Hello, and welcome to the Q2 2014 Walt Disney Company Earnings Conference Call. My name is Eric, I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note this conference is being recorded. I will now turn the call over to Lowell Singer, Senior Vice President of Investor Relations. Mr. Singer, you may begin.

Good afternoon, everyone and welcome to The Walt Disney Company's second quarter 2014 earnings call. Our press release was issued almost 45 minutes ago. It's available on our Web site at www.disney.com/investors. Today's call is also being webcast and the website and a transcript will be available on our Web site. Joining me in Burbank for today's call are Bob Iger, Disney's Chairman and Chief Executive Officer and Jay Rasulo, Senior Executive Vice President and Chief Financial Officer. Bob will lead off followed by Jay and then of course we will be happy to take some questions. So, with that, let me turn the call over to Bob and we will get started.

Thanks, Lowell, and good afternoon, everyone. We're extremely pleased with our performance in Q2, with revenues up 10%, net income up 27%, and adjusted EPS up 41% to $1.11, the highest in the history of our Company. Once again, all of our business segments achieved double-digit increases or more in operating income. Our continued strong performance reflects the strength of our brands and the quality of our content. Our extraordinary creative success and our unique ability to leverage it across the entire Company. The unprecedented global success of Disney Animation's phenomenal Frozen continues and it's now the world's highest grossing animated film of all time. The best-selling title ever released on Blu-ray and digital. The demand for Frozen merchandise remains extremely high and the soundtrack was the number one album in the U.S. again last week. And as previously announced, Frozen is headed to Broadway. Captain America: The Winter Soldier has far surpassed the first Captain America in total global box office, which obviously bodes well for our Avengers franchise. We’ve had enormous success releasing Marvel movies on the first weekend of May, including the two biggest domestic openings of all time. And we’ll continue this tradition with the Avengers Age of Ultron next year and Captain America 3 in 2016. Avengers Age of Ultron is currently shooting an early footage and looks great. This August 1st, we’re looking forward to introducing the world to more fantastic Marvel storytelling, with a great cast of new characters in Guardians of the Galaxy, which we screened last week and we believe it has strong franchise potential. Also on the Marvel front, we just announced the Disney Interactive’s Infinity 2, will feature The Avengers, as well as other Marvel and Disney characters when it’s released in the fall. Since the first version of…

Thanks Bob and good afternoon everyone. We had a great first half of fiscal 2014. In fact, it's the best first half in the Company's history. Our second quarter results once again reflect the significant benefit we derived from our strategy of investing in high-quality content. As Bob mentioned, adjusted earnings per share for the second quarter were up 41% to $1.11. Each segment delivered meaningful increases in operating income and in the case of the Studio, operating income was up over 300% to $475 million, representing one of the Studio's best quarters ever. During the quarter, the growth in operating income at the Studio was due primarily to the domestic home video release of Frozen and the film's strong theatrical performance overseas, where it has generated approximately $770 million in international box office to-date. Higher operating income from television distribution also contributed to growth in the quarter. Media Networks delivered higher operating income in the second quarter due to growth at both cable and broadcasting. At cable, growth in operating income was driven by ESPN, domestic Disney Channels and higher equity income from our investment in A&E Television Networks. Growth in ESPN's operating income was due to higher affiliate revenue and lower programming and production costs, partially offset by lower ad revenue. ESPN continues to benefit in the quarter from the absence of losses at our ESPN UK business, which was sold in the fourth quarter last year. Programming cost with ESPN were lower than in the prior year as contractual rate increases for college basketball were more than offset by the absence of costs for UK sports rights. During the second quarter, ESPN deferred $80 million less in affiliate revenue than in Q2 of last year, due primarily to the signing of a new affiliate contract. As we…

Okay, thanks Jay. Eric, we are ready to open it up for questions.

and:

Thank you. (Operator Instructions) And your first question comes from Michael Nathanson. Please go ahead.

Thanks. I have just one for Jay and Bob. Talking about Consumer Products for a second, you didn't call out Frozen in either the press release or the comments. So, can you talk about the impact Frozen will have this quarter on Consumer Products? Then if we think about it more broadly given the shortages of inventory, how big can Frozen be? Can you benchmark it to some other of your franchises, and when is the timing of Frozen in terms of hitting, if there's a catch-up trade on the inventory side? So let's start with that for a second. MoffettNathanson: Thanks. I have just one for Jay and Bob. Talking about Consumer Products for a second, you didn't call out Frozen in either the press release or the comments. So, can you talk about the impact Frozen will have this quarter on Consumer Products? Then if we think about it more broadly given the shortages of inventory, how big can Frozen be? Can you benchmark it to some other of your franchises, and when is the timing of Frozen in terms of hitting, if there's a catch-up trade on the inventory side? So let's start with that for a second.

