Exhibit 99(a)
Presentation dated November 9, 2000
with respect to the Walt Disney Internet Group
by
Thomas O. Staggs, Senior Executive Vice President and Chief
Financial Officer, The Walt Disney Company;
Steven Bornstein, Chairman, Walt Disney Internet Group;
Steven Wadsworth, President, Walt Disney Internet Group;
Spencer Neumann, Senior Vice President and Chief Financial
Officer, Walt Disney Internet Group;
and
Robert A. Iger, President and Chief Operating Officer, The Walt
Disney Company.
* * * * *
[Remarks of Winifred Webb, Senior Vice President of Investor
Relations, The Walt Disney Company]
Good morning and thanks for joining us.
Here with me today in Burbank, to discuss The Walt Disney
Company's and Disney Internet Group's fourth quarter and fiscal
year end financial results, are Michael Eisner, Chairman and CEO;
Bob Iger, Disney's President and COO; and Tom Staggs, Disney's
Senior Executive Vice President and Chief Financial Officer; as
well as the executive team from the Walt Disney Internet Group --
Chairman Steve Bornstein, President Steve Wadsworth, and Spencer
Neumann, the Internet Group's SVP and CFO.
As you probably know, we are scheduled to spend the next 45
minutes or so of this call focusing specifically on the Walt
Disney Internet Group's businesses -- and then we expect to move
on to a discussion of The Walt Disney Company more broadly
beginning at 10:15am Eastern Standard Time. For your
information, these calls are also being simulcast over the web at
disney.go.com/investors/wdig, or at disney.go.com/investors.
Before we begin with the Internet Group remarks, I wanted to
highlight that instead of just the typical "hold music" prior to
the start of this call, you may have noticed that we also ran a
series of recently-launched radio spots which promote the
redesigned GO.com web guide service -- radio spots which are
already airing in the top four markets for internet usage:
Seattle, San Francisco, Los Angeles and New York.
For today's call regarding the Walt Disney Internet Group,
Tom Staggs will lead off with a few remarks, followed by Steve
Bornstein, Spencer Neumann, Steve Wadsworth and Bob Iger. Then
we will open up the call to you for Q&A. Please note that all
referenced financial figures discussed on the Disney Internet
Group call will be pro forma figures in order to enhance
comparability year over year. Of course, the pro forma
financials represent the combination of Disney's Internet assets
with the acquired assets of Infoseek Corporation as if the
acquisition had occurred at the start of fiscal 1999.
We plan to conclude this call on the Internet Group, and to
begin the next call on Disney, at 10:15 am Eastern Standard Time.
So, let's get started.
[Remarks of Thomas O. Staggs, Senior Executive Vice President and
Chief Financial Officer, The Walt Disney Company]
Thank you, Wendy, and good morning.
I have just a few brief remarks to make before turning the
call over to our Internet Group executive team.
On this call, I think you will hear clearly that we think that
success on the internet ultimately will be determined largely by
strong brands and quality content. It is quality content that
attracts our viewers, users, customers and guests, and keeps them
coming back for more. Great content is the cornerstone of the long-
term creative and financial success for Disney, and certainly the same
is true for our Internet Group.
It is also critical to consider the value Disney's offline
assets can bring to bear to help promote the Internet Group's
product offerings.
And, as we increasingly read about internet companies whose
access to capital -- or lack thereof -- is becoming a liability
as opposed to an asset, the strength of both the Walt Disney
Company balance sheet and the importance of this medium as a
vehicle for development and distribution of Disney content should
be a comforting factor indeed. We continue to feel that we can
create significant value through our activities on the internet
and hence our commitment to this business remains strong.
Last April, The Walt Disney Company's Board of Directors
authorized the open market repurchase of up to 5 million shares
of Walt Disney Internet Group stock. So, in the fourth fiscal
quarter, we purchased roughly 910,000 shares on behalf of the
Internet Group at a cost of approximately $11.4 million.
