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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the Fiscal Year Ended September 30, 2003

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act: None.

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes     ü     No                

Documents Incorporated by Reference

      Certain information required for Part III of this report is incorporated herein by reference to the proxy statement for the 2004 annual meeting of the Company’s shareholders.

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THE WALT DISNEY COMPANY AND SUBSIDIARIES

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PART I

      The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in four business segments: Media Networks, Parks and Resorts, Studio Entertainment and Consumer Products. 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 revenues, operating income, identifiable assets and supplemental revenue of the Company’s business segments and by geographical area appears in Note 1 to the Consolidated Financial Statements included in Item 8 hereof. The Company employed approximately 112,000 people as of September 30, 2003.

MEDIA NETWORKS

Domestic Broadcast Television and Radio Networks

      We also operate the ABC Radio Networks, which provide programming to more than 4,800 affiliated radio stations reaching approximately 127 million domestic listeners weekly. The ABC Radio Networks produce and distribute to affiliates a variety of programs and formats, including ABC News Radio and other news network programming, syndicated talk and music programs, ABC Sports programming and 24-hour music formats. In addition, the ABC Radio Networks produce Radio Disney, a 24-hour music and talk format intended to appeal to children and their parents. Radio Disney is carried in 57 markets, covering more than 61 percent of the U.S. market. ABC Radio Networks also distributes the ESPN Radio format, which is carried on more than 700 stations, including 238 full-time (five of which are owned by the Company), making it the largest radio sports network in the United States.

      Generally, the television and radio networks produce their own programs or acquire broadcast rights from other producers for network programming, and pay varying amounts of compensation to affiliated stations for broadcasting the programs and commercial announcements included therein. Network operations derive substantially all of their 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.

Domestic Broadcast Television and Radio Stations

      Of the Company’s 41 owned radio stations located in the top 20 U.S. advertising markets, 24 carry predominantly locally originated music and talk programming, 13 carry the Radio Disney format and four carry the ESPN Radio format. Of the Company’s 31 radio stations in the non-top-20 markets, 28 carry the Radio Disney format. Our radio stations reach 16 million people weekly in the top 20 United States advertising markets.

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      Markets, frequencies and other station details are set forth in the following tables:

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(1)	Based on Nielsen Media Research, U.S. Television Household Estimates, January 1, 2003
(2)	Based on 2003 Arbitron Radio Market Rank

Cable/ Satellite Networks and International Broadcast Operations

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      Cable properties, the Company’s ownership percentage and subscribers are set forth in the following table:

      The Company has various other international investments in addition to the cable properties listed in the above table.

      ESPN. ESPN, Inc. operates four domestic television sports networks: ESPN, ESPN2, ESPN Classic and ESPNEWS, which is a stand-alone network or a wraparound service for some regional sports networks. In March 2003, ESPN launched ESPN HD, a high-definition television simulcast service of ESPN. ESPN, Inc. owns, has equity interests in, or has distribution agreements with 25 international networks, reaching households in more than 140 countries and territories. International networks include ESPN STAR Sports joint venture, which delivers sports programming throughout most of Asia, and CTV Specialty Television, Inc. (formerly NetStar), which owns The Sports Network, Le Réseau des Sports, ESPN Classic Canada, the NHL Network and Discovery Canada, among other media properties in Canada.

      ESPN also has several other brand extensions, including ESPN.com, the leading Internet sports content provider; ESPN Regional Television; ESPN Radio, which is distributed through the ABC Radio Networks; ESPN The Magazine; SportsTicker, the leading supplier of real-time sports news and scores; BASS, the largest fishing organization in the world; ESPN Enterprises, which develops consumer products, and the ESPN Zone sports-themed dining and entertainment facilities which are managed by Disney Regional Entertainment and included in the Parks and Resorts segment. ESPN also provides content for newer technologies such as broadband, wireless, and video-on-demand.

      Disney Channel. Disney Channel is a cable and satellite television service. New shows developed for initial exhibition on Disney Channel include comedy, adventure, animated and educational

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      Disney Channel also reaches outside of the United States of America via its international operations. Programming consists primarily of the Company’s theatrical film and television programming library, and products acquired from third parties and locally produced programming. We continue to explore the development of Disney Channel in other countries around the world.

      International Disney Channels, and launch dates are set forth in the following table:

(1)	Represents feed extensions from the Asia regional channel.
(2)	Represents feed extensions from the Latin America regional channel.