Hi Michael in terms of the impact of this quarter, Frozen, we saw that impact much more heavily at the Disney Store than we did broadly in the merchandize area. In fact, nine out of the 10 highest selling items at the Disney Store in the quarter were Frozen merchandise. So, it not only had great sales, but increased footfall at the store and at the stores, and they had a very, very strong result. Obviously, with the release of the DVD, I think you'll see the impact, the second part of your question, the impact on our license business with the impact we see in general, high periods like back-to-school and obviously Christmas in Q4, Q1 of next year you'll see the biggest impact. But, you know whether its music, whether it's interest in the DVD or general interest in this franchise, it will continue to be a driver we believe for some time into the future. It was not in our licensing business, obviously one of the top three franchises in terms of driving as you mentioned.

Okay, and I just wondered, could Bob -- I know you spent time in the past sizing some of the franchises, how will this rank in terms of what you're thinking about compared to Princess and some of the other things you've done on the Investor Days' in the past -- so how big is this billion dollar franchise you think the next couple of years? MoffettNathanson: Okay, and I just wondered, could Bob -- I know you spent time in the past sizing some of the franchises, how will this rank in terms of what you're thinking about compared to Princess and some of the other things you've done on the Investor Days' in the past -- so how big is this billion dollar franchise you think the next couple of years?

This is definitely up there in terms of our top, probably five franchises. So you can expect us to take full advantage of that over the next or at least five years, I would guess. We're already taking a number of steps for instance to increase the character's presence in our Parks and developing some concepts around that. We're developing a Broadway show. We're talking about other forms of storytelling related to Frozen, whether it's publishing or interactive or the like. So I think this is going to be, given -- the passion for this film and these characters is so extraordinary, so well beyond what we ever even imagined that it would be hard to believe that it wouldn't sustain itself over a fairly long period of time.

Okay thanks Bob. MoffettNathanson: Okay thanks Bob.

Thank you, Michael. Operator next question please.

Our next question comes from Alexia Quadrani. Please go ahead.

Hi. Thank you. Just a question on the Parks, you've had such great success lately at the Parks and it looks like you have a few more tailwinds ahead going to the June quarter and beyond with a little bit of the benefits from late Easter, the earlier pricing at Disney World and then the opening, I think it was a final bit of the fans reservation -- renovation there. I guess, could give us any color of how we should think about, can that growth kind of continue? Then any color maybe on the cost side with the launch cost if there is anything significant to this last phase of the opening? Then I guess additional costs of MyMagic+ there is mostly behind us. JPMorgan: Hi. Thank you. Just a question on the Parks, you've had such great success lately at the Parks and it looks like you have a few more tailwinds ahead going to the June quarter and beyond with a little bit of the benefits from late Easter, the earlier pricing at Disney World and then the opening, I think it was a final bit of the fans reservation -- renovation there. I guess, could give us any color of how we should think about, can that growth kind of continue? Then any color maybe on the cost side with the launch cost if there is anything significant to this last phase of the opening? Then I guess additional costs of MyMagic+ there is mostly behind us.

Taking the back half of your question first Alexia, I don’t think you should look for any extraordinary costs as we continue to market the opening of Fantasyland with the Mine Coaster. I would say that and we’ve been saying that the only extraordinary cost which of course we expect to taper over time is our launch of MyMagic+, which in Q3 we launched to all day guests, in fact all guests now who visit Walt Disney World and we’re still very much in the process of communicating its benefit, and I think guests are picking up on that very quickly. In terms of the business overall, you mentioned the one week of Easter that will give us about $45 million lift in Q3. And looking forward, it’s very hard to look in a crystal ball, but we gave you to pacing on bookings and rates. You’re right that we have the price increase earlier at Walt Disney World that will continue to help us year-over-year relative to when we took that price increase last year, and we don’t have any crystal ball that we haven’t revealed to you that I want talk about any further.

Then just as a follow-up on the Parks. I don’t know how much you can say on this front, but given you past experiences, is there any sort of general commentary you can give us and how we should think about the profitability ramp when Shanghai opens? JPMorgan: Then just as a follow-up on the Parks. I don’t know how much you can say on this front, but given you past experiences, is there any sort of general commentary you can give us and how we should think about the profitability ramp when Shanghai opens?

I don’t think it's prudent to talk in advance of -- of an event that’s over a year and a half away. I think that we are obviously very happy with the progress we're making in the construction of that project. We’re very excited about the market trends that we see in terms of the general ability of the traveling and the increase in the ability of the traveling middle-class in China, the proximate population that we feel we can market to, but I don't want to make any predictions about what will happen post opening.