This repurchase underscores the company's belief in the long-
term value inherent in our Internet Group's quality assets and in
the strength of its strategies for driving to profitability.
For more on our specific strategies and a review of the
year's results, let me turn the call over to the Internet Group
management team, beginning with Steve Bornstein. Steve?
[Remarks of Steven Bornstein, Chairman, Walt Disney Internet
Group]
Thanks, Tom, and good morning everyone. Thank you for
joining us on today's call.
I'd like to offer a few brief remarks about our first year
of operation and our outlook for fiscal year '01. Spencer
Neumann will follow with our financial results and Steve
Wadsworth will then cover our recent business highlights.
Fiscal year 2000 was a transitional period for the Walt
Disney Internet Group. We learned and accomplished a great deal
and made great strides towards becoming a more efficient
business. Today, as we report our year-end results, we feel it
is appropriate to offer you a summary of how we have performed
this past year.
I am pleased to tell you that we have accomplished what we
said we would do, and have been both measured and consistent in
our efforts. Let me elaborate on the year-in-review:
- We consolidated operations in a significant way;
- We divested assets that weren't strategic to our primary
focus;
- We integrated our sales operations;
- We controlled costs;
- We launched our new GO.com Web guide and debuted Movies.com;
- We launched our promising Auctions business with a terrific
partner -- eBay;
- We have leveraged the offline assets of Disney in several
ways -- by maximizing Internet buys through ABC's upfront
advertising sales efforts, for example, and with Disney marketing
campaigns for all of the Walt Disney Internet Group properties;
- We have furthered our leadership position in enhanced
television by expanding the quality and quantity of our
programming; and
- We have solidified an experienced, skilled management team.
Let me underscore the significant components of the Walt
Disney Internet Group: our business is a portfolio of category
leaders -- popular Web sites with rich, deep and distinct content
and services.
As we look to FY '01, we are placing particular emphasis on
building upon our key consumer brands, which are truly some of
the most visible and robust brands on the Web today. They are:
1- the Disney and Family brands,
2- our ESPN branded sites,
3- the GO.com brand,
4- our ABC branded sites, and finally,
5- our entertainment sites (Movies.com, Mr.Showbiz and Wall of
Sound).
As a quick review, I think it is important to reiterate our
strategic priorities in becoming the preeminent Internet media
player:
1- Develop and grow our market leading sites with the goal of
achieving ubiquitous distribution for all of our Internet
properties.
2- Continue the focus on our existing businesses by putting
maximum emphasis on where we can realize substantial operating
margins that will accelerate our path to profitability.
3- Enter new Internet businesses where we can leverage Disney's
significant offline assets.
We view our business as one with several revenue streams -- and
although advertising revenue will be important, we will not be solely
dependent on ad revenues. Our three-part revenue stream strategy
includes:
One: advertising -- and we continue to have confidence in
the Internet as a compelling advertising medium. In fact, in Q1
we are seeing increased revenue from established companies that
want to advertise online and that want to advertise across Walt
Disney Internet Group sites -- Steve will speak to this later in
the call.
Two: e-commerce -- we continue to experience strong growth
in this sector with our DisneyStore online and our DisneyVacation
sites as well as our new Auctions business. We will elaborate on
this point later in the call.
And three: our licensing and subscription revenue model.
We license content to our distribution partners and also operate
significant subscription businesses for ABC, Disney and ESPN. We
believe that expanding this revenue stream can make a substantial
contribution to our overall success -- when you consider the
strength of our brands and proprietary content, we are well
positioned to take advantage of this opportunity.
For example, in the wireless space, we are pursuing
subscription delivery deals that are comparable to our
relationship with DoCoMo in Japan -- that relationship offers
nearly 14 million Japanese subscribers access to Disney-themed
content from their mobile phones. To date, over 300,000
subscribers have signed up for this service -- at 100 yen (or
about $1) per subscriber per month. We are actively targeting
other domestic and international wireless carriers for similar
relationships -- we intend to fully exploit our content in all
major global markets, including Asia, Europe and the U.S., where
consumers value this type of service.
