ITEM 1. Business The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in five business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive. For convenience, the terms “Company” and “we” are used to refer collectively to the parent company and the subsidiaries through which our various businesses are actually conducted. Information on the Company’s revenues, operating income, and identifiable assets appears in Note 1 to the Consolidated Financial Statements included in Item 8 hereof. The Company employed approximately 166,000 people as of September 29, 2012. MEDIA NETWORKS The Media Networks segment includes international and domestic cable television networks, a domestic broadcast television network, television production operations, domestic and international television distribution, domestic television stations, domestic broadcast radio networks and stations, and publishing and digital operations. Cable Networks Our cable networks include ESPN, Disney Channels Worldwide, ABC Family, and SOAPnet. We also operate the UTV/Bindass networks in India. The cable networks group produces its own programs or acquires rights from third-parties to air programs on our networks. The Company also has interests in joint ventures that operate cable and broadcast programming services and are accounted for under the equity method of accounting. Cable networks derive a majority of their revenues from fees charged to cable, satellite and telecommunications service providers (Multi-channel Video Programming Distributors or MVPDs) for the right to deliver our programming to their customers and, for certain networks (primarily ESPN and ABC Family), the sale to advertisers of time in network programs for commercial announcements. Generally, the Company’s cable networks operate under multi-year agreements with MVPDs that include contractually determined fees. The amounts that we can charge to MVPDs for our cable network services are largely dependent on the competitive market and the quality and quantity of programming that we can provide. The ability to sell time for commercial announcements and the rates received are primarily dependent on the size and nature of the audience that the network can deliver to the advertiser as well as overall advertiser demand. We also sell programming developed by our cable networks to third parties worldwide in pay and syndication markets, in DVD format and also online to third-party services.   1 Table of Contents The Company’s significant cable networks and our ownership percentage and estimated subscribers as of September 29, 2012 are set forth in the following table:     ESPN ESPN is a multimedia, multinational sports entertainment company that operates eight 24-hour domestic television sports networks: ESPN, ESPN2, ESPNEWS, ESPN Classic, ESPN Deportes (a Spanish language network), ESPNU (a network devoted to college sports), ESPN 3D, and the regionally focused Longhorn Network (a network dedicated to The University of Texas athletics). ESPN also operates five high-definition television simulcast services, ESPN HD, ESPN2 HD, ESPNEWS HD, ESPNU HD, and ESPN Deportes HD. ESPN programs the sports schedule on the ABC Television Network, which is branded ESPN on ABC. ESPN owns 27 international sports networks reaching households in 190 countries and territories in 11 languages. In addition, ESPN holds a 30% equity interest in CTV Specialty Television, Inc., which owns television networks in Canada, including The Sports Network, The Sports Network 2, Le Réseau des Sports, ESPN Classic Canada, the NHL Network and Discovery Canada. ESPN owned a 50% equity interest in ESPN Star Sports, which distributes sports programming throughout most of Asia on 15 international sports networks. ESPN sold its interest to the joint venture partner in November 2012. (See Note 18 to the Consolidated Financial Statements.) ESPN holds rights for various professional and college sports programming including the National Football League (NFL), the National Basketball Association (NBA), Major League Baseball (MLB), college football and basketball conferences, National Association of Stock Car Auto Racing (NASCAR), the Wimbledon Championships, US Open Tennis and the Masters golf tournament.   2 Table of Contents ESPN also operates:                   Disney Channels Worldwide Disney Channels Worldwide is a portfolio of over 100 entertainment channels and/or channel feeds available in 35 languages and 167 countries/territories and includes Disney Channel, Disney Junior, Disney XD, Disney Cinemagic, Hungama and Radio Disney. Disney Channels Worldwide content is also available through subscription and video-on-demand services and online through our websites: DisneyXD.com, DisneyJunior.com, DisneyChannel.com and RadioDisney.com. Programming for these networks includes internally developed and acquired programming. Disney Channel - Disney Channel is a 24-hour cable network airing original and acquired series and movie programming targeted to children ages 6-14 and families. Disney Channel develops and produces shows for exhibition on its network, including live-action comedy series, animated programming and educational preschool series, as well as original movies. Live-action comedy series include A.N.T. Farm, Good Luck Charlie, Jessie, Shake It Up, and Austin & Ally. Disney Channel also airs the animated programs, Phineas and Ferb, Fish Hooks, and Gravity Falls. Original animated series for preschoolers include Disney’s Mickey Mouse Clubhouse, Doc McStuffins, Jake and the Never Land Pirates, and Special Agent Oso. Disney Channel also airs programming acquired from third parties and content from Disney’s theatrical film and television programming library. Disney Junior - Disney Junior airs original and acquired programming for children ages 2-7 and their parents and caregivers, and features animated and live-action programming which blends Disney’s storytelling and characters with learning. Programming focuses on early math and language skills, healthy eating, lifestyle and social skills. In the U.S., Disney Junior airs as a programming block on Disney Channel and has a dedicated 24-hour channel. Disney Junior also has programming blocks in Latin America, Europe, Asia, Australia and Africa. In fiscal 2012, we began the conversion of SOAPnet to Disney Junior and many MVPDs that carried SOAPnet have transitioned to carrying the Disney Junior network. Disney XD - Disney XD is a basic cable channel airing a mix of live-action and animated original programming and programming acquired from third parties for kids ages 6-14. Programming includes live-action series Kickin’ It, Lab Rats and Pair of Kings and animated series Phineas and Ferb, Kick Buttowski – Suburban Daredevil, Motorcity, TRON: Uprising, Marvel Animation’s The Avengers: Earth’s Mightiest Heroes and Ultimate Spider Man. We also have Disney XD channels in Latin America, Europe and Asia that are 24-hour networks or programming blocks in approximately 130 countries/territories. WatchDisneyChannel.com, WatchDisneyJunior.com and WatchDisneyXD.com launched in the U.S. in 2012 and are a new way for consumers to watch full-length episodes of Disney shows online through their computer or mobile device. Content is available to consumers who have subscriptions to select MVPDs.   