distribute this product is going to I continue to reflect that philosophy, but in a slightly different manner. On the dotcom side, the key sites that we invest in, espn. Disney.com, abc.com are designed to do a few things.
1, they are marketing platforms, Their brand building platforms and their revenue generating platforms. I'd like to get to the point where all 3 are run under profitable circumstances. I I'd say that ESPN stands the best chance. I won't get into specifics about ESPN's profitability, but I can tell you that Sales of things like home, espn.com home screen advertising are incredibly robust. And so that's actually a good business That's what Jimmy Pataro, the new head of that business is going to do.
And then on the ABC front, we've got a business that's designed to Basically provide consumers with another screen experience and also help market ABC better. But I would be Disappointed if we continue to lose significant amounts of money in those businesses. And if we do, I would imagine we will have to redirect in some form. Thanks,
Imran. Thank you, operator.
Operator, next question please.
And your next question comes from the line of Richard Grenfell from BTIG.
Please proceed.
Hi, thanks for taking the question. Two parts. First, just a housekeeping issue for Jay. Just trying to figure out exactly what the organic earnings war. You mentioned that there was and in the press release you mentioned the $58,000,000 programming write down.
I think on the call you said I just want to make sure that there's nothing else we should be aware of in terms of if that's one or the other. And it looks like $55,000,000 of restructuring and $3,000,000 of impairment charges. And think Bob also mentioned $100,000,000 studio related write down. So just trying to figure out what was the aggregate impact on net income and what was the adjusted earnings number quarter from an EPS standpoint. And then Bob, just you mentioned Toy Story 3 doing very well on DVD.
And we're just curious if Talk to it did probably 30%, 40% better domestically than up. I was just curious if
you could give us a
sense of whether You see it tracking notably higher than what update on DVD a year ago, given that? Thanks.
Okay. Let me start with what I mentioned about the $100,000,000 write down on our film inventory I'm not going to get into the specifics of that as you know, but we made a decision to exit that business and the write off we talked about is our best assessment of where we 60,000,000 as you the numbers you threw out relative to Lifetime. There was a show write That was closer to $50,000,000 and there was a couple of other odds and ends that took it up closer to $60,000,000 Your other There was one more part of your question.
Well, the other part was for me and it was about Toy Story 3 versus UP. Toy Story 3 has only been The marketplace I think for a week. And so it's a little early to give you any predictions, not that we would even if we were later in the game in terms of how we're doing domestically versus international or domestically versus how UP did. UP was a strong title, obviously, but Toy Story Substantially greater box office globally, but I don't have the numbers in terms of how it's trending versus up on a
And then just quickly, there was a $55,000,000 restructuring and a $3,000,000 impairment. Are those is that an incremental $58,000,000 above and beyond what was in the programming asset within Cable Networks, I presume?
Yes.
Okay. So the adjusted earnings is Call it around $0.07 higher than what you reported. Is that a fair statement?
If that's what your math takes those numbers to be, yes.
The 158 and 58, okay. Thank you very much.
Operator, next question.
And your next question comes from the line of Tuna Timobi from Stender and Poor's Credit. Please proceed.
Thank you very much for taking the questions. Just first observation on the Hong Kong Attendance seem like it surged upwards. I'm just kind of wondering what's the underlying drivers of that and what percent of that traffic currently comes from Mainland China, that would be helpful.
The numbers for Hong Kong, while they're great, are due in Part to the fact that they were depressed a year ago because of the H1N1 virus scare. That said, before that occurred, Hong Kong It was trending in a significantly positive direction. So they were knocked off course somewhat by the virus and then came back on So the comparison is a little bit apples to oranges with a year ago and apples to apples with a couple of years ago. And We continue to see real growth in Hong Kong visitation from local residents, from Mainland China residents and then what I'll call other Mainland China represents somewhere in the neighborhood of high 30s to 40%
of visitation
In terms of the creativity, in fact, one of them is Toy Story based. And it's going to take a few for us to finish that project, but I think it's well timed to take advantage of some positive visitation trends and also leverage
And regarding the Disney Stores, the reconception of the stores, is that something that you Planning to rollout across entire domestic and North America stores or just kind of some select stores at this point? And any
Okay. Well, we're pretty excited about the new design. We just opened a new store, which you should see in Times Square, But we're going to proceed with real caution. We're using the design as a platform to Greatly improved the quality of the merchandise in the presentation and we're also using it to improve location, which we've done quite well. Times Square, I think is a good example of that.