In addition, we believe the opportunity for Walt Disney
Internet Group brands and content in a broadband environment is
especially attractive; and we are well positioned to distribute
our content in broadband as broadband penetration moves from the
early adopter to the mass-market user over the next few years.
To this end, we will be building a single platform to
broadly deploy prototype content targeted at broadband users who
want personalized, on-demand, rich media through the Web. Our
initial efforts will be specifically focused on sports, news and
entertainment offerings.
In closing, let me address our operating expectations for
this year. As mentioned, we are executing on a more efficient
platform. Our number one priority is to increase revenues and
drive toward profitability. To that end, we are aggressively
managing costs, keeping our cost structure relatively flat, and
view FY '01 as a year of significant operating improvements.
Moreover, we are creating more revenue opportunities across all
of our properties, particularly as we offer a variety of more
compelling online branding and advertising solutions for our
partners. We will continue to derive benefit as the online
business of The Walt Disney Company through our access to
Disney's worldwide relationships, its great brands and its
significant offline, global assets.
Now, I'll turn it over to Spencer Neumann, who will report
on our financial results.
[Remarks of Spencer Neumann, Senior Vice President and Chief
Financial Officer, Walt Disney Internet Group]
Today, the Walt Disney Internet Group reported results for
the year and fourth quarter ended September 30, 2000. Before
walking through our performance I want to point out that our
results are impacted by two non-recurring items. First, in July
we closed the sale of Ultraseek to Inktomi Corporation. The sale
resulted in a pre-tax gain of $153 million and an after-tax EPS
benefit of 25 cents. In addition, we recorded non-cash charges
for the quarter totaling $31.5 million, or 13 cents per share
after tax, and for the full year totaling $36.5 million, or 15
cents per share, to reflect impairment in the value of certain
Internet investments. I will briefly review our performance for
the fourth quarter and the full year with and without these one-
time impacts. I will then focus the remainder of today's call on
our results excluding the Ultraseek gain and the non-cash
impairment charges.
For the fourth quarter of Fiscal 2000, total revenues were $82
million, driven by a 9% year-over-year increase in Internet revenues
that was more than offset by a 33% decline in our catalog operations.
Operating income, before amortization, was $50 million; however,
excluding the Ultraseek gain, our operating loss was $103 million.
Loss per share, excluding amortization, was 29 cents 42 cents
excluding the Ultraseek gain and impairment charges -- which is
favorable to the published analyst consensus of 46 cents).
For the full year, total revenues were $392 million -- up
13% over the prior year, driven by a 39% increase in Internet
revenues that was partially offset by our catalog operations.
Operating loss, before amortization, was $242 million (or $395
million without the Ultraseek gain). Loss per share, excluding
amortization, was $1.40 (or $1.50 excluding the Ultraseek gain
and impairment charges).
Now we'll discuss the income statement in more detail.
Focusing on the primary drivers of change, I will start with
Media Revenues. For the full year, we generated record Internet
Media revenues, closing the year at $201 million, a 24% increase
over the prior year. This is despite a 7% year-over-year decline
in the fourth quarter to $41 million. Both the fourth quarter
and the full year were characterized by growth across our ABC,
ESPN, Disney and Family, and Entertainment branded properties.
On a year-over-year basis, these properties collectively grew by
35% and 58% for the quarter and full year, respectively. Growth
within the ABC brands was primarily driven by the success of the
online version of Who Wants to Be a Millionaire and increased
advertising sales at ABCNews.com. Disney and Family were driven
by increased advertising and sponsorship revenues at the
Disney.com and Family.com sites, as well as increased licensing
revenues from the Disney-branded international operations. And
our ESPN sites continued to drive strong increases in usage and
advertising revenue. The offset to this growth was a result of
the anticipated reduction in advertising and sponsorship revenues
at GO during the redesign. With the launch of the new GO.com
behind us, we would expect to see this property regain momentum.