      Toon Disney. Toon Disney was launched in 1998 and is intended to appeal to children and features an array of family-friendly, predominantly animated programming from third parties and the Disney library.

      SOAPnet. SOAPnet was launched in January 2000 and offers a wide variety of soap opera and related programming 24 hours a day, seven days a week. SOAPnet’s primetime schedule features same-day repeat telecasts of the top-rated ABC Daytime series All My Children, General Hospital, One Life to Live and Port Charles. The service also airs the popular Ryan’s Hope and Another World and such serial dramas as Knots Landing, Dynasty and Dallas, as well as an original soap news series, SoapCenter, and the daily Emmy Award-nominated talk show, Soap Talk.

      ABC Family. In October 2001, the Company acquired Fox Family Worldwide, Inc., which was renamed ABC Family Worldwide, Inc. ABC Family operates the ABC Family Channel, a television programming service, Fox Kids Europe, and Fox Kids Latin America. ABC Family Channel programming consists of product acquired from third parties and the ABC Television Network and products from our owned theatrical film library along with original programming. Original programming

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      A&E. The A&E Television Networks are television programming services devoted to cultural and entertainment programming. The networks include A&E, A&E International, The History Channel, History International, a network that provides viewers with a window into non-U.S. perspectives, and The Biography Channel, launched in 1998, which is dedicated to exploration of the lives of exceptional people.

      Lifetime. Lifetime Entertainment Services owns Lifetime Television, which is devoted to women’s lifestyle programming. During 1998, Lifetime launched the Lifetime Movie Network, a 24-hour channel. Lifetime Real Women is Lifetime Television’s other sister channel. In April 2003, Lifetime magazine, a joint venture between The Walt Disney Company and The Hearst Corporation, was launched.

      E! Entertainment. E! Entertainment Television is a television programming service focused on the entertainment world. E! Entertainment Television also launched a sister channel, Style, in 1998, a 24-hour television service devoted to style, beauty and home design.

      The Company’s share of the financial results of the cable/satellite and international broadcast services, other than Disney Channel, ESPN, Inc., Toon Disney, SOAPnet and ABC Family, is reported under the heading “Equity in the income of investees” in the Company’s Consolidated Statements of Income.

Television Production and Distribution

      Under the Walt Disney Television and Buena Vista Television labels the Company develops and produces animated children’s television programming for distribution to global broadcasters, including Disney Channel, the ABC Television Network, and other cable broadcasters.

      The fall 2003 season on Disney Channel sees the return of Disney’s Kim Possible with new episodes and a 7-day-per-week format, as well as the premiere of Disney’s Lilo & Stitch. Upcoming Disney Channel series premieres include Dave the Barbarian in January 2004. The 2003/2004 ABC Saturday morning television season returns under the name ABC Kids. ABC Kids is a line-up of animated and live-action series that includes Disney’s Recess, Disney’s Fillmore, and Disney’s Kim Possible, as well as Disney’s Lilo and Stitch which premiered in September 2003.

      The Company also licenses its animated television properties in a number of foreign television markets. In addition, we syndicate certain of our television programs abroad, including The Disney Club, a weekly series produced for foreign markets.

      The Company is also producing original television movies for The Wonderful World of Disney, which the ABC network airs on Saturday evenings.

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      We also produce a variety of prime-time specials for exhibition on network television, as well as live-action syndicated programming, which includes Live! with Regis and Kelly and The Wayne Brady Show, daily talk shows, Ebert & Roeper, a weekly motion picture review program, and game shows such as Who Wants to Be a Millionaire.

Internet

      ABC.com, is the official Web site of the ABC Television Network, while ABCNEWS.com draws on the knowledge and expertise of ABC News correspondents throughout the world. ABCNEWS.com provides subscription broadband services that provide on-demand access to leading ABC News shows, such as World News Tonight with Peter Jennings and Nightline, through alliances with AOL Broadband, Yahoo! and Real Networks.

      Enhanced TV provides interactive television programming and advertising services during ABC telecasts, such as Monday Night Football.

      ESPN.com delivers comprehensive sports news, information and video to millions of fans each month.

Competition

      The Company’s television and radio stations are in competition with other television and radio stations, cable and satellite television programming services, videocassettes, DVDs and other advertising media such as newspapers, magazines, billboards and the Internet. Competition occurs primarily in individual market areas. A television or radio station in one market generally does not compete directly with stations in other market areas.