But we look at specialty retail as a relatively challenging business. And with that in mind, we're going to be really Careful and watch these results quite carefully. We've redesigned in the 2018, 2019 store range, maybe it's around 20, And we don't see going significantly higher fast. We're going to wait and see how these stores do before make any decisions about rollout. It cost us slightly above $1,000,000 a store for this new design.
I think we think Probably closer to 1.4 for the initial stores, and that will trend down as we bring this designed to more, but we're going to be careful about this.
And lastly, Bob
By the way, our comp store Sales are up significantly across the chain, not just with our new stores, but they're up significantly more with the redesign, which is interesting to us. Now a lot of that has to do with some unbelievably strong product in the marketplace. Toy Story is clearly leading the way, but the Princess line continues to be strong. Cars is very strong. Fairies is strong.
And We obviously have some great IP coming to support that even more with the Tangled movie coming up and then Cars 2
That's helpful. And lastly, Bob, can you update us on your views Kitchens, you guys obviously are ramping up on that. And given the announcement from Ultraviolett, is this something that you're pretty going to Can you speak to or are we looking at it as a format war? At some point, I would hope that there would be a convergence In standards, what's your views on that?
Well, we're big believers in offering interoperability, which is what chess was designed to do. Obviously, the reason for that is that when people buy a file in some form, If you give the ability to play that file on multiple devices or in multiple locations, then you're creating more value for them. And I think lack of interoperability is an impediment or a barrier to growing digital media. So Key Justice was designed to add interoperability. We didn't get much buy in from the industry on it.
So We're using it for our own films and we've rolled it out with Toy Story 3 through a relationship with Walmart and their So if you buy the multi pack that I cited earlier of Toy Story 3, you have the ability to stream Toy Story 3 through Vudu, which is a form of interoperability, and you'll see more of that as we roll out more titles. We are not Inclined to or expect to enter a format war over this. I'll quickly get out of my element if I start getting more technological detail, but there's actually a way that Keychess can work with the ultraviolet platform. Again, don't ask me for specifics on that, but I'm sure there are others who can give you that detail. But it's not our goal to create a format war, it's our goal to product and to implement technology that ultimately creates more value to the consumer and obviously, in doing so, delivers more value distributor or the seller, whether a retailer, a bricks and mortar retailer or a digital retailer and obviously to the content owner.
Thanks a lot. Operator, we have time for one more question.
And your next question comes from the line of James Mitchell from Goldman Sachs. Please proceed.
Great. Thank you. A couple of quick questions, if I might. First of all, could you talk about the benefits of buying Viacom out of the 2 Marvel movies, Iron Man 3 and Avengers, especially any not obvious benefits. And then secondly, just to repeat Richard's question, I wanted to confirm that the $58,000,000 restructuring charge on Page 12 of the release, that is a separate charge from the $58,000,000 programming charge in the CableNet division on Page 3 of the release.
On the housekeeping question, yes, they both happen to be 58 and they are 2 distinct and additive numbers.
Excellent. The properties that we bought back the marketing and distribution rights for The way Paramount handled it, but when everything is in house, when it's your product that you're distributing and marketing and when it's Done as part of basically an overall franchise building strategy and brand building strategy for the company that you create more value. I said from the beginning of the Marvel acquisition that we would be invested in growing and supporting the Marvel brand as For instance, that's not necessarily something that was of interest to or value creation proposition to a third party distributor like They were in the business of distributing the film. We're in the business of distributing the film, building the franchise and growing the brand. And there was great value, although it's obviously, we were able to quantify it for ourselves.
I'm not going to articulate all the ways that we did that. But There's great long term value for us in not only controlling the marketing and the distribution, but of appreciating the kind value that can be created when you do that.
Great. I look forward to the movies.
Thanks, James. And thanks again, everyone, for joining us today. Note that business performance at the time we make them, and we do not undertake any obligation to update these statements. Forward looking statements are subject to a number of including factors contained in our annual report on Form 10 ks and in our other filings with the Securities and Exchange Commission. This concludes today's