Okay thank you very much. JPMorgan: Okay thank you very much.

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And the next question comes from Jessica Reif Cohen with Bank of America. Please go ahead.

Thanks. The first one is for Bob. It's clear that this branded content strategy in the film division is unique, and obviously it's a huge success. So I was just hoping you could give us some color or your views on where you think you are on this strategy. As this fully rolls out, I know are you comfortable now, are you confident that Marvel is at a new higher level, I mean, it seems like each division is -- given just a few films is very focused, are really working and working throughout the organization. So I would love to get your views on kind of how far you are on that strategy. Then for Jay, you mentioned with the new FASTPASS, part of the MyMagic+ rollout, that capacity, that you can get more people in and out of the Parks, how much did capacity increase? Bank of America Merrill Lynch: Thanks. The first one is for Bob. It's clear that this branded content strategy in the film division is unique, and obviously it's a huge success. So I was just hoping you could give us some color or your views on where you think you are on this strategy. As this fully rolls out, I know are you comfortable now, are you confident that Marvel is at a new higher level, I mean, it seems like each division is -- given just a few films is very focused, are really working and working throughout the organization. So I would love to get your views on kind of how far you are on that strategy. Then for Jay, you mentioned with the new FASTPASS, part of the MyMagic+ rollout, that capacity, that you can get more people in and out of the Parks, how much did capacity increase?

I'm obviously biased, Jessica, but I think the strategy of making branded movies is definitely working and I think that we really are just seeing the beginnings of it in terms of their impact on the Company, particularly since we have a fair amount of visibility about the pipeline from all of these great brands. It's clear for instance that we've continued the great success at Pixar since that acquisition and that that acquisition has had a great impact on raising the quality level and the success of the films of Disney Animation, not just with Frozen, but Tangled before, and Wreck-It Ralph and films coming up. Marvel is, as far as we're concerned is just getting started. The results of Captain America, though I think are very, very telling, because when you look at the film that is approaching almost $700 million in global box office, I think $680 million, and you compare that to Captain America 1, which did under $400 million worldwide and even look at it versus Thor movies, a few of the Iron Man movies, you're looking at a film that has actually done substantially better than a lot of the Marvel films that we put out. Now, it was a great film, but it's clear that momentum is building for that franchise and with Avengers 2 in production and coming up and characters from Avengers still very much in favor with audiences, I think there is huge potential there. In addition to that, we've got a new film, Guardians of the Galaxy coming out August 1 in the United States this summer, which we've seen, I mentioned in my comments. We feel quite good about that too. That's a whole other Marvel realm or universe in terms of where it takes place, the characters…

In terms of your second question on FastPass+ and MyMagic+ in general. In my opening remarks, I talked about what's happening, I want to emphasize that whatever I say about both of these new products that we are in very, very early days and we have to sort of calibrate what our findings have been by the fact that we're only a few months in. But what we have found and, of course, capacity increases only really matter in our peak days and weeks. But because of FastPass+ the ability to basically plan your day as it relates the top attractions in the Park in advance. Has had huge pickup by our guests. It allows a better distribution of guests around the Park, and quite often the amount of capacity we can let into the Park is highly driven by pinch points, in particular areas of the Park that we don't want to get to overcrowded. So when guests are better distributed around the Park, we can often allow more in. I don’t want to get into the specific numbers, it is in the thousands. But I don’t want to get into the details about what that might ultimately mean financially. But we know that from a guest experience when you're down at Walt Disney World on peak days for Easter, Christmas, typically, some weeks in the summer, it is a huge enhancement in your experience when you can go to the Park you want to go to, on the day you want to and not fear that it’s going to be closed out. So we see this is all great stuff. Again, very early in the process, but we’re very, very encouraged across all the variables that we had hoped to achieve with MyMagic+ and FastPass+.

Thank you. Bank of America Merrill Lynch: Thank you.

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The next question comes from David Bank with RBC Capital Markets. Please go ahead.

Thanks very much. A question I guess on Maker Studios. Your successful acquisitions of scale I think historically certainly some Bob, you’ve been running the Company have tended to focus on brands that you simply can't build right there. They had to be bought, they had incredible value, and most of them have turned out pretty successfully. So, how do you put Maker in that context, what couldn’t you build -- what is the world-class brand that you’ve acquired here and how does the Disney difference kind of make it a more powerful platform? RBC Capital Markets: Thanks very much. A question I guess on Maker Studios. Your successful acquisitions of scale I think historically certainly some Bob, you’ve been running the Company have tended to focus on brands that you simply can't build right there. They had to be bought, they had incredible value, and most of them have turned out pretty successfully. So, how do you put Maker in that context, what couldn’t you build -- what is the world-class brand that you’ve acquired here and how does the Disney difference kind of make it a more powerful platform?

