DIS
#On the motion picture side we see global motion picture consumption actually growing.
A lot of that is obviously due to the number-one growth market in the world in terms of grosses, and that's China, where we've seen just massive increase in moviegoing over the last even 2 to 3 years.
I know a lot has been said about the window and whether technology and the opportunity to view under higher-quality circumstances in the home is going to compress the theatrical window.
For the kind of movies that we make, which are largely what I'll call tentpole films, we actually believe the theatrical window is incredibly important to us.
And at the moment we don't really see any need to aggressively compress it.
We time our, I'll call it, the home video product that goes into the marketplace very carefully, mostly to track the retail opportunities that we have as a Company, retail opportunities to both sell the movie into that window and retail opportunities to take advantage of the Consumer Products sales that we generally get at retail from a lot of the movies that we make.
So, we think that generally motion picture consumption is increasing in the world.
It has been relatively flat in the United States, by the way; I don't think that's going to change.
And for at least us, we don't really see taking steps to decrease the theatrical window because, frankly, it's working for us.
On the Star Wars front, <UNK>, we know that there is just incredible interest in this film.
We've put two teaser trailers out and the response has been enormous.
Anything that moves gets a lot of attention, and anticipation is obviously huge.
And we've seen some examples already of Star Wars product going into the marketplace on the Consumer Products front including in markets like China that are very, very encouraging.
That said, as enthusiastic as we are for what we know of the film, we have not seen a Star Wars film, any original one, since 2005.
And there are markets around the world that are less familiar with Star Wars than, say, the United States, for instance.
So, while the enthusiasm is, I think, rather apparent, we just want to be careful that the world doesn't get ahead of us too much in terms of estimates.
And we have seen them as well.
We are making, at this point, no estimates whatsoever in terms of what we believe the film will do.
We know we have probably the most valuable film franchise that ever existed.
We know we have the ability as a Company to leverage it in very, very compelling ways, whether it's in Disney, Infinity, whether it's at parks, as <UNK> cited, whether it's on the Consumer Products front or on the TV front.
And we fully expect that the success of this film will reverberate throughout the Company not only in 2016 but in the years beyond because we obviously have a rich slate of Star Wars films coming.
So we just want to be careful here that the market doesn't get too far ahead of us or ahead of itself, even, on this.
Let's all continue to anticipate the movie and be optimistic about it.
But we have to take a wait-and-see approach in terms of what it will do.
On the Shanghai front I'm going to let <UNK> talk about the economic impact in 2016.
But you know, there, too, like Star Wars in many ways, there's huge anticipation.
As I mentioned in my comments, the reaction to what we revealed a couple of weeks ago in Shanghai was extraordinary not just in terms of the level of interest but a level of enthusiasm and the positive reaction to the fact that we were building a park that was of such scale and was so unique in many ways, particularly in its blend of what I will call traditional Disney theme park experiences and a lot of things that are both original and very, very specifically tailored for the Chinese market.
Okay, <UNK>.
Your question about ESPN ---+ the new NBA deal will occur in 2017.
And we still believe that ESPN has plenty of room to grow.
On the question about China, the announcement that was made about a deal with Youku, I think you mentioned, was not correct.
We have not entered into a partnership arrangement with them.
The home video market in China is obviously challenged by the fact that it's a market that has been, as you know, rife with piracy.
And so, there wasn't ---+ a legitimate home video market never quite develop there.
That said, there are a number of new platforms that have launched or that are expected to launch.
And we are in a number of conversations, none that we can discuss because we're not ready to announce it, with some of them about output deals for our films.
And we feel good about essentially digital delivery of these films into a window that is likely to be lucrative for us over a long period of time, and essentially enable us to put legitimate product into the marketplace swiftly to hopefully counter what we have encountered in a lot of Asian markets, which is piracy.
Okay.
<UNK>, on the $500 million, that's another good question regarding foreign-exchange.
It's not the simplest subject.
But if we had not hedged at all, the FX impact would have in more significant in fiscal 2015.