One issue that has increasingly been raised is the reliance
on dot-com advertising. To analyze this, we isolate pure play
"dot coms," or companies that were created for, and conduct all
or nearly all of their business on, the Internet. This analysis
highlights that advertising agreements with traditional companies
represented 60% of our ad revenue this quarter, up 7 percentage
points from Q3.
The changing mix of our advertising revenue toward more
traditional companies is driven by several factors. In
particular, it is largely driven by the reduction in funding for
many of these young Internet firms, resulting in companies that
no longer exist or firms that have rationalized their sales and
marketing spend ratios. This undoubtedly creates a drag on our
ad revenue base. To counter this drag, the Walt Disney Internet
Group plans to leverage its world class brands and innovative
marketing solutions to facilitate and accelerate the transition
of traditional advertisers to the web. Innovations such as the
Big Impression Ad and the Active Ad Box are testament to this
commitment.
Moving to Internet Commerce Revenues. Our Internet Commerce
revenues grew 74% and 100% for the quarter and full year,
respectively. This growth reflected increased sales at our
Disney-branded properties, specifically the DisneyStore.com and
DisneyVacations. The primary driver was transaction volume, as
the total number of orders per month increased by 51% and 74% for
the quarter and full year, respectively. In addition, we
experienced a healthy increase of 43% in average order value on a
full-year basis.
In our Direct Marketing business, revenues declined by 33%
and 23% for the quarter and full year, respectively. This
decrease in revenue resulted from a planned reduction in catalog
circulation, fewer product offerings, lower catalog response
rates, and ongoing migration to our online business. We
mentioned in our last call that we would expect to see some
uplift in Q4 relative to Q3. And we are pleased to report that
we are seeing signs of improvement in the business. In
particular, on a sequential quarter basis, revenues increased by
25%. This is partially driven by the seasonal nature of the
business which is characterized by a stronger third calendar
quarter, but the higher revenues were also driven by an enhanced
merchandise selection as well as improved marketing efforts. As
a result, we were able to mail more books to our targeted
customers and improve our response rates.
Moving down the income statement total operating losses for
the quarter and full year, excluding amortization of intangibles,
were $103 million and $395 million, respectively.
Losses from our Internet operations increased from $184
million to $365 million for the year, and from $62 million to $93
million for the quarter. These higher Internet losses for the
quarter reflected higher operating expenses across each of our
branded properties, primarily driven by continued investment in
web site technology and new product initiatives; additional
infrastructure to address growth across the Disney, ESPN, ABC,
and Entertainment businesses; ongoing enhancements to our sites
and the redesign of GO.com; and increased sales and marketing
expenditures across our Disney, ESPN and ABC properties that were
partially offset by reduced marketing at GO.
Losses also increased due to the declining revenues at
GO.com. In addition, for the full year, Internet operating
losses were negatively impacted by toysmart.com.
Direct Marketing operating losses increased from $23 million
to $30 million for the year, driven by lower revenues that were
partially offset by reduced operating costs as a result of a
planned reduction in catalog circulation and lower cost of goods
sold. For the quarter, operating performance also benefited from
an inventory write-off in the prior-year quarter and improved
margins in the liquidation channel, driving a reduction in
operating losses from $16 million to $9 million.
A quick look at a few of our key operating metrics points to
the continued consumer satisfaction and increasing usage of our
site.
According to September Media Metrix, the Walt Disney
Internet group maintained its position as the sixth most visited
web property on the Internet. Furthermore, total unique visitors
across our properties grew by just over 1 million people from
June to September.
Our registered user base grew by 11% on a sequential quarter
basis to 27 million. For the year, this represents a 70%
increase in our registered users.
