June 10, 2008 Deutsche Bank 2008 Media and Telecom Conference

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Deutsche Bank 16th Annual Media and Telecommunications Conference

JUNE 10 , 2008

Disney Speaker:

George Bodenheimer Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

P R E S E N T A T I O N Doug Mitchelson – Analyst, Deutsche Bank

We are going to get started. We are on the clock. We have 45 minutes. Very, very pleased to have with us today George Bodenheimer, who is the Co-Chairman Disney Media Networks, President of ESPN. As you all know, George has been integral to building up ESPN to what it is today. I think there is a feeling on Wall Street that ESPN is a strong business, a terrific business. We're not getting the questions we got three or four years ago about dire things about programming costs and competition and other areas. But I still feel like within Disney there are two areas that are undervalued fairly dramatically. One is ESPN. There is more growth at ESPN than people realize. Investors are discounting it. I think in consumer products also is an awful lot of growth that is not necessarily being discounted in the stocks.

Deutsche Bank Securities Inc. Media and Telecom Conference

June 10, 2008

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I was pretty excited when George was willing to come speak today, because right now ESPN represents one-third of Disney’s EBIT. It's pretty amazing. One-third of Disney's EBIT comes from the business that this man right here runs, and again I think the prospects are stronger than many believe. So with that, George is going to do a bunch of slides and we're going to do some Q&A after that. We will try to leave some time for a couple questions from the audience. Please welcome George. George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

Thank you, Doug. A pleasure to be with all of you today on this beautiful day here in New York City. I have just a few slides to give you a brief look at ESPN, really kind of top-line stuff. It is a great time to be in our business. The whole sports pie continues to grow quite a bit. Ratings on ESPN are up significantly this year on a number of properties. We had a number of firsts - highest golf telecast ever on cable and with our debut of the Masters this year, NASCAR is going well, double-digit growth in NBA ratings which we are enjoying right now. So, really things are going extremely well and it is a great time to be in the business. The entire pie, if you will, to sports consumption is growing. And as you will see, in these slides and as we talk today, ESPN is continuing to ride that wave. What you see here are really the key drivers of our growth. As I mentioned, our core business, the television business for us continues to be extremely strong and continues to grow. At the same time, we are expanding rapidly in digital media and I will touch upon that again later this morning. But it is not only helping us to attract new fans and satisfy existing fans, of most importance to you, it's helping us drive new revenue opportunities. Our international business is continuing to grow nicely. I will touch on that in a moment. I am pleased to have Christine Driessen, our CFO, here with us this morning. Christine, her title doesn't reflect it but she is really partners with Russell Wolfe, the fellow that runs our international business and she and he deserve a lot of credit for the growth in our international business. Our branded strength frankly continues to soar. That's s-o-a-r. Just kidding. One of my goals was to see if I could get you guys to laugh this morning, so I guess we can check that one off the list. All kidding aside, the ESPN brand continues to grow in every study we look at, every cable operator study, every advertiser study. One of


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them -- I am obviously most proud of the ones that come directly from the consumers and the fans, where we continue to do well. But a key barometer of our continued success would be what our distributors think of us. And our primary distributors -- cable, the gentleman you had up here preceded me from DirecTV, and the telco groups, are our primary distributors and for seven years in a row, rated ESPN and ESPN 2 the most valuable services. That is a cable point on cable systems, seven years in a row. I'm very proud of that and that is going to enable us to continue our growth. Lastly, I guess what I'm most proud about, I have been fortunate enough to be at this Company for almost 28 years and we have a very stable management team. We don't have a lot of turnover at ESPN. We have a higher retention than a lot of other major media companies. We try to provide a challenging yet nice place to work and we attract a very good group of executives who are motivated to grow our company. But the passion for the ESPN company amongst the ESPN employees, and specifically the management team, is extremely high. And if I was investing in major media companies, I would want to understand kind of, “where's the head of our management team” and it is very boldly behind ESPN's continued growth. I'm very proud of our management team, as are all of our people. Our core businesses, I touched on a moment ago, distribution - we have locked up our distribution for a long term. In fact, 100% of our distribution is locked up through 2010 and 80% plus through 2012. I grew up on this side of the business. I'm a little partial to it. I don't really think any other company has the quality of distribution contracts that ESPN enjoys. And we certainly lead the industry in the generation of attracting value or rates for what we deliver. Sports rights, we have also been extremely successful in - as Doug put it - locking up sports rights. Whether it is the National Football League for eight years or Major League Baseball for eight years, or NASCAR for eight years or the Big 10 conference for ten years, we’ve continued to be able to grow or to secure rights long-term - which, obviously, helps us establish a rate structure or a fee structure for this element of our expense that we can predict. And lastly, I think we're way out in front of acquiring the broad rights that we need. It is no longer about just acquiring a right to air an event in a three-hour window on a television network. If you are not acquiring the rights to exploit on the Internet, on your wireless devices, it will be of less use to you going forward as those mediums