But the reason I say that is we don't know what rates are going to do in fiscal 2016.
But right now for fiscal 2016 we are expecting that $500 million adverse impact.
And the hedge ratios that we have in place are actually more favorable than current levels.
So if there were changes in different directions during the year, we would continue layering in during 2016 for 2017.
But right now the hedges that we have in place for 2017, albeit more modest than where we are for 2016, they are ---+ right now they look like they would benefit us in a strong dollar market.
ESPN, in particular ---+ the FX issue there is separate and distinct from the $500 million that we talked about.
The foreign-exchange impact for ESPN is over that three-year period.
And when we talked back in 2014 at the Investor Day for that outlook, at that point in time the US dollar had not started it's a significant strengthening.
That was in the summer of 2014.
So during that period the dollar has significantly strengthened across a number of key currencies for our cable nets, including the yen, the euro, the pound as well as the Brazilian real.
So that FX impact is part of that outlook guidance that we gave.
It's a combination.
It's both the adverse impact of lower expected sub levels and the adverse impact of the stronger dollar.
No.
I think just the way we've explained that is what we can do.
We are seeing real growth.
But it's still relatively small in terms of total dollars versus what we see on the traditional platforms.
In ESPN's case, as we have said before, they package their ad sales across all of their platforms, basically their linear, more analog platforms as well as all their digital platforms and platforms like radio and even their magazine.
But we think that there's going to be tremendous growth from a percentage basis of digital.
And we are going to continue to work with advertisers and with the research firms that are out there to work to not only get more creative but to provide more details, essentially more consumption research so that we can grow the business even more.
The demand is clearly there.
What you see in the advertising community ---+ not only do you see much more opportunity for what I'll call addressable advertising, but you see a huge demand from the advertising community as well.
By the way, while we're on the subject of ESPN, because we have been on it a lot, so why not, I want to make one other point about it.
First of all, we've set a number of times when you think ESPN you have to think about the NFL, NBA, Major League Baseball, the best package available in college football, college football championships, college basketball, events like Wimbledon, U.S. Open, et cetera.
The other thing you have to consider is that in many of these cases we're only at the beginning or, in some cases, not even at the beginning, like the NBA, of new deals that kick in.
Those new deals all provide for more programming, more opportunity for content on digital platforms which will enable us to increase consumption on digital platforms and grow that business even more.
And generally, more flexibility in terms of how we distribute this product.
So the NBA's a great example.
You are going to have a huge increase in essentially inventory on ESPN across its platforms.
So while there is definitely increase in cost, there's huge increase in terms of opportunity as well to reach more people, to serve advertisers more effectively, and to grow our digital platforms.
Thanks, <UNK>.
You can think about the 53rd week in terms of it being an additional week of operations.
So it's relatively proportional in the year, so that would be a benefit here in fiscal 2015 and it would have the reverse effect in fiscal 2016.
You are absolutely correct.
Our leverage has reduced as the Company has continued to perform.
We generate cash flow that we deployed to returning shareholders as well as businesses, doing strategic acquisitions.
So when we look at our leverage, the number that you quote is actually a gross number.
And we do look at our leverage in terms of the way the rating agencies look at it.
So they will make some adjustments to that for things like pension obligations.
So it's actually a little bit higher from a rating agency perspective.
That being said, we do enjoy a mid single A credit rating.
We also are a tier 1 commercial paper issuer.
So as it currently stands, we feel like we are returning capital to shareholders as well as investing in businesses, doing acquisitions.
And at the same time we are maintaining financial strength and flexibility.
Thank you, <UNK>.
And thanks again, everyone, for joining us today.
Note that a reconciliation of non-GAAP measures that were referred to on this call to equivalent GAAP measures can be found on our investor relations website.
Let me also remind you that certain statements on this call may constitute forward-looking statements under the securities laws.
We make these statements on the basis of our views and assumptions regarding future events and business performance at the time we make them, and we do not undertake any obligation to update these statements.
Forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results expressed or implied in light of a variety of factors including factors contained in our Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission.
Thanks again for joining us today.