3 Table of Contents Disney Cinemagic - Disney Cinemagic is a premium subscription service in Europe. Disney Cinemagic shows Disney movies, classic and newer Disney cartoons and shorts as well as animated television series such as Disney’s House of Mouse, Lilo & Stitch: The Series, and Tarzan. Hungama - Hungama is a kids general entertainment cable network in India which features a mix of anime, Hindi-language series and game shows. Radio Disney - Radio Disney is a 24-hour radio network for kids, tweens and families which is available on 31 owned domestic terrestrial radio stations, RadioDisney.com, SiriusXM satellite radio, iTunes Radio Tuner, Facebook and mobile phones. Radio Disney programming can be downloaded via the iTunes Music Store. The Company operates twelve Radio Disney stations in South America. Seven TV - On November 18, 2011, the Company acquired a 49% ownership interest in Seven TV network from UTH Russia Limited for $300 million. The Seven TV network has been converted to an ad-supported, free-to-air Disney Channel in Russia. (See Note 3 to the Consolidated Financial Statements.) The Company’s share of the financial results of Seven TV is reported as “Equity in the income of investees” in the Company’s Consolidated Statements of Income. ABC Family ABC Family is a U.S. television programming service that targets viewers in the 14-34 demographic. ABC Family produces original live-action programming including the returning series The Secret Life of the American Teenager, Switched at Birth, Melissa & Joey as well as new original series Bunheads, Baby Daddy and the reality series Beverly Hills Nannies. ABC Family also acquires programming from third parties including the returning series Pretty Little Liars and The Lying Game. Additionally, ABC Family airs content from our owned theatrical film library and features branded holiday programming events such as “13 Nights of Halloween” and “25 Days of Christmas”. ABCFamily.com provides online access to full-length episodes of ABC Family programming through personal computers and mobile devices. ABCFamily.com also provides online extensions to ABC Family programming such as Pretty Dirty Secrets which is an extension of Pretty Little Liars. SOAPnet SOAPnet offers same-day episodes of daytime dramas and classic episodes of daytime dramas and primetime series. Programming includes daytime dramas such as Days of Our Lives, General Hospital and The Young and the Restless and classic episodes from series such as All My Children, One Life to Live, The O.C., One Tree Hill, Beverly Hills 90210, The Gilmore Girls, Veronica Mars and Brothers & Sisters. In fiscal 2012, we began the conversion of SOAPnet to Disney Junior and many MVPDs that carried SOAPnet have transitioned to carrying the Disney Junior network. Content related to SOAPnet’s programming is available on SOAPnet.com, including commentary, video extras, games, blogs, community forums, photos and sneak peeks. UTV During fiscal 2012, the Company increased its ownership in UTV Software Communications Limited (UTV) from 50% to 99% through a public tender offer on the Indian stock exchange. (See Note 3 to the Consolidated Financial Statements.) UTV operates the Bindass, UTV World Movies, UTV Action, UTV Movies, and UTV Stars cable television channels in India as well as theatrical and television production and distribution and interactive game development businesses. AETN The A&E Television Networks (AETN), a joint venture owned 50% by the Company and 50% by the Hearst Corporation, operates a variety of cable programming services including A&E, HISTORY, BIO, H2, History En Espanol, Lifetime, LMN, and Lifetime Real Women. A&E offers entertainment ranging from reality series to original movies, dramatic series, and justice shows. HISTORY offers original non-fiction series and event-driven specials. BIO offers original series about prominent people and their lives, including the “Biography” series. H2 focuses on the culture and history of various countries throughout the world from the perspective of locals. Lifetime Television is devoted to women’s lifestyle programming. LMN is a 24-hour movie channel. Lifetime Real Women is a 24-hour cable network with programming focusing on women. Internationally, AETN programming is available in over 150 countries. On August 22, 2012, the Company’s ownership interest in AETN increased from 42.1% to 50% as a result of AETN’s redemption of NBCUniversal’s 15.8% equity interest in AETN. See Note 3 to the Consolidated Financial Statements. The Company’s share of the financial results of AETN is reported as “Equity in the income of investees” in the Company’s Consolidated Statements of Income.   4 Table of Contents Broadcasting Our broadcasting business includes the ABC Television Network (ABC), ABC Studios, Television Distribution and Domestic Television Stations. The Company also has an interest in a joint venture that distributes content on the internet. Domestic Broadcast Television Network The Company operates the ABC Television Network (ABC), which as of September 29, 2012, had affiliation agreements with 239 local television stations reaching 99% of all U.S. television households. ABC broadcasts programs in the following “dayparts”: primetime, daytime, late night, news, and sports. ABC produces its own programs and also acquires programming rights from third parties, as well as entities that are owned by or affiliated with the Company. ABC derives the majority of its revenues from the sale to advertisers of time in network programs for commercial announcements. The ability to sell time for commercial announcements and the rates received are primarily dependent on the size and nature of the audience that the network can deliver to the advertiser as well as overall advertiser demand for time on network broadcasts. ABC also receives fees for its broadcast feed from affiliated television stations. ABC.com is the official website of ABC and provides access to full-length episodes of ABC shows online through personal computers and mobile devices. ABCNews.com provides in-depth worldwide news coverage online and video-on-demand news reports from ABC News broadcasts. In October 2011, ABC News entered into an agreement to provide news content to Yahoo! News. Television Production The Company produces original live-action television programming under the ABC Studios label. Program development is carried out in collaboration with independent writers, producers, and creative teams, with a focus on half-hour comedies and one-hour dramas, primarily for primetime broadcasts. Primetime programming produced either for our networks or for third parties for the 2012/2013 television season include the returning one-hour dramas Army Wives, Body of Proof, Castle, Criminal Minds, Grey’s Anatomy, Once Upon a Time, Private Practice, Revenge and Scandal; the returning half-hour comedies Cougar Town and Happy Endings. New primetime series include the one hour dramas Nashville and Perception, and the half-hour comedies Malibu Country and The Neighbors. Additionally the drama series Devious Maids, Mistresses, Red Widow and Zero Hour and the comedy Family Tools are in production for mid-season launch. The Company also produces the late night show Jimmy Kimmel Live, and a variety of primetime specials for network television and live-action syndicated programming. Syndicated programming includes the daytime talk shows, Katie and Live! with Kelly and Michael, and the game show, Who Wants to Be a Millionaire. The Company also produces news programming including World News with Diane Sawyer, Good Morning America, 20/20 and Nightline and programming for daytime such as The View, The Chew, This Week with George Stephanopoulos and General Hospital. Television Distribution We distribute the Company’s productions worldwide in pay