And the depth of their usage continues to expand through
increased consumption of our content and services. A key
barometer in this regard is our ability to earn a share of our
user's time. According to Media Metrix, total time spent across
the Internet Group's sites increased 7% on a sequential quarter
basis to 2.3 billion minutes of usage. That means that on
average, during the fourth quarter, our users each spent about 1
hour and 43 minutes on our sites.
Average daily page views for the quarter decreased 5% on a
sequential basis from 92 million to 87 million, primarily driven
by the seasonally soft summer period, the absence of marketing
for GO.com pending the October relaunch, and lower traffic to
ABC.com's Millionaire. Page views did rebound in October to 93
million.
For the full year, page views increased by 60% to a daily
average of 83 million. And once again, this is without any
material acquisitions during the year and a significant reduction
in GO.com marketing spend.
With respect to ecommerce, as already noted, these
businesses showed strong quantity and quality of usage, as they
experienced solid growth in both the number of transactions and
average order value.
Before providing a look ahead, I'd like to briefly take
stock on this fiscal year. Shortly after completing the outright
acquisition of Infoseek, we articulated a few key financial
objectives.
First, we set out to reposition GO, making it clear that in
doing so we would be willing to sacrifice near-term revenues in
order build a stronger, long-term business.
Second, in the midst of the integration of Infoseek,
Starwave, and Disney Internet businesses, we committed to
continue to invest prudently in our branded properties with a
view to drive long-term growth.
And third, we set out to build the necessary technology and
infrastructure to achieve a scalable Internet Media company.
Well, we have now launched the new GO.com. We have also
completed the heavy lifting associated with our integration
efforts, and did so while building many properties that remain,
or have become, category leaders. And finally, this was all
achieved with prudent investment and strict financial discipline
that should allow us to grow our business while narrowing our
losses.
Looking ahead to 2001, we expect to continue to drive top
line revenue growth. It is likely that the velocity of this
growth will be impacted by two factors:
First, it is reasonable to suspect that for the industry as
a whole, the changing mix of advertising spend will continue to
pose a short to medium term drag on revenue growth -- and we will
not be immune to those industry forces.
Second, we will continue to be effected by a planned, modest
decline in Disney Catalog revenues as we encourage migration to
our online properties and reduce our losses in this segment.
Nonetheless, we continue to be encouraged by our ability to
offset these factors, primarily through growth in our Disney and
Family, ESPN, and GO branded Internet properties. We will
achieve this growth while controlling our operating expenses and
in turn meaningfully reduce our operating losses in Fiscal 01.
I should note that these trends in both revenue growth and
improved bottom line performance will begin to be seen in our
first quarter, but should accelerate as we move into the 2nd
quarter and then the second half of the year. This is primarily
driven by two factors:
First, as we have discussed, we are aggressively
transitioning our advertising mix to traditional advertisers. The
ongoing adjustment in sales and marketing spend of the dot com
companies, and the resulting offset to revenue growth, will
likely be felt more significantly in the first half of the fiscal
year.
Secondly, given that the new GO was not even released until
mid-October, and sales and marketing efforts are continuing to
ramp up, the full benefit of the new GO will not be felt in the
first quarter. Having said that, Steve will discuss the positive
reaction and early wins that we can already point to with the new
product. In addition, the sales and marketing efforts will be
ramping up in Q1, and therefore while we would still expect our
operating losses to narrow relative to the prior year, the
reduction will not be as dramatic as in future quarters.
One final housekeeping item as you consider our financial
outlook in 2001. Our intangible asset balance at the close of
Fiscal 2000 will be significantly reduced due to the amortization
of the first tranche of the Infoseek investment as well as the
goodwill associated with the Ultraseek sale. As such, relative
to the $212 million of non-cash goodwill amortization running
through the P&L this quarter, we would expect approximately $185
million in the first quarter of Fiscal 2001, and roughly $155-
$160 million in each of the remaining three quarters.
