1 Description of the Business and Segment Information

The Walt Disney Company, together with the subsidiaries through which businesses are conducted (the Company), is a diversified worldwide entertainment company with operations in the following business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive Media.

DESCRIPTION OF THE BUSINESS

Media Networks

The Company operates through consolidated subsidiaries the ESPN, Disney Channels Worldwide, ABC Family and SOAPnet cable television networks. The Company also operates the ABC Television Network and eight owned television stations, as well as the ESPN Radio Network and Radio Disney Network (the Radio Networks) and 35 owned and operated radio stations. Both the ABC Television Network and Radio Networks have affiliated stations providing coverage to households throughout the United States. The Company also produces original television programming for network, first-run syndication, pay, and international television markets, along with original animated television programming for network, pay, and international syndication markets. The Company has interests in joint ventures that operate programming services and are accounted for under the equity method including AETN/Lifetime. Additionally, the Company operates ABC-, ESPN-, ABC Family- and SOAPnet-branded internet businesses.

Parks and Resorts

The Company owns and operates the Walt Disney World Resort in Florida and the Disneyland Resort in California. The Walt Disney World Resort includes four theme parks (the Magic Kingdom, Epcot, Disney’s Hollywood Studios, and Disney’s Animal Kingdom), 17 resort hotels, a retail, dining, and entertainment complex, a sports complex, conference centers, campgrounds, water parks, and other recreational facilities. The Disneyland Resort includes two theme parks (Disneyland and Disney California Adventure), three resort hotels, and a retail, dining and entertainment complex. Internationally, the Company manages and has an effective 51% ownership interest in Disneyland Paris, which includes two theme parks (Disneyland Park and Walt Disney Studios Park), seven themed hotels, two convention centers, a shopping, dining and entertainment complex, and a 27-hole golf facility. The Company manages and has a 47% ownership interest in Hong Kong Disneyland Resort, which includes one theme park and two resort hotels. The Company has a majority stake in the management company and 43% ownership of Shanghai Disney Resort, which is currently under construction. The Company also earns royalties on revenues generated by the Tokyo Disneyland Resort, which includes two theme parks and three Disney-branded hotels, and is owned and operated by an unrelated Japanese corporation. The Company also manages and markets vacation club ownership interests through the Disney Vacation Club, operates the Disney Cruise Line, the Adventures by Disney guided group vacations business and the newly opened Aulani, a mixed-use Disney Resort and Spa in Hawaii. The Company’s Walt Disney Imagineering unit designs and develops theme park concepts and attractions, as well as resort properties.

Studio Entertainment

The Company produces and acquires live-action and animated motion pictures for worldwide distribution to the theatrical, home entertainment, and television markets. The Company distributes these products through its own distribution and marketing companies in the United States and both directly and through independent companies and joint ventures in foreign markets primarily under the Walt Disney Pictures, Touchstone Pictures, Pixar, Marvel, and Disneynature banners. We also distribute certain motion pictures for DreamWorks under the Touchstone Pictures banner. The Company also produces stage plays, musical recordings and live entertainment events.

Consumer Products

The Company licenses trade names, characters and visual and literary properties to various manufacturers, retailers, show promoters, and publishers throughout the world. The Company also engages in retail and online distribution of products through The Disney Store and DisneyStore.com. The Disney Store is owned and operated in Europe, North America and Japan. The Company publishes entertainment and educational books and magazines and comic books for children and families and operates English language learning centers in China.

Disney Interactive Media Group

The Company creates and delivers branded entertainment and lifestyle content across interactive media platforms. The primary operating businesses are Games which produces and distributes console, online and mobile games, and Online which develops branded online services in the United States and internationally. The Interactive Media Group also manages the Disney-branded mobile phone business in Japan which provides mobile phone service and downloadable content to consumers. Certain properties are also licensed to third-party video game publishers.

SEGMENT INFORMATION

The operating segments reported below are the segments of the Company for which separate financial information is available and for which segment results are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and in assessing performance.

Segment operating results reflect earnings before corporate and unallocated shared expenses, restructuring and impairment charges, other income (expense), net interest expense, income taxes, and noncontrolling interests. Segment operating income includes equity in the income of investees. Equity investees consist primarily of AETN/Lifetime, which is a cable business included in the Media Networks segment. Corporate and unallocated shared expenses principally consist of corporate functions, executive management, and certain unallocated administrative support functions.

Equity in the income of investees by segment is as follows:


	2011		2010		2009
Media Networks ⁽¹⁾	$	584	$	438	$	567
Studio Entertainment		—		—		(4)
Consumer Products		—		—		2
Interactive Media		—		—		2
Corporate		1		2		10

	$	585	$	440	$	577

⁽¹⁾

Substantially all of these amounts relate to investments at Cable Networks.

Beginning fiscal 2011, the Company made changes to certain transfer pricing arrangements between its business units. The most significant change was to the allocation of home video revenue and distribution costs between the Media Networks and Studio Entertainment segments for home video titles produced by the Media Networks segment and distributed by the Studio Entertainment segment. These changes will generally result in higher revenues, expenses and operating income at our Media Networks segment with offsetting declines at our Studio Entertainment segment.