and syndication markets, in DVD and Blu-ray formats and also online via Company internet sites such as ABC.com and third-party services. Our distribution groups also distribute programming aired on our cable networks. Domestic Television Stations The Company owns eight television stations, six of which are located in the top-ten markets in the U.S. The television stations derive the majority of their revenues from the sale to advertisers of time in television station programs for commercial announcements. The stations also receive retransmission fees from MVPDs for the right to deliver our programming to their customers. All of our television stations are affiliated with ABC and collectively reach 23% of the nation’s television households. Each owned station broadcasts three digital channels: the first consists of local, ABC, and syndicated programming; the second is the Live Well Network in standard definition; and the third is the Live Well Network in high definition. The Live Well Network provides programming on lifestyle topics such as interior design, healthy cooking, and outdoor activities. The Live Well Network is available to 64% of the nation’s households through our owned stations and affiliates.   5 Table of Contents Details for the stations we own are as follows:     Hulu Hulu LLC’s (Hulu) principal business is to aggregate television and film entertainment and other content for consumer viewing on the internet. Hulu generates revenue through the sale of advertising to third parties and from the Hulu Plus subscription service. On October 5, 2012, Hulu redeemed Providence Equity Partners’ 10% interest increasing the Company’s ownership interest from 29% to 32%. (See Note 18 to the Consolidated Financial Statements.) The Company’s share of the financial results of Hulu is reported as “Equity in the income of investees” in the Company’s Consolidated Statements of Income. Competition and Seasonality The Company’s Media Networks businesses compete for viewers primarily with other television and cable networks, independent television stations and other media, such as DVDs, video games and the internet. With respect to the sale of advertising time, our broadcasting operations, certain of our cable networks and our television and radio stations compete with other television networks and radio stations, independent television stations, MVPDs and other advertising media such as newspapers, magazines, billboards, and the internet. Our television and radio stations primarily compete for viewers in individual market areas. A television or radio station in one market generally does not compete directly with stations in other markets. The growth in the number of networks distributed by MVPDs has resulted in increased competitive pressures for advertising revenues for both our broadcasting and cable networks. The Company’s cable networks also face competition from other cable networks for carriage by MVPDs. The Company’s contractual agreements with MVPDs are renewed or renegotiated from time to time in the ordinary course of business. Consolidation and other market conditions in the cable and satellite distribution industry and other factors may adversely affect the Company’s ability to obtain and maintain contractual terms for the distribution of its various cable programming services that are as favorable as those currently in place. The Company’s Media Networks businesses also compete for the acquisition of sports and other programming. The market for programming is very competitive, particularly for sports programming. The Company currently has sports rights agreements with the NFL, college football and basketball conferences (including college football bowl games), NBA, NASCAR, MLB, World Cup and various soccer leagues, and golf and tennis associations. The Company’s internet websites and digital products compete with other web sites and entertainment products in their respective categories. Advertising revenues at the Media Networks are subject to seasonal advertising patterns and changes in viewership levels. Revenues are typically somewhat higher during the fall and somewhat lower during the summer months. Affiliate revenues are typically collected ratably throughout the year. Certain affiliate revenues at ESPN are deferred until annual programming commitments are met. These commitments are typically satisfied during the second half of the Company’s fiscal year, which generally results in higher revenue recognition during this period.   6 Table of Contents Federal Regulation Television and radio broadcasting are subject to extensive regulation by the Federal Communications Commission (FCC) under federal laws and regulations, including the Communications Act of 1934, as amended. Violation of FCC regulations can result in substantial monetary forfeitures, limited renewals of licenses and, in egregious cases, denial of license renewal or revocation of a license. FCC regulations that affect our Media Networks segment include the following:               Federal legislation and FCC rules also limit the amount of commercial matter that may be shown on broadcast or cable channels during programming designed for children 12 years of age and younger. In addition, broadcast channels are generally required to provide a minimum of three hours per week of programming that has as a “significant purpose” meeting the educational and informational needs of children 16 years of age and younger. FCC rules also give television station owners the right to reject or refuse network programming in certain circumstances or to substitute programming that the licensee reasonably believes to be of greater local or national importance.     7 Table of Contents The foregoing is a brief summary of certain provisions of the Communications Act and other legislation and of specific FCC rules and policies. Reference should be made to the Communications Act, other legislation, FCC rules and public notices and rulings of the FCC for further information concerning the nature and extent of the FCC’s regulatory authority. FCC laws and regulations are subject to change, and the Company generally cannot predict whether new legislation, court action or regulations, or a change in the extent of application or enforcement of current laws and regulations, would have an adverse impact on our operations. PARKS AND RESORTS The Company owns and operates the Walt Disney World Resort in Florida, the Disneyland Resort in California, Aulani, a Disney Resort & Spa in Hawaii, the Disney Vacation Club, the Disney Cruise Line and Adventures by Disney. The Company manages and has effective ownership interests of 51% in Disneyland Paris, 48% in Hong Kong Disneyland Resort and 43% in Shanghai Disney Resort, each of which is consolidated in our financial statements. The Company also licenses the operations of the Tokyo Disney Resort in Japan. The Company’s Walt Disney Imagineering unit designs and develops new theme park concepts and attractions as well as resort properties. The businesses in the Parks and Resorts segment generate revenues predominately from the sale of admissions to theme parks; sales of merchandise, food and beverages; charges for room nights at hotels; sales of cruise vacations; and sales and rentals of vacation club properties. Costs consist principally of labor; depreciation; costs of merchandise, food and beverage sold; marketing and sales expense; repairs and maintenance; cost of vacation club units; entertainment; and cruise ship fuel expense. Walt Disney World Resort The Walt Disney World Resort is