Now I'll turn the call over to our President, Steve Wadsworth.
[Remarks of Steven Wadsworth, President, Walt Disney Internet
Group]
Thanks, Spence, and good morning everyone.
As you know, we successfully launched our new GO.com site, a
guide to the Web unlike any other search or content site
available today. The new GO.com Web guide is designed to help
the growing number of online users who want to find comprehensive
information more easily, particularly in entertainment and
recreation. In keeping with our strategic priorities and by
building on the strengths of our strong Internet assets, we
believe we are in a unique position to lead in this category.
With its new focus, GO.com is a more user-friendly and compelling
consumer proposition.
The site launched with a phased, consumer beta rollout in
September and was opened to all Web users in early October. As
we have said, we have a three-fold objective with the new GO:
1- to create a better, more effective product for guiding
people through the Web;
2- to significantly improve our revenue opportunity by making
it a more efficient and compelling forum for advertisers; and
3- to use GO to drive traffic to our other sites and our
partners' sites.
The consumer beta rollout gave us the opportunity to
introduce the product gradually and also refine it with consumer
feedback. While we will continue to evolve and improve the new
GO.com, overall our users tell us they like what they see -- they
particularly like GO's comprehensive search results, its quick
download performance, ease of use and new design. In addition,
our users find our GO Guides' "Proven Picks" recommendations to
be of great value. Our GO Guides -- an online community of
reviewers that has grown from 10,000 Guides last year to 43,000
today -- is proving to be a highly differentiating aspect of
GO.com. We are very encouraged by users' positive feedback,
particularly given that we haven't yet fully rolled out our
marketing campaign.
A few words about that campaign: to promote the new GO,
we're sponsoring a major consumer marketing effort, highlighted
by a year-long, national advertising campaign themed, "Where to
Look." The campaign, sized in the tens of millions of dollars,
will be the first time in over a year that GO.com has undertaken
any marketing outreach to consumers. The creative elements of
the ad campaign emphasize GO.com's new role as a lifestyle Web
guide, using the tagline, "Your Guide to a Better Time," and it
has just started to run on print, radio, television and online
media.
In addition, the campaign will leverage the significant
offline media assets of The Walt Disney Company. Specific
efforts include co-marketing with ABC Television, ESPN, Walt
Disney World and Disney hotel properties in Orlando, the soon-to-
open Disney California Adventure in Anaheim, and ABC's Videotron
screen in Times Square. We believe the overall campaign will
creatively brand GO as the ultimate consumer Web guide.
We are also encouraged by the reaction from our marketing
partners to the many new advertising opportunities on GO.com -
I'll speak more about this in a moment.
Over the course of this fall season, we have also been
introducing new site designs and enhancements across our
portfolio of Web properties -- including ESPN.com, ABC.com and
DisneyStore.com -- all of which sport new looks. ABCNews.com and
Family.com will introduce their new designs later this month.
We're particularly upbeat about Page 2 - a new enhancement to
ESPN.com that debuted on Monday. Page 2 is a second ESPN home
page that is modeled after ESPN Magazine with its look and
attitude, and will feature writers and celebrity authors offering
a range of edgy content and opinions on different areas of sports
-- notably gonzo journalist Hunter S. Thompson. We've also
signed up Richard Ben Cramer, author of the new Joe DiMaggio
biography; humorist Nick Bakay; and several others, including a
celebrity guest columnist each Friday.
Our objective with each redesign is to make each site a more
compelling offering for consumers, and of course, to increase
revenues, most notably with the introduction of the "Big
Impression" ad, an online advertising space that is prominently
positioned on our key sites and is 30% larger than any standard
ad space offered on the Web today.