The following segment results include allocations of certain costs, including information technology, pension, legal, and other shared services costs, which are allocated based on metrics designed to correlate with consumption. These allocations are agreed-upon amounts between the businesses and may differ from amounts that would be negotiated in arm’s length transactions. In addition, all significant intersegment transactions have been eliminated except that Studio Entertainment revenues and operating income include an allocation of Consumer Products and Interactive Media revenues, which is meant to reflect royalties on sales of merchandise based on certain Studio film properties.


	2011		2010		2009
Revenues
Media Networks	$	18,714	$	17,162	$	16,209
Parks and Resorts		11,797		10,761		10,667
Studio Entertainment
Third parties		6,061		6,495		6,016
Intersegment		290		206		120

		6,351		6,701		6,136

Consumer Products
Third parties		3,335		2,876		2,533
Intersegment		(286)		(198)		(108)

		3,049		2,678		2,425

Interactive Media
Third parties		986		769		724
Intersegment		(4)		(8)		(12)

		982		761		712


Total consolidated revenues	$	40,893	$	38,063	$	36,149


Segment operating income (loss)
Media Networks	$	6,146	$	5,132	$	4,765
Parks and Resorts		1,553		1,318		1,418
Studio Entertainment		618		693		175
Consumer Products		816		677		609
Interactive Media		(308)		(234)		(295)

Total segment operating income	$	8,825	$	7,586	$	6,672


Reconciliation of segment operating income to income before income taxes
Segment operating income	$	8,825	$	7,586	$	6,672
Corporate and unallocated shared expenses		(459)		(420)		(398)
Restructuring and impairment charges		(55)		(270)		(492)
Other income		75		140		342
Net interest expense		(343)		(409)		(466)

Income before income taxes	$	8,043	$	6,627	$	5,658


Capital expenditures
Media Networks
Cable Networks	$	179	$	132	$	151
Broadcasting		128		92		143
Parks and Resorts
Domestic		2,294		1,295		1,039
International		429		238		143
Studio Entertainment		118		102		135
Consumer Products		115		97		46
Interactive Media		21		17		21
Corporate		275		137		75

Total capital expenditures	$	3,559	$	2,110	$	1,753


	2011		2010		2009
Depreciation expense
Media Networks	$	229	$	213	$	197
Parks and Resorts
Domestic		842		807		822
International		323		332		326
Studio Entertainment		53		56		50
Consumer Products		48		33		29
Interactive Media		16		19		28
Corporate		148		142		128

Total depreciation expense	$	1,659	$	1,602	$	1,580

Amortization of intangible assets
Media Networks	$	8	$	9	$	9
Parks and Resorts		–		–		–
Studio Entertainment		79		33		10
Consumer Products		57		45		10
Interactive Media		38		24		22
Corporate		–		–		–

Total amortization of intangible assets	$	182	$	111	$	51

Identifiable assets⁽¹⁾⁽²⁾
Media Networks	$	27,244	$	27,112
Parks and Resorts		19,530		17,529
Studio Entertainment		12,221		12,742
Consumer Products		4,992		4,786
Interactive Media		1,801		1,756
Corporate⁽³⁾		6,336		5,281

Total consolidated assets	$	72,124	$	69,206

Supplemental revenue data
Media Networks
Advertising⁽⁴⁾	$	7,668	$	7,099	$	6,624
Affiliate Fees		8,790		8,082		7,407
Parks and Resorts
Merchandise, food and beverage		3,738		3,457		3,445
Admissions		3,870		3,504		3,403

Revenues
United States and Canada	$	30,848	$	28,279	$	27,508
Europe		6,455		6,550		6,012
Asia Pacific		2,517		2,320		1,860
Latin America and Other		1,073		914		769

	$	40,893	$	38,063	$	36,149

Segment operating income
United States and Canada	$	6,388	$	5,474	$	4,923
Europe		1,517		1,275		1,158
Asia Pacific		627		620		430
Latin America and Other		293		217		161

	$	8,825	$	7,586	$	6,672

Long-lived assets ⁽⁵⁾
United States and Canada	$	47,124	$	47,766
Europe		6,458		5,090
Asia Pacific		2,037		1,828
Latin America and Other		267		237

	$	55,886	$	54,921

⁽¹⁾	Identifiable assets include amounts associated with equity method investments. Equity method investments by segment are as follows:


	2011		2010
Media Networks	$	2,044	$	2,103
Studio Entertainment		2		2
Interactive Media		4		10
Consumer Products		1		–
Corporate		1		8

	$	2,052	$	2,123

⁽²⁾	Goodwill and intangible assets by segment are as follows:


	2011		2010
Media Networks	$	17,421	$	17,442
Parks and Resorts		172		171
Studio Entertainment		6,498		6,416
Consumer Products		3,715		3,699
Interactive Media		1,330		1,323
Corporate		130		130

	$	29,266	$	29,181

⁽³⁾	Primarily fixed assets, deferred tax assets, cash and cash equivalents.

⁽⁴⁾	Advertising revenue includes amounts reported in Interactive Media.

⁽⁵⁾	Long-lived assets include total assets less current assets, long-term receivables, deferred taxes, financial investments and derivatives recorded in other non-current assets.