located 22 miles southwest of Orlando, Florida, on approximately 25,000 acres of owned land. The resort includes theme parks (the Magic Kingdom, Epcot, Disney’s Hollywood Studios and Disney’s Animal Kingdom); hotels; vacation club properties; a retail, dining and entertainment complex; a sports complex; conference centers; campgrounds; golf courses; water parks; and other recreational facilities designed to attract visitors for an extended stay. The Walt Disney World Resort is marketed through a variety of international, national and local advertising and promotional activities. A number of attractions in each of the theme parks are sponsored by other corporations through long-term agreements. Magic Kingdom — The Magic Kingdom, which opened in 1971, consists of six themed lands: Adventureland, Fantasyland, Frontierland, Liberty Square, Main Street USA and Tomorrowland. Each land provides a unique guest experience featuring themed rides and attractions, live Disney character interaction, restaurants, refreshment areas and merchandise shops. Additionally, there are daily parades and a nighttime fireworks extravaganza, Wishes. Fantasyland is undergoing an expansion that will nearly double its size and add new attractions and other guest offerings. The expansion is scheduled to be completed in phases through 2014. Epcot — Epcot, which opened in 1982, consists of two major themed areas: Future World and World Showcase. Future World dramatizes certain historical developments and addresses the challenges facing the world today through pavilions devoted to showcasing science and technology improvements, communication, energy, transportation, use of imagination, nature and food production, the ocean environment and space. World Showcase presents a community of nations focusing on the culture, traditions and accomplishments of people around the world. Countries represented with pavilions include Canada, China, France, Germany, Italy, Japan, Mexico, Morocco, Norway, the United Kingdom and the United States. Both areas feature themed rides and attractions, restaurants and merchandise shops. Epcot also features Illuminations: Reflections of Earth, a nighttime entertainment spectacular.   8 Table of Contents Disney’s Hollywood Studios — Disney’s Hollywood Studios, which opened in 1989, consists of four themed areas: Animation Courtyard, Backlot, Hollywood Boulevard and Sunset Boulevard. The four areas provide behind-the-scenes glimpses of Hollywood-style action through various shows and attractions. The park also offers themed food service and merchandise facilities and features Fantasmic!, a nighttime entertainment spectacular. Disney’s Animal Kingdom — Disney’s Animal Kingdom, which opened in 1998, consists of a 145-foot Tree of Life centerpiece surrounded by six themed areas: Africa, Asia, Camp Minnie-Mickey, Dinoland U.S.A., Discovery Island and Rafiki’s Planet Watch. Each themed area contains adventure attractions, entertainment shows, restaurants and merchandise shops. The park features more than 300 species of mammals, birds, reptiles and amphibians and 3,000 varieties of trees and plants. In September 2011, the Company announced an agreement with James Cameron’s Lightstorm Entertainment and Fox Filmed Entertainment for the exclusive global theme park rights to create themed lands based on the AVATAR franchise with the first land planned for Disney’s Animal Kingdom. Hotels and Other Resort Facilities — As of September 29, 2012, the Company owned and operated 18 resort hotels at the Walt Disney World Resort, with a total of approximately 24,000 rooms, including the addition of 2,000 rooms in 2012 that opened as part of Disney’s Art of Animation Resort, and 3,010 vacation club units. Resort facilities include 468,000 square feet of conference meeting space and Disney’s Fort Wilderness camping and recreational area which offers approximately 800 campsites. The Walt Disney World Resort also hosts a 120-acre retail, dining and entertainment complex known as Downtown Disney. Downtown Disney is home to Cirque du Soleil, DisneyQuest, the House of Blues and the 51,000-square-foot World of Disney retail store featuring Disney-branded merchandise. A number of the Downtown Disney facilities are operated by third parties that pay rent to the Company. ESPN Wide World of Sports, which opened in 1997, is a 230-acre sports complex providing professional caliber training and competition, festival and tournament events and interactive sports activities. The complex, which hosts over 200 amateur and professional events each year, accommodates multiple sporting events, including baseball, tennis, basketball, softball, track and field, football and soccer. Its stadium, which has a seating capacity of approximately 9,500, is the spring training site for MLB’s Atlanta Braves. In the Downtown Disney Resort area, seven independently-operated hotels are situated on property leased from the Company. These hotels include approximately 3,700 rooms. Additionally, the Walt Disney World Swan and the Walt Disney World Dolphin hotels, which have approximately 2,300 total rooms, are independently operated on property leased from the Company near Epcot. Other recreational amenities and activities available at the Walt Disney World Resort include four championship golf courses, miniature golf courses, full-service spas, tennis, sailing, water skiing, swimming, horseback riding and a number of other noncompetitive sports and leisure time activities. The resort also includes two water parks: Blizzard Beach and Typhoon Lagoon. Disneyland Resort The Company owns 461 acres and has the rights under long-term lease for use of an additional 49 acres of land in Anaheim, California. The Disneyland Resort includes two theme parks (Disneyland and Disney California Adventure), three hotels and Downtown Disney, a retail, dining and entertainment complex designed to attract visitors for an extended stay. The Disneyland Resort is marketed as a destination through international, national and local advertising and promotional activities. A number of the attractions and restaurants at the theme parks are sponsored by other corporations through long-term agreements. Disneyland — Disneyland, which opened in 1955, consists of eight principal areas: Adventureland, Critter Country, Fantasyland, Frontierland, Main Street USA, Mickey’s Toontown, New Orleans Square and Tomorrowland. These areas feature themed rides and attractions, shows, restaurants, merchandise shops and refreshment stands. Additionally, Disneyland offers daily parades and a nighttime entertainment spectacular, Fantasmic!. Disney California Adventure — Disney California Adventure, which opened in 2001, is adjacent to Disneyland and includes eight principal areas: Buena Vista Street and Cars Land, which opened in 2012, as well as Condor Flats, Grizzly Peak, Hollywood Land, Pacific Wharf, Paradise Pier and “a bug’s land”. These areas include rides, attractions, shows, restaurants, merchandise shops and refreshment stands. Additionally, Disney California Adventure offers a nighttime water spectacular, World of Color.   