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explode. And we are all over exploiting that and gaining those rights and we have been very successful. Advertising, obviously our bread and butter, is that while 30% of our audiences is made up of women and by no means am I implying that women are not a big part of our business or great sports fans, the bread and butter advertising business for us historically has been and will continue to be the delivery of the young affluent males - that is really our bread and butter. Most sports viewing is done live, therefore it is a bit DVR resistant and people want to see what is happening and when it is happening. We have an integrated sales force. If you talk to an ESPN salesperson, they are versed and motivated and incented to sell across the entire swath of ESPN, not just TV, or you are not going to see a radio salesman tomorrow or just a dot.com salesman the next day. Our people are empowered and knowledgeable across all of those. I mean, I love talking to CEOs or heads of marketing of consumer companies. I say, if you are interested in associating your brand with our Company, and here's all the reasons why I think you should be, why the heck would you just want to buy television? We have industry-leading mediums online, on radio, in print and on wireless and that is a pretty compelling message. So we are continuing to work hard at integrated sales and as a result we drive premium CPMs for our inventory. I wanted to give you just an example, I talked about distribution. I said industry-leading rates. I will move through those quickly. I mentioned this point a moment ago, about 80% of our sub base under contract through 2012. We continue to do longer-term deals, both on the distribution side as well as the sports rights business as well. And as I said, we're doing a good job of capitalizing on the high value we bring in those affiliation agreements. Here is a look at sports rights, and this just shows the next five years. In some cases these go out longer, but you can see the top-quality sports leagues and conferences that we are already affiliated with through this period of time which - no bragging, it is just a fact, no other company has that collection of sports rights under one contract at one time, it just leads the industry in doing that. And that helps us lock in our business as I pointed out earlier. You hear Bob Iger and Tom Staggs often talk about the “Disney Difference.” Here is our version of this. Whereas Disney takes a wonderful property like a High School Musical and uses it throughout the Company in all of our different businesses, the ESPN difference - I mentioned earlier about this swath of rights we're able to capture and


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we're negotiating now. Here's an example of the NBA where we can use the NBA product on 17 different platforms, and we will be all day today, including tonight for game three of the Finals in Los Angeles. In addition, we have rights to utilize the NBA and other major products on technologies that have not been invented yet. So, it's not as if we're able to just capture what we know today and we have to go back to the League and renegotiate. We're able to say look, we're in this business together. It is good for you when we can exploit your product across all of these mediums and we cannot predict what is coming up tomorrow. Neither can you. So we would like to acquire those rights from you and therefore make it easier for us to move quickly to market and exploit those when they come to market. So I think the NBA - we call this the wheel - is a good example of the “ESPN Difference” which dovetails nicely with the “Disney Difference.” I really don't consider ESPN a domestic company that happens to have an international department. I really view ESPN as a global sports media company. You can see the areas of the world where ESPN has networks. That's over 30. We televise in 15 different languages now. We're acquiring local rights, so in India, for example, we are all over cricket. In Latin America, we're all over soccer and so on and so on. This is not just taking an American-style company and trying to exploit it around the world and tell people what to enjoy. We're giving people the product that they wish to have in their local markets. We have 15 different SportsCenters now around the world. So not only is the ESPN brand growing but one of our most important sub brands is growing as well, SportsCenter. Lastly and really to conclude, everything our company does is about the ESPN mission to serve fans. Now we have updated it over the years as the industry has grown to serve sports fans wherever sports are watched, listened to, discussed, debated, read about or played. And I feel very confident that if you walk the halls of our company, our headquarters in Bristol, Connecticut, about 100 miles north of here, and you asked people what our mission was, an extremely high degree of our employees would know exactly what the mission is. And often times, people give me way too much credit than I deserve and they say, “how do you figure out what you're going to do next?” or “how do you figure out what technology you're going to move into next?” And I give them the same answer every time, “I don't know. I cannot predict the future any better than you can.”