We are beginning to see the results of our new advertising
revenue opportunities across our sites. As you know, the "Big
Impression" is planned for all of our Web sites, and now appears
on ESPN.com, ABC.com and GO.com, with ABCNews.com, and Family.com
to follow shortly. Response from marketers has been favorable -
in fact, we've already sold new Big Impression ads from prominent
marketing companies including Procter & Gamble, Hewlett-Packard,
Compaq, Universal and Nike, and we are very encouraged by this
reception. In addition, AT&T has agreed to a "road block"
advertising commitment -- buying the Big Impression
simultaneously across all of our sites for a three-day time
period later this month. We believe this type of response from
traditional advertisers is indicative of the commitment to
marketing in the online space and is a credit to Walt Disney
Internet Group's differentiated online advertising model -- one
in which we as a company have the relationships with major
marketers, have great products and brands, and offer the right
marketing environments.
We've also seen strong interest in GO.com's ActivAd module,
which displays relevant products, content or tools on GO's search
results page, and can support special promotions and spur user
registrations. To date, advertisers signed for the ActivAd
include Adidas, J.C. Penney, Kraft, State Farm and Hertz.
Our enhanced TV products continue to attract major advertisers,
such as Toyota, Mazda, Nortel and Verizon, with cross-media buys on TV
and online.
Let's move now to e-commerce. We are excited about Disney
Auctions, which we launched last month together with eBay.
Disney Auctions offers consumers the chance to purchase one-of-a-
kind and collectible Disney memorabilia, authenticated by The
Walt Disney Company. Auctions introduces a new revenue stream
for the Walt Disney Internet Group -- we will receive a
significant share of the revenue generated from each Disney
auction item sold. Moreover, our deal with eBay affords us with
a $30 million marketing allocation over the next four years which
will enable us to promote this new offering widely.
We are encouraged by the initial results based on strong
bidding by consumers and by significant sell-through experienced
to date -- this confirms to us the appetite for the type of
products we are offering. Moreover, our association with eBay is
working well -- eBay, in fact, is planning a high-end, online
catalog for the Christmas holiday which will prominently feature
Disney items, and we are well-integrated in their site.
On the subject of e-commerce, let me highlight the strong
results and progress made at DisneyStore.com and
DisneyVacations.com. At DisneyStore.com, total revenue is nearly
110 percent over the same period last year, driven by strong sale
of Halloween merchandise. We expect to see continued strength in
DisneyStore sales as a result of a technology platform upgrade,
homepage and site navigation redesign, easier checkout, added
feature functionality such as wish lists, aggressive marketing
promotions, tighter marketing integration with The Disney Store,
as well as ongoing migration from the catalog.
As we have stated previously, one of the keys to
profitability for the Walt Disney Internet Group - and The Walt
Disney Company -- is the success of our online commerce in the
travel sector. For that reason, we are very pleased that
DisneyVacations experienced a 300% increase in both package and
ticket sales during Q4 2000 versus the same period last year, and
we expect DisneyVacations to show continued strong growth this
quarter and for the remainder of FY '01. Growth will be driven
by an increasing share of theme park package sales via the
Internet, a richer product offering that includes car and airline
reservations, as well as the addition of new Disney properties --
including Disneyland Paris, the Tokyo Disney Resort and the new
Disney's California Adventures theme park.
Finally, let me briefly touch on our licensing and subscription
business. Since last year, we have expanded our Disney Blast program
substantially, with the number of overall markets increasing worldwide
from four in FY '99 to 26 markets served today. We also recently
concluded deals to syndicate our ABC and ESPN content on a licensee
basis. In fact, our total revenue from licensing and subscriptions
has doubled from Q4 '99 to Q4 2000, driven by Blast and ESPN Fantasy
Games. We expect to see continued revenue growth in this area as we
pursue more deals worldwide. With these recent developments, we're
successfully transitioning our focus toward exciting new product
enhancements, revenue growth and a more efficient operation.
Thank you, and now I'm pleased to hand the call over to Bob Iger.
[Remarks of Robert A. Iger, President and Chief Operating
Officer, The Walt Disney Company]
Thank you, Steve.