      The growth in the cable/satellite industry’s share of viewers has resulted in increased competitive pressures for advertising revenues. In addition, the market place for the acquisition of sports and other programming continues to be competitive. The Company’s cable/satellite networks also face competition for carriage by cable and satellite service operators and distributors. The Company’s contractual agreements with cable and satellite operators are renewed or renegotiated from time to time in the ordinary course of business. A significant number of these arrangements will be up for renewal in the next 18 months. Consolidation 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 and satellite programming services that are as favorable as those currently in place.

      The Company’s Media Networks segment also competes for the acquisition of sports and other programming. The market for programming is very competitive, particularly the markets for sports programming. The Company currently has sports rights agreements with the four major professional

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      ABC Television Network

      Events of this kind for which the Company secures right from third parties are an integral part of our programming strategy and, when combined with news and information and original programming, enable us to deliver a full complement of sports assets to our fans, advertisers and distributors.

      The Internet properties are in competition for users and advertising revenues with other sports, news, family and entertainment Internet web sites, as well as Internet web portals.

Federal Regulation

	•	Licensing of television and radio stations. Each of the television and radio stations we own must be licensed by the FCC. These licenses are granted for periods of up to eight years, and we must obtain renewal of licenses as they expire in order to continue operating the stations. We must also obtain FCC approval whenever we seek to have a license transferred in connection with the acquisition of a station. The FCC may decline to renew or approve the transfer of a license in certain circumstances. Although we have generally received such renewals and approvals in the past, there can be no assurance that we will always obtain necessary renewals and approvals in the future.

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	•	Television and radio station ownership limits. The FCC imposes limitations on the number of television stations and radio stations we can own in a specific market, on the combined number of television and radio stations we can own in a single market and on the aggregate percentage of the national audience that can be reached by television stations we own. As of September 30, 2003:

	•	FCC regulations would have permitted us to own an additional television station in all of the 10 markets in which we have television stations, and we did not own more than one television station in any of those markets.
	•	FCC regulations would have permitted our stations in the aggregate to reach 35% of the national audience (attributing UHF television stations with only 50% of the television households in their market). Our stations reached approximately 24% of the national audience calculated using the FCC’s attribution rule.
	•	FCC regulations may in some cases impose restrictions on our ability to acquire additional radio or television stations in the markets in which we own radio stations, but we do not believe any such limitations are material to our current business plans.

      The FCC recently adopted changes to these rules that would generally permit entities to own more television and radio stations in some markets and allow a single entity to own television stations that in the aggregate reach a larger percentage of the total national audience. The effectiveness of the new rules has, however, been stayed by a federal court order, and Congress is considering a number of measures to repeal or prevent implementation of some or all of the new rules.

	•	Dual networks. FCC rules currently prohibit any of the four major television networks – ABC, CBS, Fox and NBC – from being under common ownership or control. The new FCC rules, if implemented, would not modify this limitation.
	•	Regulation of programming. The FCC regulates programming by, among other things, banning “indecent” programming and imposing restrictions and commercial time limits on political advertising. Federal legislation and FCC rules also limit the amount of commercial matter that may be broadcast during programming designed for children 12 years of age and younger and generally require a minimum of three hours per week of programming that has as a “significant purpose” meeting the educational and informational needs of children 17 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.
	•	Cable and satellite carriage of broadcast television stations. With respect to cable systems located within a television station’s DMA, FCC rules require that every three years each television station elect either “must carry” status, pursuant to which cable operators must carry a local television station in the station’s market, or “retransmission consent” status, pursuant to which the cable operator is required to negotiate with the television station to obtain the consent of the television station for carriage of its signal. Under the Satellite Home Improvement Act, satellite carriers are permitted to retransmit a local television station’s signal into its local market with the consent of the local television station. If a satellite carrier elects to carry one local station in a market, the satellite carrier must carry the signals of all local television stations that also request carriage.
	•	Digital television. FCC rules currently require full-power analog television stations, such as ours, to provide digital service on a second broadcast channel granted specifically for the phase-in of digital broadcasting. FCC rules also regulate digital broadcasting to ensure continued quality carriage of mandated free over-the-air program service. All of the Company’s stations have launched digital facilities and we are evaluating various options with respect to use of digital channels. All broadcasters are required to operate exclusively in digital

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		mode and surrender the additional channel by December 31, 2006, but the FCC has the authority to extend this deadline in certain circumstances and is expected to do so in most markets because the number of households receiving a digital signal is not likely to exceed 85% by the deadline.