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But what I do know is that I have nearly 6,000 employees who understand precisely that that is the mission of the Company. And not only are they full of ideas and passion for our Company but they almost demand that when they have a good idea for a way to serve sports fans - high def is probably the best example - when they see an opportunity to serve fans, they almost demand that management support them. I am being a little facetious, but not really. HD was a great example. You might recall four years ago, HD, the whole industry was throwing up their hands, “oh my gosh, there are competing formats. Oh my gosh, no one knows if this is really going to develop. Oh my gosh, no one really knows if there is a business plan.” Well, our people said if we're going to be sports leaders, and you want to serve the fans, there is no question we must produce our product in high definition. You guys figure out the business plan and all of those nasty technical issues and all of that. We have to move. And ESPN was the first to move into high def. Now, forget just the sports business, we lead the entire television business in the production and delivery of high def. We just launched our third network - ESPN News, just this spring, joined ESPN 2 and ESPN. We will have our fourth in August, ESPNU, our network devoted solely to college sports will be in high def. And you saw the gentleman from DirecTV talk about the importance of high def. You will hear that from many cable executives or telco executives as well, and ESPN is driving a train right through that high def opportunity. I think that's the best example of how our people know the mission and literally demand we move in there. Lastly, many of you know from prior conferences that for seven years we have developed company priorities, which again helps speak to our nearly 6,000 employees to tell us exactly what is important to our company so they can use that to make decisions in their everyday workplace. The first point is really a digital media point: make ESPN the clear choice in Web and mobile media. Number two is to exploit technology to better serve fans, customers and ourselves. I'm really proud of the third point. This is resonating greatly with our employees where we continue to demonstrate to our employees that they are our most important asset by developing, mentoring and measuring our current future leaders. I'm not just looking for managers. I am not just looking for people who are technically good at whatever their skill is, whether they're an accountant or a television producer or a PR person. Yes, you have that that if you want to grow in our company, but we're looking for leaders. And it's the leaders that are going to continue to drive this company forward.


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We're going to continue to grow in our international business. And then lastly we are going to increase our focus which is already quite a bit, but we're going to double down on our efforts to serve the US Hispanic sports fan with our ESPN Deportes television business, radio business, print business and online business. We think there is great opportunity there. All of these dovetail nicely with Bob Iger's continued focus on creativity, technology and international expansion for The Walt Disney Company. I do believe that the ESPN difference, the many things I have laid out here this morning, will drive continued global growth for the ESPN Company. Thank you very much for allowing me to go through a few slides. I'm happy to do my best to answer any of Doug's questions. Oh, I'm sorry. One other item, I did not want to break my string, Doug. We have this decade old, or I should say decade young, television campaign called This Is SportsCenter. Many of you have seen it if you watch ESPN. A decade is an eternity in the creative business of television promotions and we have produced over 300 over those ten years. And I wanted to at least run one, because what would an ESPN presentation be without at least one This Is SportsCenter promotion. [VIDEO] We'll see who has the last laugh because obviously the Celtics are up two games to zero. But we're getting good reaction from that spot, as we do all of those. There was one other thing I wanted to mention to you today, particularly in what I was talking about on the affiliate revenue side and the distribution side. In our second quarter earnings call, we told you we expected to reach certain programming commitments in the fourth quarter of this fiscal year. Based on our current expectations, we now expect to reach those programming commitments in the third quarter of fiscal 2008, just like we did last year. Now, this update makes no difference to ESPN's economics on an annual basis but it could impact quarterly forecasts and we just wanted to give you the courtesy of mentioning that today. Thank you.