Earlier in this presentation, Steve Bornstein discussed the
Walt Disney Internet Group's three-part revenue strategy based on
advertising, e-commerce, and licensing and subscription models.
In commenting on the advertising market, which impacts a number
of our media businesses, whether we are in a robust advertising
marketplace or one that is less active, advertisers follow the
same strategy of seeking out audience delivery leaders to convey
their messages. Like our traditional media assets, the reach of
the Walt Disney Internet Group is significant, with 93 million
page views a day and 22 million visitors a month. We command
these results due to the strength of our brands. Advertisers and
consumers alike respond to our content offerings, and we have
integrated our sales efforts at the Walt Disney Internet Group
with our other media properties to better meet the marketing
goals of our advertisers and build market share.
In the last six months, we have seen tremendous changes in
the new media industry, with the failure of numerous dot.com
ventures due to unsustainable business models and less than
compelling content. The Walt Disney Company is a content company
that maintains leadership positions due to the strength of its
creativity. We exploit this comparative advantage across all
channels to the consumer, including the Internet.
The Walt Disney Internet Group provides users with rich
content that is either unique to our sites, extends our
television, cable, film or theme park assets, or is an
interactive application that enhances our television programming.
We are ahead of the curve in the area of Enhanced Television and
continue to expand our offerings in this space. This past
Tuesday night, ABC News.com complemented ABC News' coverage of
the elections by offering the first-ever live, interactive
network news telecast, which allowed viewers to "connect" in real-
time to the ABC News Elections' team. The Walt Disney Internet
Group estimates that 215,000 unique viewers -- connecting for an
average of 27 minutes -- participated in The ABC News American
Election Challenge. ABCNEWS.com, the 24-hour online service of
ABC News, registered 27.1 million page views on Tuesday, which
bested by 170% the previous single-day site record.
Enhanced TV applications, opportunities to distribute our
content in the wireless space, and program integration are a
principal focus, in order to differentiate our Internet offerings
from the competition, provide a more compelling experience for
users, and create an interactive link to consumers for our
advertisers.
In addition to great content, The Walt Disney Company
affords other distinct advantages to its Internet Group through
its offline marketing support and capital resources, which
bolster the Internet Group's competitive positioning. Our
Internet businesses are a strategic necessity for the long-term.
We remain committed to sustaining and building the Walt Disney
Internet Group and driving it to sustained profitability over
time. Using the powerful promotional capabilities of the ABC TV
Network, owned television stations, radio networks and stations,
ESPN, and The Disney Channel, substantial promotional weight was
devoted to 10 key online initiatives in the fourth quarter of
2000. Our traffic results during this promotional period trended
above industry average growth rates with increased traffic to
such sites as ABCNews.com's Moneyscope and ABC News for Kids,
ABC.com's Daytime and Millionaire sites, and ESPN.com. Moving
forward, our long-term investment in the on-going success of our
Internet businesses will be further demonstrated with on-air
marketing campaigns on ABC's media assets for the launch of
Disneyauctions and TheDisneyStore.com during the holiday selling
season.
As I stated, The Walt Disney Internet Group has some of the
strongest brands on the Internet with lead positions in sports,
news, kids, vacations and entertainment. Our long-term strategic
plans are focused on building these brands, capturing greater
market share, and yielding strong returns.
[Remarks of Winifred Webb, Senior Vice President of Investor
Relations, The Walt Disney Company]
Thanks again for joining us today. Let me remind you that
certain statements in today's press release and on this
conference call may constitute forward-looking statements under
Federal securities laws. These statements are subject to a
number of risks and uncertainties and actual results may differ
materially from those expressed or implied in light of future
decisions by the company and by market, economic, competitive and
technological developments beyond the company's control. For
more information on factors that may affect future performance,
you may wish to review our periodic financial reports, which are
available at our disney.com investor relations websites.
This concludes Disney Internet Group's year-end conference call.
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