Well, I think Maker has established itself as a bit of a brand and what is clearly a fast-growing space of short-form video online or on mobile platforms. But as we look at Maker, we see it first and foremost as a distribution platform and a very successful one, one that not only can command more eyeballs, more consumption, but with that more advertising revenue or revenue in general. We did not believe that we had the ability in the Company near term to distribute as effectively and to sell as effectively. We also thought they had an expertise from a production and a creative perspective on creating short-form video that we didn't think was as deep as it could've been at Disney. So we bought a lot of different capabilities, but mostly distribution. As we look at it, we believe that by creating access for the Maker people to some of our big brands and characters and storytelling, Star Wars would be a perfect example of that, Marvel, another one, that we can actually allow the Maker people to substantially improve the distribution or the reach of short-form video using these characters and stories, but also add their expertise on the production side. They also have great access to data and algorithms that you wouldn't have unless you had volume. It will take a long time to build the kind of technological expertise in that regard to essentially maximize the potential of a video online. They've got all that. So, we look at this as a great opportunity, both for Maker and for Disney, Maker using our IP, Disney using their expertise to distribute our product much more effectively. The other thing I want to add is, this is also potentially a great marketing opportunity for the Company. More and more, we're taking advantage of short form video and distribution for marketing messages for our movies, our theme Parks and our television shows. You can see the marketplace with a fair amount of it, but getting maximum traction from the distribution perspective takes a lot of expertise and a lot of experience and they've got that. So we think there is a huge marketing opportunity for this Company.

Can you give us any detail in terms of impact on the income statement, just as a quick follow-up? RBC Capital Markets: Can you give us any detail in terms of impact on the income statement, just as a quick follow-up?

It will be dilutive, David, for a couple of years, a couple of cents.

Thank you very much. RBC Capital Markets: Thank you very much.

You are welcome.

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The next question comes from Benjamin Swinburne with Morgan Stanley. Please go ahead.

Thanks. Jay, I just wanted to confirm that you're still expecting cable expense growth, I think in the high singles on programming this year, is that still the expectation, I know first half was quite a bit lower? Morgan Stanley: Thanks. Jay, I just wanted to confirm that you're still expecting cable expense growth, I think in the high singles on programming this year, is that still the expectation, I know first half was quite a bit lower?

Yes. You know we've said from the outset and I said to many of you at the Investor Day that we always expected those programming cost to be back-loaded in the second half of the year. It is simply related to the calendar of sports right as they role in. I ticked a couple of them off. I guess I'll do it again, Major League Baseball being one, the new NFL contract, which kicks-in in Q4 of '14 and we've got the World Cup this year in the third and fourth quarters. Those are the biggest drivers. There is also some college football in there. Lastly as I had mentioned before the launch of the SEC Network, so that is what is driving the somewhat back-loaded nature of our increase in costs for the year.

And this might be a bit of a stretched time used together, Bob, but when you look at the bet you've made with Maker and the bet on online video and maybe the agreement you've made with DISH, which at least it seems it that allows them to move towards an online streaming bundle. It seems like the Company is taking a view that they want to be -- you want to have Disney present for the future of television or future of streaming. I'm wondering if you look at that as a hedge against pay-TV and what will be happening in pay-TV, do you view them as complementary? I know this is probably a 10-year view than a six-month view, but how are you looking at those decisions in the context of your business, which as you outlined a few weeks ago at ESPN, the Media Networks throw off a lot of cash flow for the Company and the pay-TV bundle drives that. So any color there would be helpful. Morgan Stanley: And this might be a bit of a stretched time used together, Bob, but when you look at the bet you've made with Maker and the bet on online video and maybe the agreement you've made with DISH, which at least it seems it that allows them to move towards an online streaming bundle. It seems like the Company is taking a view that they want to be -- you want to have Disney present for the future of television or future of streaming. I'm wondering if you look at that as a hedge against pay-TV and what will be happening in pay-TV, do you view them as complementary? I know this is probably a 10-year view than a six-month view, but how are you looking at those decisions in the context of your business, which as you outlined a few weeks ago at ESPN, the Media Networks throw off a lot of cash flow for the Company and the pay-TV bundle drives that. So any color there would be helpful.