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Q & A Doug Mitchelson – Analyst, Deutsche Bank

Okay, so we have 26 minutes and we'll leave time for a couple of questions. And so I think Tammy is telling me that the statement George just read means the [incremental] $120 million that was going to be deferred from 3Q to 4Q is no longer the case. There will not be a deferral. But of course, feel free to talk to the Disney guys for more exact clarification. So George, thanks for coming. George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

Pleasure, it is a pleasure to be here. Doug Mitchelson – Analyst, Deutsche Bank

So, a few things in your presentation that I thought were pretty intriguing, so let's hit a couple of little items and we will hit some of the bigger items. You made a comment about quality of distribution contracts being better than anyone else out there. Certainly your rates are great, and your rate of growth has been great. Is there anything else about the distribution contracts that you were thinking of when you said quality? George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

Yes, quite a bit more. They have turned into very complex agreements from when I started out doing them in 1981, but they cover far more than rates. I would say the other major aspect of them is just how you are carried, and you may see in the press or from your knowledge of the business, various methods - whether it be an HBO pay service style carriage, a la carte if you will, sports tiers, or other digital tiers. There's so much going on in the business now. These contracts that we have now lock us in the 90% plus style to which we are distributed. So for example, ESPN is in 96 million homes which is right there in the upper tier of the cable business, and our contracts protect us and keep us in that position, which times the rate, helps to drive the revenues we enjoy.


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After that, there's 50 other significant items, Doug. Signal quality, what you can and can’t do with the local advertising time, more legal protections than you could ever shake a stick at, but the guts of it are the rates and how you are carried. And really, on those two pieces ESPN is at the top of the heap. Doug Mitchelson – Analyst, Deutsche Bank

I think you were pretty clear on the major programming being locked up for the next five or six plus years. Is there anything that you are missing that you are interested in? You still seem to be acquiring events here and there. George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

We've been quite successful as of late. Recently we announced the U.S. Open - US Tennis Open. We will have the U.S. Golf Open in 48 hours from Torrey Pines. But the U.S. Tennis Open we're very pleased to take that over this year on the cable package so that is a big acquisition. The Masters was our first year. We are always looking. The Olympics are coming up. That will not be done in a backroom anywhere. That will be a very visible process. We'll be involved in that. The Premiership, potential soccer in the UK, will be coming up again because those rights are only let out every three years. We are actually involved in every negotiation. Where it makes sense, we're going to be aggressive and where it does not make good sense we're going to take a pass. And we have done that as well over the last couple of years. I'm not here to say and I do not want to give you the impression that ESPN must own everything to be successful. That is not our business plan. We're going to own properties where we can mutually benefit. Doug Mitchelson – Analyst, Deutsche Bank

How do you think about that? Because at this point your affiliate are locked in for the next several years regardless of whether or not you add more sports. So how do you think about the returns on investment in more sports contracts?


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George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

That is an excellent question. In the short-term, say the next two to three or four years, I look at it as, can it help us with our digital businesses, will it help grow our advertising base, will it set the table for the next series of affiliate agreements that will come around. That is how we are viewing those acquisitions. Longer-term, if we can acquire world-class properties like the U.S. Open, like The Masters, to me you never - the first time I heard this was John Lassiter, where he said, “quality is a great business plan,” speaking of Pixar. I guess I always thought that that always applied to ESPN. If we can acquire world-class events, that will be good for business and that is what we intend to do. Doug Mitchelson – Analyst, Deutsche Bank

So, let's shift over to… you kind of mentioned, to make ESPN a clear choice in Web and mobile media. I think that is probably going to be a big focus over the next series of questions here. You have been acquiring a lot of digital rights, and I think when you have done your latest round of contracts for the last three or four years you actually probably allocated part of the cost of the contract to those digital rights. So I guess in that light, has what you acquired so far met your business plan? Is it driving revenue? Is it material? Is it something people in this room should be tracking closely? George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