9 Table of Contents Hotels and Other Resort Facilities — Disneyland Resort includes three Company-owned and operated hotels with a total of approximately 2,400 rooms, 50 vacation club units, and 180,000 square feet of conference meeting space. Disneyland Resort also includes Downtown Disney, a themed 15-acre outdoor complex of entertainment, dining and shopping venues, located adjacent to both Disneyland and Disney California Adventure. A number of the Downtown Disney facilities are operated by third parties that pay rent to the Company. Aulani, a Disney Resort & Spa In August 2011 the Company opened its first mixed-use family resort outside of its theme park developments on a 21-acre oceanfront property on Oahu, Hawaii. Aulani, a Disney Resort & Spa features 359 hotel rooms, an 18,000 square foot spa and 12,000 square feet of conference meeting space. The resort is also home to a 481 unit Disney Vacation Club facility that is being constructed in phases. As of September 29, 2012, 207 vacation club units have been completed. Disneyland Paris The Company has a 51% effective ownership interest in Disneyland Paris, a 5,510-acre development located in Marne-la-Vallée, approximately 20 miles east of Paris, France, which has been developed pursuant to a master agreement with French governmental authorities. The Company manages and has a 40% equity interest in Euro Disney S.C.A., a publicly-traded French entity that is the holding company for Euro Disney Associés S.C.A., the primary operating company of Disneyland Paris. Euro Disney S.C.A. and its subsidiaries operate Disneyland Paris, which includes two theme parks (Disneyland Park and Walt Disney Studios Park); seven themed hotels; convention centers; a shopping, dining and entertainment complex; and a 27-hole golf facility. Of the 5,510 acres comprising the site, approximately half have been developed to date, including the Val d’Europe development discussed below. An indirect, wholly-owned subsidiary of the Company is responsible for managing Disneyland Paris. Euro Disney S.C.A. is required to pay royalties and management fees to the Company based on the operating performance of the resort. Disneyland Park — Disneyland Park, which opened in 1992, consists of five principal themed areas: Adventureland, Discoveryland, Fantasyland, Frontierland and Main Street. These areas include themed rides, attractions, shows, restaurants, merchandise shops and refreshment stands. Disneyland Park also features a daily parade and a nighttime entertainment spectacular, Disney Dreams!. Walt Disney Studios Park — Walt Disney Studios Park opened in March 2002 adjacent to Disneyland Park. The park takes guests into the worlds of cinema, animation and television and includes four principal themed areas: Backlot, Front Lot, Production Courtyard and Toon Studios. These areas each include themed rides, attractions, shows, restaurants, merchandise shops and refreshment stands. In 2012, Euro Disney S.C.A announced a multi-year expansion of Walt Disney Studios Park. Hotels and Other Facilities — Disneyland Paris operates seven resort hotels, with a total of approximately 5,800 rooms and 250,000 square feet of conference meeting space. In addition, several on-site hotels that are owned and operated by third parties provide approximately 2,400 rooms. Disneyland Paris also includes Disney Village, a retail, dining and entertainment complex of approximately 500,000 square feet, located between the theme parks and the hotels. A number of the Disney Village facilities are operated by third parties that pay rent to a subsidiary of Euro Disney S.C.A. Val d’Europe is a planned community that is being developed near Disneyland Paris. The completed phases of the development include: a town center, which consists of a shopping center; a 150-room hotel; office, commercial, and residential space; and a regional train station. Third parties operate these developments on land leased or purchased from Euro Disney S.C.A. and its subsidiaries. In September 2012, the Company provided €1.3 billion of financing to Euro Disney S.C.A (ED) which ED used to repay its outstanding third-party bank debt (DLP refinancing). The repayment eliminated certain financial and operating covenants, notably those related to capital expenditure limitations and the payment of royalties and management fees due to the Company. (See Note 8 to the Consolidated Financial Statements.)   10 Table of Contents Hong Kong Disneyland Resort The Company owns a 48% interest in Hong Kong Disneyland Resort through Hongkong International Theme Parks Limited, an entity in which the Government of the Hong Kong Special Administrative Region (HKSAR) owns a 52% majority interest. A separate Hong Kong subsidiary of the Company is responsible for managing Hong Kong Disneyland Resort. The Company is entitled to receive royalties and management fees based on the operating performance of Hong Kong Disneyland Resort. Located on 311 acres on Lantau Island, the resort is in close proximity to the Hong Kong International Airport. Hong Kong Disneyland Resort includes one theme park and two themed hotels. Hong Kong Disneyland – Hong Kong Disneyland opened in 2005 and consists of the following themed lands and areas: Adventureland, Fantasyland, Grizzly Gulch, Main Street USA, Tomorrowland and Toy Story Land. These areas feature themed rides and attractions, shows, restaurants, merchandise shops and refreshment stands. Additionally, there are daily parades and a nighttime fireworks extravaganza. Hotels – Hong Kong Disneyland Resort includes two themed hotels with a total of 1,000 rooms. In July 2009, the Company and the HKSAR agreed to a capital realignment and expansion plan for Hong Kong Disneyland Resort. The expansion brings three new themed areas to Hong Kong Disneyland: Toy Story Land, which opened in November 2011; Grizzly Gulch, which opened in July 2012; and Mystic Point, which is currently scheduled to open in 2013. Pursuant to the plan, the Company converted a loan to Hong Kong Disneyland Resort into equity and made additional capital contributions of $332 million, and the HKSAR contributed like amounts of capital by converting a portion of its loan to Hong Kong Disneyland Resort into equity. This increased the Company’s effective ownership interest from 43% to 48%. (See Note 6 to the Consolidated Financial Statements.) Shanghai Disney Resort On April 8, 2011, the Company and Shanghai Shendi (Group) Co., Ltd (Shendi) announced that the Chinese central government in Beijing had approved an agreement to build and operate a Disney resort (Shanghai Disney Resort) in the Pudong district of Shanghai. On opening day, the Shanghai Disney Resort will be located on roughly 1,000 acres, with additional room to expand in the future, and will include the Shanghai Disneyland theme park; two themed hotels with a total of 1,220 rooms; a retail, dining and entertainment complex; and an outdoor recreational area. Shanghai Disney Resort is currently targeted to open by the end of calendar 2015. Construction and operation of the project will be the responsibility of a joint venture in which Shendi owns a 57% interest and the Company owns 43%. Construction has commenced and we expect the total investment to be approximately 24.5 billion yuan to build the theme park and an additional 4.5 billion yuan to build other aspects of the resort, including the hotels and the retail, dining and entertainment area. The investment amounts will be funded in accordance with each partner’s equity ownership percentage. In addition, a joint venture management company, in which Disney has a 70% interest and Shendi a 30% interest, is responsible for creating, developing and operating the resort. The management company will be entitled to receive management fees based on operating performance of the resort. Shanghai Disney Resort will also pay the Company royalties based on resort revenues. Tokyo Disney Resort Tokyo Disney Resort is located on approximately 494 acres of land, six miles east of downtown Tokyo, Japan. The resort includes two theme parks (Tokyo Disneyland and Tokyo DisneySea); three Disney-branded hotels; six independently operated hotels; and a retail, dining and entertainment complex. Tokyo Disneyland — Tokyo Disneyland, which opened in 1983, was the first Disney theme park to open outside the U.S. Tokyo Disneyland consists of seven principal themed areas: Adventureland, Critter Country, Fantasyland, Tomorrowland, Toontown, Westernland and World Bazaar. Tokyo DisneySea — Tokyo DisneySea, adjacent to Tokyo Disneyland, opened in 2001. The park is divided into seven “ports of call,” including American Waterfront, Arabian Coast, Lost River Delta, Mediterranean Harbor, Mermaid Lagoon, Mysterious Island and Port Discovery.   