Yes, I feel it as complementary. I mean, you're throwing a lot of different concepts into the mix there. Maker versus the -- Maker and the streaming video, it's possible through the new DISH deal. Now in the Maker front, we think short-form is a front tier opportunity for us, meaning huge growth in consumption. We'd like to take advantage of that growth by essentially generating more revenue and more consumption of our product, not just for marketing messages, I mentioned a few minutes ago. So we really believe in essentially growth in entertainment on new media platforms, short-form and long-form too. If you look at what we did with Disney Movies -- the DMA product, Disney Movies Anywhere that we launched recently is another example of that. We think that you're going to see continued growth of consumption of media, entertainment in particular on mobile platforms, smartphones and tablets. We feel we need to be present in that space. On the DISH side, I mean that’s a completely different story. The bet that’s being made there by us and by DISH is that that product has the ability to attract people who may not have already signed up for multichannel service and getting them to sign up for something instead of nothing, we believe would be a real value to us. There is I guess an example of something that is very complementary to you call the pay-TV model. The same is we’ve been doing with the WATCH apps that we’ve been pretty aggressive with, a complementary product to make the pay-TV model more attractive for subscribers.

Got it, thank you. Morgan Stanley: Got it, thank you.

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The next question comes from Todd Juenger with Sanford Bernstein. Please go ahead.

Hi. Thank you. I got a question on ABC and then a follow-up on the Parks. For ABC, according our numbers it looks like primetime ratings were down, I don't know, maybe double-digits year-over-year, which by the way was not unique among broadcast networks, and yet you had total revenue that was flattish and profitability was up. So my question is, as you think about that business going forward, how you think about -- I’m sure, your plan is not to continue to have ratings erosion of that degree, but how do you think about putting capital at risk pursuing higher audiences versus the reality perhaps that there might be some audience erosion that’s inevitable and the new economic formula that might suggest to you focus more on profitability? Sanford Bernstein: Hi. Thank you. I got a question on ABC and then a follow-up on the Parks. For ABC, according our numbers it looks like primetime ratings were down, I don't know, maybe double-digits year-over-year, which by the way was not unique among broadcast networks, and yet you had total revenue that was flattish and profitability was up. So my question is, as you think about that business going forward, how you think about -- I’m sure, your plan is not to continue to have ratings erosion of that degree, but how do you think about putting capital at risk pursuing higher audiences versus the reality perhaps that there might be some audience erosion that’s inevitable and the new economic formula that might suggest to you focus more on profitability?

First of all, ABC is still profitable. As we look at the year that they’ve had. We look at first of all the C3 rating, 18 to 49 because that’s the primary driver of revenue. Because the network -- ABC has very little sports, some of it provided by ESPN, but less than certainly some of the other networks. We tend to look at non-sports programming, as we see it -- we're down high single-digits in the C-3 18 to 49 number exports for this season, little bit more than that for the quarter that we just reported. The name of the game obviously is strengthening our programming, which is what ABC is just in the middle of with a lineup of pilots that have just been screened and decisions that are being made this week to populate the schedule for the fall is our hope that we will reverse the tide of some of that ratings erosion, it better shows on the air, quite frankly, and that's what the mission is. In addition to strengthening programming and raising ratings and hopefully revenues, the marketplace cooperates, the goal is also to own a substantial amount of that programming. And in today's world, that can create huge value for the owner of that property. As we've seen in many, many different cases, both with our programming and programming that is created by others, thanks to obviously many new entrants in the marketplace, Netflix and Hulu, among them. So we're still viewing this business as a profit generating business and a business that can generate a substantial or acceptable returns on invested capital for the Company.

That's a perfect segue into the follow-up I wanted to ask on Parks. Jay, I don't know if you or Bob want to take this, but let me take another run at the Parks because return on invested capital is a metric that in the early days of latest cruise ships, is a metric you actually I think shared with us a couple times. If I recall correctly, you talked about ROICs in the mid to high teens for the new cruise ship operations. I would think that, at least for Disney California Adventure you'd have enough time now to have measured that. In fact, I'm quite sure you measured it. I wondered, if you'd share with us what you think the returns on that capital deployment have been? Then put that in the context, now the future to come openings including of course Shanghai and the new capital you decided to put on top of that and sort of what your hurdle rates and thoughts around ROIC in that is? Sanford Bernstein: That's a perfect segue into the follow-up I wanted to ask on Parks. Jay, I don't know if you or Bob want to take this, but let me take another run at the Parks because return on invested capital is a metric that in the early days of latest cruise ships, is a metric you actually I think shared with us a couple times. If I recall correctly, you talked about ROICs in the mid to high teens for the new cruise ship operations. I would think that, at least for Disney California Adventure you'd have enough time now to have measured that. In fact, I'm quite sure you measured it. I wondered, if you'd share with us what you think the returns on that capital deployment have been? Then put that in the context, now the future to come openings including of course Shanghai and the new capital you decided to put on top of that and sort of what your hurdle rates and thoughts around ROIC in that is?