Yes. If you are a watcher, if you are a student of ESPN, I would continue to watch what we're doing in digital media. Again, our business is not very complicated. We serve sports fans, and sports fans are looking for content in other places beyond television. So if we're going to continue to fulfill our mission, we must serve fans where they want to be served when they want to be served. So we're working as hard as we can to do that both online and with mobile devices. Now to answer your question, I think there are a number of metrics which indicate we're on the right track. In April, for example, we had 140 million video views on ESPN.com. Now, it wasn't that long ago where school was out a little bit or the jury was out I should say on video online. But if that jury is not in, it's walking into the court room.


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People, particularly sports fans, they're not home yet or they are out-of-pocket or what have you, they're ready to see video online or on mobile. We had 140 million views in April, which was up 40% vs. the April prior. So from that metric, it is growing. Although we do not detail our specifics, our ad sales are growing robustly on ESPN.com and they will continue to. But I am not here to say that we have figured it out. I'm here to say just the opposite. In my view anybody that tells you they have it figured out is a little self-delusional. This business is moving so quickly if you're not ready to move, change what you're doing online, react, be nimble, I think you have got a problem because our fans and our viewers are always interested in looking at new things and being approached in different ways. We're going to redesign ESPN.com. We already have. It will be coming out this fall. It seems like just yesterday we did it. That's not a sign of weakness, that's a sign of strength. We are moving. We have to continue to be vibrant and show our fans that we're listening to them. So whether it is enhanced placement of scores and making it easier to get my scores, which is something our fans told us loud and clear, I want one click. I don't want three clicks to find out if my favorite team won. Or make it easier to watch a video or make it easier to play fantasy. We are in an ongoing development of that business. Doug Mitchelson – Analyst, Deutsche Bank

One of the things you always see with ESPN.com is your front page is so complicated and the true sports fan must love it. The casual sports fan is probably a little bit intimidated by ESPN.com. Is that one of the things that gets resolved? George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

I might have referred to it as interestingly complex instead of so complicated but we are simplifying the front page. You will see that when we rollout our new design late summer or early fall. Doug Mitchelson – Analyst, Deutsche Bank

So sticking with the digital theme, there are a couple of major sports leagues that are not giving you digital rights, I think the NFL and Major League Baseball. Is that something


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you're finding is hindering you anyway? Is there some way to crack that code over the next years or do you have to wait for the next contracts to come up? George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

Just to clarify, we have quite a bit of digital rights from Major League Baseball already. And we are in an ongoing relationship with the MLBAM, their digital licensing arm and we're in the process of negotiating an extension of that deal. So we do have rights from baseball. The biggest league that we have not been able to acquire highlight rights yet for is the National Football League, and I would hope that over time we're able to acquire those rights. However, a couple of important points. You do not necessarily need highlights to speak to your fan base about the National Football League. Go on ESPN.com and during the football season, you will see plenty of our commentators talking about the NFL. That is one of the things we do quite a bit. We talk and we give you our opinion, and our talent - our commentators give you their opinion. We have been doing that for years and we will continue to do that with or without highlights. So, I would not paint it as such a drastic choice of being in the highlight business or not. I hope to be in the highlight business with them, but if I'm not, we will continue to find a way to continue to serve NFL fans online. Doug Mitchelson – Analyst, Deutsche Bank

You said you don't necessarily know the future but is there any other insights you can give us behind your online strategy? What else are you doing to kind of reach that goal of making ESPN the clear choice on the Web? George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

I think we're working hard to bring our television franchises online where it makes sense with our distributors, who pay us for those TV franchises. But whether it be new versions of SportsCenter or new versions of Pardon the Interruption or NFL Countdown, I see us taking advantage of the strength in ESPN's franchises on television, online. We need to do that in a proper manner out of respect for our distributors who are paying us for that product and we will do it that way, but I see continued growth there. I see continued growth in fantasy sports. I see continued growth in video overall. But we're certainly not looking at just taking the ESPN television product and putting it