11 Table of Contents Hotels and Other Resort Facilities - The resort includes three Disney-branded hotels with a total of more than 1,700 rooms. The resort also includes the Disney Resort Line monorail, which links theme parks and resort hotels with Ikspiari, a retail, dining and entertainment complex, and Bon Voyage, a Disney-themed merchandise location. The Company earns royalties on revenues generated by the Tokyo Disney Resort, which is owned and operated by Oriental Land Co., Ltd. (OLC), a Japanese corporation in which the Company has no equity interest. OLC markets the Tokyo Disney Resort through a variety of local, domestic and international advertising and promotional activities. Disney Vacation Club The Disney Vacation Club offers ownership interests in 11 resort facilities located at the Walt Disney World Resort; Disneyland Resort; Vero Beach, Florida; Hilton Head Island, South Carolina; and Oahu, Hawaii. Available units at each facility are offered for sale under a vacation ownership plan and are operated as hotel rooms when not occupied by vacation club members. The Company’s vacation club units consist of a mix of units ranging from one bedroom studios to three bedroom villas. Unit counts in this document are presented in terms of two bedroom equivalents. Disney Vacation Club has 3,267 vacation club units as of September 29, 2012 and is scheduled to open an additional 274 units at Aulani, a 21-acre oceanfront resort on the island of Oahu, Hawaii. The Company expects to open a twelfth vacation club property, located at Disney’s Grand Floridian Resort at Walt Disney World Resort, in late 2013. Disney Cruise Line Disney Cruise Line, which operates out of ports in North America and Europe, is a vacation cruise line that includes four ships: the Disney Magic, the Disney Wonder, the Disney Dream, the last of which launched in January 2011, and the Disney Fantasy, which launched in March 2012. The ships cater to children, families and adults, with distinctly-themed areas and activities for each group. The Disney Magic and the Disney Wonder are 85,000-ton ships with 877 staterooms, while the Disney Dream and the Disney Fantasy are 130,000 ton ships with 1,250 staterooms. Many cruise vacations include a visit to Disney’s Castaway Cay, a 1,000-acre private Bahamian island. Adventures by Disney Adventures by Disney offers all-inclusive guided vacation tour packages predominantly at non-Disney sites around the world. The Company offered 24 different excursion packages during 2012. Walt Disney Imagineering Walt Disney Imagineering provides master planning, real estate development, attraction, entertainment and show design, engineering support, production support, project management and other development services, including research and development for the Company’s operations. Competition and Seasonality The Company’s theme parks and resorts as well as Disney Cruise Line and Disney Vacation Club compete with other forms of entertainment, lodging, tourism and recreational activities. The profitability of the leisure-time industry may be influenced by various factors that are not directly controllable, such as economic conditions including business cycle and exchange rate fluctuations, travel industry trends, amount of available leisure time, oil and transportation prices, and weather patterns and natural disasters. All of the theme parks and the associated resort facilities are operated on a year-round basis. Typically, the theme parks and resorts business experiences fluctuations in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and local entertainment excursions. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early-winter and spring-holiday periods.   12 Table of Contents STUDIO ENTERTAINMENT The Studio Entertainment segment produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings and live stage plays. The Company distributes produced and acquired films (including its film and television library) in the theatrical, home entertainment and television markets primarily under the Walt Disney Pictures, Pixar and Marvel banners. The Company produces and distributes Indian movies worldwide through its UTV banner. In August 2009, the Company entered into an agreement with DreamWorks Studios (DreamWorks) to distribute live-action motion pictures produced by DreamWorks for seven years under the Touchstone Pictures banner for which the Company receives a distribution fee. Under the agreement, the Company has distributed six films to date. As part of the agreement, the Company provided financing to DreamWorks, which as of September 29, 2012, totaled $154 million. There is an additional $90 million available to DreamWorks. Prior to the Company’s acquisition of Marvel in 2010, Marvel had agreements in place for third-party studios to distribute its films including Iron Man, Iron Man 2, Thor, Captain America and The Incredible Hulk, which have all been released. Under these arrangements, Marvel incurred the cost to produce the films and pays the third-party studio a distribution fee. In fiscal 2011, the Company purchased the distribution rights for Marvel’s The Avengers and Iron Man 3 from a third-party studio and starting in fiscal 2012 we paid certain fees to that studio associated with the performance of those films, subject to a minimum guarantee. Beginning with Marvel’s The Avengers, which was released in May 2012, the Company distributes all Marvel produced films. Also prior to the Company’s acquisition of Marvel in 2010, Marvel had licensed the rights to produce and distribute feature films for certain other Marvel properties including Spider-Man, The Fantastic Four, and X-Men to third-party studios. Under these licensing arrangements, the third-party studio incurs the cost to produce and distribute the films and pays the Company a licensing fee. Generally under these arrangements, Marvel retains the merchandise licensing rights and pays the third-party studio a royalty. During the fourth quarter of fiscal 2011, the Company completed a two-way transaction to simplify the Spider-Man arrangement with Sony Pictures. In this transaction, the Company purchased Sony Pictures’ participation in Spider-Man merchandising, while at the same time, Sony Pictures purchased from the Company our participation in Spider-Man films. This transaction will allow the Company to control and fully benefit from all Spider-Man merchandising activity, while Sony Pictures will continue to produce and distribute Spider-Man films. The Company holds a 99% interest in UTV, one of the leading film production studios and film distributors in India, which produces and co-produces live-action and animated content. In fiscal 2012, notable UTV releases included Rowdy Rathore and Barfi. On December 3, 2010, the Company sold Miramax Film NY, LLC (Miramax) for $663 million. Net