You may remember, actually Todd I'm not sure you were following our Company then, but when we announced the expansion of Disney California Adventure, we said that we believe that the returns would be attractive i.e., above our cost of capital at that time. In fact, so far, and, of course, returns in the Parks business are based over the long-term, but so far we have been absolutely thrilled with the results of that investment that we put in place and to a large extent on some variables meeting and others exceeding our expectations for what that investment could bring. So we still are very, very bullish that the returns that you and we are both going to feel very good about those returns. Although, I'm sorry, I'm not going to share the explicit numbers with you, but when I say please, I certainly mean above our cost of capital. Similarly for Walt Disney World, the expansion there, we don't take on projects that we don't believe will exceed our hurdle rate and the signs are absolutely go forward great on Walt Disney World. Bob talked earlier about the world's interest in Frozen. That is very focused on Anna and Elsa. You remember that the expansion of Fantasyland was very focused around Princess meet and greets and we can only expect great things there. You've seen the numbers quarter-after-quarter at Walt Disney World, including the last quarter where we've been able to price behind these investments and still feel very strong about our volume going forward. So we feel very good about it, I wish I could be more forthcoming with the numbers, but as I say they will work themselves out or payback over time, all signals so far are very strong.

If can just, thanks Jay, just a very quick follow-up, when you think about China, I think I understand your cost of capital philosophy, is there an extra hurdle rate sort of a risk factor that you throw in top there that makes your expected returns need to be higher, is that a fair statement? Any color you put on the way you think about it, it'd be great. Sanford Bernstein: If can just, thanks Jay, just a very quick follow-up, when you think about China, I think I understand your cost of capital philosophy, is there an extra hurdle rate sort of a risk factor that you throw in top there that makes your expected returns need to be higher, is that a fair statement? Any color you put on the way you think about it, it'd be great.

Well, the China situation because it's a shared investment, is a little more complicated situation. First, we don't like to take on projects that are on a total ownership basis, don't have returns that we would like to see for our investors. But remember we have a much more limited investment and the flows are complicated between our partners and ourselves. So we also look at the return to Disney's investment in that. In both cases, we feel very good about it. We do risk adjust our hurdles rates in general. I don't want to get into the details of that, but I think you know that most companies based on relative inflation rates and other risk factors adjust international hurdle rates appropriately and we do as well.

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The next question comes from Anthony DiClemente with Nomura. Please go ahead.

Hi. Thanks. A couple of questions. First, Jay, I think on ESPN on the last quarterly call you had said pacing was up. You mentioned in your prepared remarks that just the ad market has been soft, I mean, we've seen that in the other media companies earnings reports. I mean, how would you really explain the slowdown in the market since your comment. Does it seem like something temporary that happened towards the latter part of the quarter, or is it something that’s perhaps a little bit more ongoing or permanent, be it budget shift to digital or anything any other call out in terms of the ad market more broadly. Then second question for Bob, just had a question about Shanghai in terms of your decision to accelerate the CapEx, should we think about that as more of an acceleration or an addition to the existing plan? Then just wondering if you can give us some more color on the updated cadence of CapEx for Shanghai as we get closer to the opening? I’m just wondering if that acceleration or addition has any impact on potential capital returns in 2015. I know that you’ve not given guidance on that, but would love to hear any incremental color given your decision on the $800 million? Nomura: Hi. Thanks. A couple of questions. First, Jay, I think on ESPN on the last quarterly call you had said pacing was up. You mentioned in your prepared remarks that just the ad market has been soft, I mean, we've seen that in the other media companies earnings reports. I mean, how would you really explain the slowdown in the market since your comment. Does it seem like something temporary that happened towards the latter part of the quarter, or is it something that’s perhaps a little bit more ongoing or permanent, be it budget shift to digital or anything any other call out in terms of the ad market more broadly. Then second question for Bob, just had a question about Shanghai in terms of your decision to accelerate the CapEx, should we think about that as more of an acceleration or an addition to the existing plan? Then just wondering if you can give us some more color on the updated cadence of CapEx for Shanghai as we get closer to the opening? I’m just wondering if that acceleration or addition has any impact on potential capital returns in 2015. I know that you’ve not given guidance on that, but would love to hear any incremental color given your decision on the $800 million?