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online and saying, “There you go sports fans. We have now served you.” We are in a completely different world. People have a different experience online in many cases. Yes, some people want to watch the game if they are out of the office or not at home and we will be working on supplying some of that. We have a broadband service, ESPN 360, with events on it. But mostly, you all know. You get online, you check your messages, you check some headlines, maybe you communicate with a friend or two, in our case you want to check a score or see a highlight. For us to think about just sending the same product that we do on television online seems like we are not at all trying to capture the potential that is there of this new medium. So, I continue to see us grow and try to change and do new things. Doug Mitchelson – Analyst, Deutsche Bank

One of the things you have done is you have gone on an unprecedented run at acquiring top writing talent. I think there's a lot of newspaper companies out there that are not very happy with you right now. At the same time, there is a trend online for general news in terms of -- for example, Google News is a website where they kind of aggregate news from massive numbers of sources on any given topic. And to the extent that someone wants the score of their favorite game, they will go anywhere on the Web that is available. Is the talent you're hiring on the sports side going to make ESPN draw traffic in a world where information is more available? George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

I think so. I think, like you cannot underestimate passion in your employees, you can't underestimate excellent writing. Whether the device that we all access good writing on changes - I guess it was at some point stone tablets, I'm told, were the original things you read on. And now we're into books and newspapers. Now we're on to electronics with the Kindle and whatnot and we are online. Okay, the device may change but quality writing, there will always be a market for that. So, we're going to continue to put an emphasis on writing; hire the best writers we can and, to answer your question, I do believe that will make a difference. Just last week was our first column and our first work by Rick Reilly. Very proud to have Rick join the ESPN team. He put out his first column under our banner, which was very poignant. For those of you who saw it or would like to see it, it's on ESPN.com and also ESPN the Magazine.


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But people like Rick Reilly or Bill Simmons have large followings. And underestimating that and just assuming people want a generic example or a generic comment about the game or the Belmont or the NBA Finals, that's not where we are headed. We're headed to distinctive writing, people who will come to us to see what our writers and our people are saying. Doug Mitchelson – Analyst, Deutsche Bank

Something we talk about a lot in the Internet space, in terms of areas of growth, one is that local seems to be underserved. That's certainly true for sports when it comes to high school and other areas, and then social networking of course has been the talk for the last few years. Are those areas you're focused on in terms of your online strategy? George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

We are. We just purchased a publication called Rise, we did not spend an awful lot of time on the brand - we now call it ESPN Rise, and it serves high school athletes and has a circulation of about one million. Our goal in this space is to attract more high school aged girls and boys to our products. It is not about having content that adults think is interesting relative to high school. If that is a byproduct, great. But we're trying to attract - and again, our bread and butter is young fans, through our strategy we're trying to attract more high school aged students. Now, I think Rise will provide a foundation for us to do that but we are - we're focused on it but we still have a ways to go, to answer your question. We're just getting started. We televise a few high school games here and there. I want to be careful doing that. We want to do that properly. But we are focused on it. Doug Mitchelson – Analyst, Deutsche Bank

When you look out, let's say, five years - I know you guys do five-year plans. What percentage of the Company do you think online or digital media could become?


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You know I really cannot answer that specifically but I think it will be significant. I have a couple of teenage sports fans under my roof and see their access of their computer and how they use it to be better fans, to enjoy fandom. So, it will be significant. But I am hard pressed to provide you a number or be more specific. Doug Mitchelson – Analyst, Deutsche Bank

So international, you mentioned it's a big area of focus and it is an area of growth and you're already pretty substantial in your international presence. I think Europe and the UK is the biggest revenue base when it comes to international cable networks and their sports are a little bit more competitive in terms of football being pretty high priced. Is that an area where you feel like you need a substantial presence, on the football side, to be a winner or can you make a lot of money in Europe without football rights? George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