proceeds, which reflected closing adjustments, the settlement of related claims and obligations and Miramax’s cash balances at closing totaled $532 million. The sale included both Miramax and Dimension film assets. Theatrical Market We produce and distribute both live-action films and full-length animated films. During fiscal 2013, we expect to distribute domestically eight of our own produced feature films and one DreamWorks film. As of September 29, 2012, the Company had released domestically approximately 980 full-length live-action features and 90 full-length animated features. We distribute and market our filmed products principally through our own distribution and marketing companies in the U.S. theatrical market. In international theatrical markets, we distribute our filmed products both directly and through independent distribution companies or joint ventures. Films released theatrically in the U.S. may be released simultaneously in international territories or generally up to four months later. The Company incurs significant marketing and advertising costs before and throughout the theatrical release of a film in an effort to generate public awareness of the film, to increase the public’s intent to view the film and to help generate consumer interest in the subsequent home entertainment and other ancillary markets. These costs are expensed as incurred; therefore, we typically incur losses on a film in the theatrical markets, including in periods prior to the theatrical release of the film.   13 Table of Contents Home Entertainment Market In the domestic market, we distribute home entertainment releases directly under each of our motion picture banners. In the international market, we distribute home entertainment releases under each of our motion picture banners both directly and through independent distribution companies. In addition, we acquire and produce original content for direct-to-video release. Domestic and international home entertainment distribution typically starts three to six months after the theatrical release in each market. Home entertainment releases may be distributed in both physical (DVD and Blu-ray) and electronic formats. Titles are generally sold to retailers, such as Wal-Mart and Best Buy and physical rental channels, such as Netflix, Redbox and Blockbuster, however, the rental channels may be delayed up to 28 days after the start of home entertainment distribution. As of September 29, 2012, we had approximately 1,400 active produced and acquired titles, including 1,000 live-action titles and 400 animated titles, in the domestic home entertainment marketplace and approximately 2,700 active produced and acquired titles, including 2,200 live-action titles and 500 animated titles, in the international marketplace. Television Market Pay-Per-View (PPV)/Video-on-Demand (VOD): Concurrently with, or up to one month after, the home entertainment distribution begins, we license titles for use on a PPV/VOD basis to MVPDs, internet, gaming consoles, and mobile platforms. PPV/VOD services deliver titles electronically to consumers for a specified rental period (e.g. 24 hours) at a price comparable to that of physical media rentals. Pay Television (Pay 1): There are generally two pay television windows. The first window is generally sixteen months in duration and follows the PPV/VOD window. The Company has licensed exclusive domestic pay television rights to substantially all films released under the Walt Disney Pictures, Pixar, and Touchstone Pictures banners to the Starz pay television service through calendar year 2015. DreamWorks titles distributed by the Company are licensed to Showtime under a separate agreement. Free Television (Free 1): The Pay 1 window is followed by a television window that may last up to 84 months. Motion pictures are usually sold in the Free 1 window on an ad-hoc basis to major networks, including ABC, and basic cable services. Pay Television 2 (Pay 2) and Free Television 2 (Free 2): In the U.S., Free 1 is generally followed by a fourteen-month Pay 2 window under our license arrangements with Starz and Showtime, and finally by a Free 2 window. Major packages of the Company’s feature films have been licensed for broadcast under multi-year agreements within the Free 2 window. The Free 2 window is a syndication window where films are licensed both to basic cable networks and to third-party television station groups. International Television: The Company also licenses its theatrical properties outside of the U.S. The typical windowing sequence is consistent with the domestic cycle such that titles premiere on television in PPV/VOD then air in pay TV before airing in free TV. Windowing strategies are developed in response to local market practices and conditions, and the exact sequence and length of each window can vary country by country. Disney Music Group The Disney Music Group includes Walt Disney Records, Hollywood Records (including the Mammoth Records and Buena Vista Records labels), Lyric Street Records, Buena Vista Concerts and Disney Music Publishing. Walt Disney Records produces and distributes compact discs and music DVDs in the U.S. and licenses our music properties throughout the rest of the world. Music categories include infant, children’s read-along, teens, all-family and soundtracks from film and television series distributed by Walt Disney Pictures and Disney Channel. Hollywood Records develops, produces and markets recordings from talent across a spectrum of popular music. The Disney Music Group commissions new music for the Company’s motion picture and television programs, records the songs and licenses the song copyrights to others for printed music, records, audio-visual devices, public performances and digital distribution. Buena Vista Concerts produces live-entertainment events with artists signed to the Disney Music Group record labels.   14 Table of Contents Disney Music Publishing controls the copyrights of thousands of musical compositions derived from the Company’s motion picture, television, record and theme park properties, as well as musical compositions written by songwriters under exclusive contract. It is responsible for the management, protection, and licensing of the Disney song catalog on a worldwide basis. Disney Theatrical Productions Disney Theatrical Productions develops, produces and licenses live entertainment events. The Company has produced and licensed Broadway musicals around the world, including Beauty and the Beast, The Lion King, Elton John & Tim Rice’s Aida, Mary Poppins (a co-production with Cameron Mackintosh Ltd), Little Mermaid, Newsies, and TARZAN®. Other stage musical ventures have included an off-Broadway production of Peter and the Starcatcher and, most recently, stage adaptations of the film Aladdin. In addition, the Company licenses musicals for local, school and community theatre productions globally through Music Theatre International. Disney Theatrical Productions also delivers live shows globally through its license to Feld Entertainment, producer of Disney On Ice and Disney Live!. Disney On Ice features several titles the newest of which, Rockin’ Ever After, launched in August 2012 for North America tours. Competition and Seasonality The Studio Entertainment businesses compete with all forms of entertainment. A significant number of companies produce and/or distribute theatrical and television films, exploit products in the home entertainment market, provide pay television programming services and sponsor live theater. We also compete to obtain creative and performing talents, story properties, advertiser support and broadcast rights that are essential to the success of our Studio Entertainment businesses. The success of Studio Entertainment operations is heavily dependent upon public taste and preferences. In addition, Studio Entertainment operating results fluctuate due to the timing and performance of releases in the theatrical, home entertainment and television markets. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods. CONSUMER PRODUCTS The Consumer Products segment engages with among others licensees, publishers and retailers throughout the world who design, develop, publish, promote and sell a wide variety of products based on existing and new characters and other Company intellectual property through its Merchandise Licensing, Publishing and Retail businesses. In addition to leveraging the Company’s film and television properties, Consumer Products also develops new intellectual property with the potential of also being used in the Company’s other businesses. Merchandise Licensing The Company’s merchandise licensing operations cover a diverse range of product categories, the most significant of which are: toys, apparel, home décor and furnishings, stationery, health and beauty, accessories, food, footwear, and consumer electronics. The Company licenses characters from its film, television and other properties for use on third-party products in these categories and earns royalties, which are usually based on a fixed percentage of the wholesale or retail selling price of the products. Some of the major properties licensed by the Company include Mickey Mouse, Cars, Disney Princess, Winnie the Pooh, Toy Story, Disney Fairies, and the Marvel properties including Spider-Man and Avengers. The Company also participates in the design of individual products and creates exclusive themed and seasonal promotional campaigns for retailers based on characters, movies and TV shows. Publishing Disney Publishing Worldwide (DPW) creates, distributes, licenses and publishes children’s books, magazines and digital products in multiple countries and languages based on the Company’s Disney-, Pixar- and Marvel-branded franchises. Digital products include content for mobile devices such as e-books and apps, including Disney Princess Dress-Up: My Sticker Book, Minnie Bow Maker, Brave: Story Book Deluxe and Cars 2: World Grand Prix Read and Race. DPW also operates Disney English, which develops curriculum that helps Chinese children learn English through Disney stories in 43 centers across 10 cities in China.   15 Table of Contents Marvel Publishing creates and publishes comic books, and graphic novel collections of comic books, principally in North America in print and digital formats. Marvel Publishing also licenses the right to publish translated versions of our comic books, principally in Europe and Latin America. Titles include X-Men, The Avengers, Spider-Man, Thor, Captain America, Iron Man, and The Incredible Hulk. Retail The Company markets Disney- and Marvel-themed products through retail stores operated under the Disney Store name and through internet sites in North America (DisneyStore.com and Marvelstore.com), Western Europe, and Japan. The stores, which are generally located in leading shopping malls and other retail complexes, carry a wide variety of Disney merchandise and promote other businesses of the Company. The Company currently owns and operates 216 stores in North America, 106 stores in Europe, and 47 stores in Japan. Competition and Seasonality The Company’s merchandise licensing, publishing and retail businesses compete with other licensors, publishers and retailers of character, brand and celebrity names. Based on independent surveys, we believe the Company is the largest worldwide licensor of character-based merchandise based on retail sales. Operating results for the licensing and retail businesses are influenced by seasonal consumer purchasing behavior and by the timing and performance of theatrical releases and cable programming broadcasts. INTERACTIVE The Interactive segment creates and delivers branded entertainment and lifestyle content across interactive media platforms. The primary operating businesses of Interactive are Interactive Games which produces multi-platform games for global distribution, and Interactive Media, which develops branded online services. Interactive derives revenues from a combination of wholesale sales, licensing, advertising, sponsorships, subscription services and in-game accessories (micro transactions). Interactive also manages the Company’s Disney-branded mobile phone business in Japan which provides mobile phone service and content to consumers. Interactive Games The Interactive Games business creates, develops, markets and distributes console and handheld, games worldwide, including 2012 titles such as Disney Universe and Brave. The Interactive Games business also produces online games, such as Disney’s Club Penguin and Disney Fairies Pixie Hollow, interactive games for social networking websites such as Gardens of Time and Marvel Avengers Alliance, and games for smartphone platforms such as Where’s My Water and Where’s My Perry. Certain properties are also licensed to third-party video game publishers. On August 27, 2010, the Company completed the acquisition of Playdom, Inc., a company that develops and publishes online games for social networking websites. Interactive Media Interactive Media develops, publishes and distributes content for branded online services intended for kids and family entertainment through a portfolio of websites including Disney.com and the Disney Family Network. Interactive Media also provides website maintenance and design for other Company businesses. Disney.com integrates many of the Company’s Disney-branded internet sites including sites for the Disney Channel and Walt Disney Pictures. Competition and Seasonality The Company’s online sites and products compete with a wide variety of other online sites and products. The Company’s video game business competes primarily with other publishers of video game software and other types of home entertainment. Operating results for the video game business fluctuate due to the timing and performance of video game releases, which are determined by several factors including theatrical releases and cable programming broadcasts, competition and the timing of holiday periods. Revenues from certain of the Company’s online and mobile operations are subject to similar seasonal trends.   16 Table of Contents INTELLECTUAL PROPERTY PROTECTION The Company’s businesses throughout the world are affected by its ability to exploit and protect against infringement of its intellectual property, including trademarks, trade names, copyrights, patents and trade secrets. Important intellectual property includes rights in the content of motion pictures, television programs, electronic games, sound recordings, character likenesses, theme park attractions, books and magazines. Risks related to the protection and exploitation of intellectual property rights are set forth in Item 1A – Risk Factors. AVAILABLE INFORMATION Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available without charge on our website, www.disney.com/investors, as soon as reasonably practicable after they are filed electronically with the SEC. We are providing the address to our internet site solely for the information of investors. We do not intend the address to be an active link or to otherwise incorporate the contents of the website into this report.