Okay Anthony, let me take the first half of that, which was the ESPN ad sales. Obviously when we spoke to you all last quarter, we gave you what our pacings were, that was a fact. I think that what happened in the quarter -- there are couple of complicating factors that are not typical of any quarter for ESPN. First, you know, every four years we have the perturbation in the sports market of the Winter Olympics or the Summer Olympics in the other years, it's very hard to predict what the impact of that is going to be. We took a guess at it, the impact turned out to be a little more than we thought. We also -- when you're broadcasting live sports, the match ups and the cities involved in the matchups announce speak specifically about the NBA, have something to do with the ads, you sell behind them. Whether it's Los Angeles, New York, or Boston three very big markets for basketball are not involved in the NBA post-season. So they affect our ratings. We already mentioned that we thought the ad market was a little bit soft and look I don't think this is a permanent situation. We've seen it this quarter. I don't expect it to be a long-term phenomenon.

The question about Shanghai and CapEx, we always anticipated expanding that Park. In fact, the property that we've allocated -- that's been allocated for the project provides ample opportunity for expansion. As I said last week or early this week and as we indicated earlier today, what we're doing year after basically seeing some rather dramatic changes in the marketplace that we believe were positive is that we're accelerating investment, the $800 million which is what we announced we were accelerating it by is obviously shared with our partners, the Shanghai government. So, its impact from a capital expense perspective is relatively modest for us. As is our hope that with this expansion, which increases capacity, that most of it will be available to us at opening, puts a little more pressure on us because we're essentially building something that is bigger, but that is certainly the goal. Then you can expect in success, which we have every reason to believe will occur that there will be continued investment in this Park because of the size of the property and the size of the market, most populous city in the most populous country in the world, which is we've said a few times, 330 million people that we believe are potential Park guests living within a 3.5 hour trip. It's pretty compelling circumstance or opportunity for us and our partners and probably will deserve an infusion of more capital investment because we think the returns are going to be rather significant for us from this project.

Anything, you could tell from the buyback. Okay thanks. Nomura: Anything, you could tell from the buyback. Okay thanks.

On your question on the CapEx. So I want to first of all what Bob just talked about, what you asked about, is really a '15 and '16 event. It won't affect our capital expenditures in '14. In fact previously, what I had told all of you was that, we expected our CapEx in '14 to be $1 billion higher than it was in '13, and when adjusted for the Shanghai partner’s contribution, it would be $600 million higher. In fact, I want to update that, I think our CapEx in 2014 will actually be $800 million higher not $1 billion, and $400 million not $600 million on an adjusted basis after the contribution from Shanghai. And that simply has to do with the timing. Obviously when you put a big project in place, you have all kinds of planning and you map against how that money will be spent. It's slightly different, in fact it's slower. It's a little bit slower, which means that spending will be out in '15 and '16.

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The next question comes from Jason Bazinet with Citibank. Please go ahead.

Just a question for Mr. Rasulo, I think in the past you mentioned that for the total outlays for Shanghai, you did come out of the investing activities and then you’d see add back under the financing side for the portion that is not yours? Are we already seeing those add backs under the financing line of the cash flow statement? Citibank: Just a question for Mr. Rasulo, I think in the past you mentioned that for the total outlays for Shanghai, you did come out of the investing activities and then you’d see add back under the financing side for the portion that is not yours? Are we already seeing those add backs under the financing line of the cash flow statement?

Yes, we are Jason. Those are being added in. Look they’re not day-for-day obviously. We extend the capital, there is a process by which our partner reimburses the share of the spending, but it is lockstep is not delayed.

That’s just under financing other in the numbers that you give us? Citibank: That’s just under financing other in the numbers that you give us?

That’s correct, Jason. Thank you.

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The next question comes from David Miller with Topeka Capital Markets. Please go ahead.

Yes hi guys, congratulations on the stellar results. Just another question on Shanghai. Bob or Jay, just correct me if I'm wrong, I remember maybe five years ago -- four years ago, five years ago or so when Hong Kong opened, the kind of the core criticism, if you will, against the Park at the time was that just that it was too small. Indeed I think crowds just sort of overwhelmed that property for the first six or nine months or so. Is the residue left over from that memory part of the reason why you guys accelerated this investment in Shanghai because you just want to be sure that it's not too small or what led to this specifically? Was there another market study done or another sort of demographic study done to make you determine that the eligible patrons as you alluded to, will get into the Park quicker? I mean, if you could just answer that, I'd appreciate it. Topeka Capital Markets: Yes hi guys, congratulations on the stellar results. Just another question on Shanghai. Bob or Jay, just correct me if I'm wrong, I remember maybe five years ago -- four years ago, five years ago or so when Hong Kong opened, the kind of the core criticism, if you will, against the Park at the time was that just that it was too small. Indeed I think crowds just sort of overwhelmed that property for the first six or nine months or so. Is the residue left over from that memory part of the reason why you guys accelerated this investment in Shanghai because you just want to be sure that it's not too small or what led to this specifically? Was there another market study done or another sort of demographic study done to make you determine that the eligible patrons as you alluded to, will get into the Park quicker? I mean, if you could just answer that, I'd appreciate it.