That is an excellent question. I think it is going to take time to answer that question. We were active in Europe with ESPN Classic in 25 or 30 countries there. We just purchased the North American Sports Network last year, which we're going to rebrand ESPN later this year, which is also in 20 to 30 countries and is very active. We have our Soccernet site which is a very powerful soccer website, which actually does get great usage during these excellent soccer events like the Europe 2008 that is occurring now. We're working on mobile applications. So, I don't know is the answer to your question. We can be involved in the Premiership in a manner that makes economic sense, and I think Bob Iger spoke about this in the last call, obviously we will wish to do that. But we are not going to take enormous gambles on that and hope we make out all right. I would rather think of our Europe strategy as building from the bottom up. And almost like ESPN did way back almost 30 years ago and start small and find ways to grow that might be alternative. The wireless businesses and online businesses may be our most significant businesses 10 years from now. It's not the barriers to entry you have by acquiring the Premiership in trying to make the television side of it work.


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Doug Mitchelson – Analyst, Deutsche Bank

How do you build the wireless businesses? You obviously start out with a shot at a phone provider, you're switched back to - is that more of a licensing business? And is it easy to get on the back in international markets? George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

I think it depends. It's like almost anything. There's no easy answer to some of these complicated questions. Our business in wireless is through our WAP site which is basically a scores and text service. We're already the leaders by far today in people, particularly in the United States, accessing ESPN.com for scores. We have the MVP product, which was the outgrowth of our efforts on MVNO which we licensed to Verizon. And then we have a full-blown, I will call it a television network, a 24/7 linear feed that we license through QUALCOMM. So really, when you talk about ESPN's wireless business you really have to look at those three businesses to understand it. Your question was how is that going to grow up in Europe. I'm not certain I know the answer to that yet, but we're active in all three of those areas which is part of what I like about our company. Our company is always looking to do things different and better than we did yesterday. So, we're active in all of those areas and then we employ some high-level management expertise to it. What works we try to do farther and better and faster, and what doesn't work we stop doing. That is pretty much our management strategy. It's not that complicated. Doug Mitchelson – Analyst, Deutsche Bank

I have a few more questions but we will take a couple from the audience if there are any. Otherwise, I will keep going. Unidentified Audience Member

Given the economic environment, can you give an update on advertising?


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You know, we don't really give any comments prior or in between earnings calls. I think Tom Staggs spoke to our situation during the second quarter call. I will say that the success at ABC had just this last week with the upfront bodes well for us. Our ratings are up. I think we have a sales team poised to sell across the whole width or breadth of ESPN. So I am bullish on our continued advertising. I feel good about where we are. Unidentified Audience Member

Your cable networks are a very large entity, as an aggregate disclosure, not on ESPN directly. So if you look at ESPN and the other ESPN properties, how are those managed? Are they managed as an entire entity or do all the other networks have their own P&L like the Deportes or whatever? And are the core brands over time, or on a go forward basis, high single digit revenue, double-digit profit growth and then those other brands are in investment mode? Or are they growing faster in revenue - I assume faster in revenue but faster in profitability or are they still in investment mode? George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

Sounds like a four-parter. Unidentified Audience Member

I can make it a six-parter. Doug Mitchelson – Analyst, Deutsche Bank

I think Tom is asking if you are the man and how fast are you going to grow. George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

No and yes. To answer your first question first. Yes, all of our businesses - we have quite a bit of financial discipline led by Christine Driessen, our CFO, on all of our businesses. So yes we have individual P&Ls and most of the businesses have individual managers, although I pride myself on the teamwork that we have at ESPN


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amongst our management team, so some of those businesses may be managed in a joint approach across business lines. As far as your second, third and fourth question I really cannot give you any specifics on our continued growth other than to say that we are bullish on the continued growth of the company. We feel like we have the company moving in the right direction, both maintaining the strength in our core business as I said earlier, which is locking up distribution and rights so we can continue with that business model, but at the same time paddling as fast as we can on every new business we can that we think serves sports fans. And I believe over time, some of those businesses will end up being significant. Unidentified Audience Member

And then trying to rephrase it, if you look at the profit growth potential from ESPN versus profit growth from ESPN 2 and Deportes and high def, etc., is that second bucket potentially larger than that first bucket in terms of forward profit growth? George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

You know, I don't think I am prepared to comment specifically on that, but I repeat I am bullish on the growth of the overall company. Unidentified Audience Member

Ok, thanks. Doug Mitchelson – Analyst, Deutsche Bank

One more in the back. Unidentified Audience Member

Okay, so if you won't answer it that way, how about revenue and operating income by international versus domestic?


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I feel like I'm dealing with my kids. I mean that respectfully, because if you don't get the right answer from mom, go ask dad. It's a tried and true strategy. I really cannot give you any specifics there. But I appreciate you asking me the question. But all kidding aside, I am bullish on our international growth. As I mentioned earlier and as you saw on the slide there in all the flags we planted in the ground, I don't think anybody who has built a better set of sports television assets around the world than ESPN has. The issue we have is that in no country in the world do they pay for television like we do here in the good old United States of America. So if and when some of those markets develop, we are poised to benefit from them and we're not going anywhere. We're in it for the long-term. At the same time, we're working on new business models. As Doug and I were speaking to a moment ago, we launched our broadband service, ESPN360 in Mexico. We launched it in Europe. Again, barriers to entry are lower. I'm not sure what the business model is but I've been hanging around here long enough where to me, it looks like ESPN 1979 if you have seen ESPN360. It is a little crazy. It has some events that are obscure - not all, you will see the Euro on there, the Euro 2008 now. It is a great product if you are a sports fan. The technical quality is high. And we are not sure what the business plan is which does not daunt us in anyway. I'm actually kind of intrigued by that. And I'm glad we are in it. And I'm glad we don't see any other media companies really replicating it. We will forge that space on our own. It is not a huge investment but it feels like the right thing to be doing. And you can start to see when you put the right event on ESPN360, you are attracting viewership to it. So, I am bullish about our growth outside of the US for those reasons. Doug Mitchelson – Analyst, Deutsche Bank

I will ask one last question. So, George how fast are you going to grow? So, last real question here, Lakers or Boston, how many games? I know you care more about the games than the winner.


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I will quote my head of advertising sales, Edward Erhardt, who says, “We're rooting for Nielsen.” I don't know, it will be interesting to see. Tonight is a pivotal game and we will see what happens. And we would of course like seven games and there would be a nice promotional lift for the company. The reality is we have done a good job selling The Finals. We have got some buzz. Ratings are up 45% or 50% and the series is just getting going. But in addition to the revenue, it provides a great - not only buzz for The Walt Disney Company, and I can tell you the excitement around the company but tonight, for example, gives us a great opportunity to promote Wall-E, our Pixar film coming up in a couple of weeks. And we have a tremendous platform tonight of filmgoers and we're going to be there - there's plenty of opportunity when we get a great series like we're going to get here. Doug Mitchelson – Analyst, Deutsche Bank

Great, well join me in thanking George. George Bodenheimer – Co-Chairman, Disney Media Networks, President, ESPN, Inc. and ABC Sports

Thank you.

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Management believes certain statements in this webcast may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made. Management does not undertake any obligation to update these statements. Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by the Company, including restructuring or strategic initiatives (including capital investments or asset acquisitions or dispositions), as well as from developments beyond the Company’s control, including:

- adverse weather conditions or natural disasters; - health concerns; - international, political, or military developments; - technological developments; and - changes in domestic and global economic conditions, competitive conditions and consumer preferences.

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- expenses of providing medical and pension benefits; - demand for our products; and - performance of some or all company businesses either directly or through their impact on those who distribute our products.

Additional factors are set forth in the Company’s Annual Report on Form 10-K for the year ended September 29, 2007 and in subsequent reports on Form 10-Q under Item 1A, “Risk Factors”. Reconciliations of non-GAAP measures to closest equivalent GAAP measures can be found at www.disney.com/investors.

Economy & Finance

June 10, 2008 Deutsche Bank 2008 Media and Telecom Conference