Well, we've learned a lot from Hong Kong. Actually the problem that we had was a good problem to have and that demand was greater than we had expected initially. This is a different circumstance in many respects, but it doesn't mean that some of the learnings that we glean from Hong Kong can't be applied, and we are doing that and we have every reason to believe we're going to continue to do that. So I guess that's a way of my saying that we have -- as we've looked at this market, since we made the decision to build, since we broke ground and we've seen further development, more development than we expected, we clearly are reacting to what we believe will be greater demand than we initially anticipated for the Park in its first -- a year of operation or its early years of operation. We want to make sure that we build enough capacity to meet that demand. There are other things we’re going to Resort to, to manage expectations in terms of visitation. For instance, it’s likely that when we go to the market selling tickets there will be tickets that are date specific tickets, so that we can manage in effect, traffic or visitation much more carefully than you would if you just sold tickets and didn’t have a date, and had no idea when the people who bought the tickets were going to show up. So, we’re going to apply a number of things that we've learned over the years both from Hong Kong and other Parks, in how we -- what we build, how much we build, and how we operate.

Okay thank you very much. Topeka Capital Markets: Okay thank you very much.

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Okay. And the last question comes from Michael Morris with Guggenheim Securities. Please go ahead.

Thank you. Good afternoon guys. One on the DISH personal subscription over-the-top service. What is -- how important is it to you that they reach the critical mass needed for that service to take off? And is it a situation where the ball is really in their court to go out and get partners? Is it something that you can actively support in some way and bring other content companies on board? Are you looking at a similar service with any of your other distribution partners? Then I have one on Parks. Guggenheim Securities: Thank you. Good afternoon guys. One on the DISH personal subscription over-the-top service. What is -- how important is it to you that they reach the critical mass needed for that service to take off? And is it a situation where the ball is really in their court to go out and get partners? Is it something that you can actively support in some way and bring other content companies on board? Are you looking at a similar service with any of your other distribution partners? Then I have one on Parks.

It’s DISH’s responsibility to get critical mass from a program perspective. I saw Charlie Ergen last week and he is doing just that. I’m not going to give you an update on how he’s doing, but it’s their responsibility. We don’t intend to participate in that pursuit at all. We’d like to see this product rolled into the marketplace because we think it's a smart thing for us to do, something that we should certainly try is a critical, no, but it's certainly critical that it gets critical mass from a programmer’s perspective in order to bring it to market. And the second part of your question...

Second part on DISH.

Other distribution partners, whether you are... Guggenheim Securities: Other distribution partners, whether you are...

Are you going to sell it to others?

I'm sorry, yes, yes, yes. We're open to selling it to others, but we have not engaged in any of those discussions yet.

Then at Parks, Comcast is committed to investing in both the Park and the Resorts, the hotels down in Orlando. I'm curious what have you seen in the past when competitors have invested locally? Is it a drag or does it actually generate more traffic in the region? How does that usually shakeout? Guggenheim Securities: Then at Parks, Comcast is committed to investing in both the Park and the Resorts, the hotels down in Orlando. I'm curious what have you seen in the past when competitors have invested locally? Is it a drag or does it actually generate more traffic in the region? How does that usually shakeout?

What we've typically seen is that it drives more traffic to the region. Basically business goes up in Orlando or Central Florida. So we don't necessarily view it as negative for us because it really drives more people to the area. We not only have great product, but we have new product too. Fantasyland is the most recent example of that. As you know, we're developing Avatar for that Park, looking at a variety of other things to add in Orlando, opening up a hotel. Four Seasons is opening up this summer, for instance. So there'd be plenty more that we'd put into the marketplace that will take advantage of any growth the marketplace has.

Great. Thank you. Guggenheim Securities: Great. Thank you.

Okay, thanks Mike, and thanks again everyone for joining us today. Note that a reconciliation of non-GAAP measures that we'll refer to on this call with equivalent to GAAP measures can be found on our Investor Relations website. Let me also remind you that certain statements on this call may constitute forward-looking statements under securities laws. We make these statements on the basis of our views and assumptions regarding future events and 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 risks and uncertainties and actual results may differ materially from the results expressed or implied in light of a variety of factors including factors contained in our Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission. This concludes today's call. Have a good afternoon, everyone.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.