      The foregoing is a brief summary of certain provisions of the Communications Act and other legislation and of specific FCC rules and policies. This summary focuses on provisions material to our business. 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 and Disney Cruise Line in Florida, the Disneyland Resort in California, ESPN Zone facilities in several states and Anaheim Sports in California. The Company manages and has an ownership interest in the Disneyland Resort Paris in France and Hong Kong Disneyland, which is under construction. The Company’s ownership interest in Disneyland Resort Paris and Hong Kong Disneyland is 39% and 43%, respectively. The Company also licenses the operations of both the Disneyland Resort Paris and Hong Kong Disneyland. The Company also licenses the operations of the Tokyo Disneyland Resort in Japan.

Walt Disney World Resort

      The entire Walt Disney World destination resort is marketed through a variety of national, international and local advertising and promotional activities. Several attractions in each of the theme parks are sponsored by corporate participants.

      Magic Kingdom – The Magic Kingdom, which opened in 1971, consists of seven themed lands: Main Street USA, Adventureland, Fantasyland, Frontierland, Liberty Square, Mickey’s Toontown Fair 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 spectacular nighttime fireworks extravaganza.

      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 major pavilions devoted to showcasing science and technology improvements, communication, energy, transportation, using your imagination, life and health, 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 the United States, Canada, China, France, Germany, Italy, Japan, Mexico, Morocco, Norway and the United Kingdom. Both areas feature themed rides and attractions, restaurants and merchandise shops.

      Disney-MGM Studios – The Disney-MGM Studios, which opened in 1989, consists of a theme park, an animation studio and a film and television production facility. The park centers on

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      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: Dinoland U.S.A., Africa, Rafiki’s Planet Watch, Asia, Discovery Island and Camp Minnie — Mickey. Each themed area contains adventure attractions, entertainment shows, restaurants and merchandise shops. The park features more than 200 species of animals and 4,000 varieties of trees and plants on more than 500 acres of land.

      Resort Facilities – As of September 30, 2003, the Company owned and operated 16 resort hotels at the Walt Disney World Resort, with a total of approximately 20,000 rooms and 318,000 square feet of conference meeting space. In addition, Disney’s Fort Wilderness camping and recreational area offers approximately 800 campsites and 400 wilderness homes. Disney’s Pop Century Resort, a value priced resort hotel which will include buildings themed to different decades from the 1900’s to the 1990’s, is scheduled to open on December 14, 2003. The Pop Century Resort will add 2,880 rooms.

      The Disney Vacation Club (DVC) offers ownership interests in 6 resort facilities, located at the Walt Disney World Resort, as well as in Vero Beach, Florida, and Hilton Head Island, South Carolina. Disney’s Saratoga Springs Resort & Spa in Orlando, Florida is scheduled to begin a phased opening in May 2004. Available units at each facility are for sale under a vacation ownership plan and operated as rental property until the units are sold.

      Recreational amenities and activities available at the Walt Disney World Resort include five 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 operates two water parks: Blizzard Beach and Typhoon Lagoon.

      We have also developed a 120-acre retail, dining and entertainment complex known as Downtown Disney, which consists of the Marketplace, Pleasure Island and West Side. In addition to more than 20 specialty retail shops and restaurants, the Downtown Disney Marketplace is home to the 50,000-square-foot World of Disney retail store featuring Disney-branded merchandise. Also featured is Once Upon a Toy, the fun new interactive store with Walt Disney World attraction toys and Hasbro games with a Disney twist. Pleasure Island, a nighttime entertainment center adjacent to the Downtown Disney Marketplace, includes restaurants, nightclubs and shopping facilities. Downtown Disney West Side is situated on 66 acres on the west side of Pleasure Island and includes a DisneyQuest facility, Cirque du Soleil and several retail, dining and entertainment operations.

      Disney’s Wide World of Sports, which opened in 1997, is a 200 acre sports complex providing professional caliber training and competition, festival and tournament events and interactive sports activities. The complex’s venues accommodate more than 30 different sporting events, including baseball, tennis, basketball, softball, track and field, football and soccer. Its 9,000-seat stadium is the spring training site for MLB’s Atlanta Braves. Additionally, the complex is the pre-season training site of the NFL’s 2003 Super Bowl Champion, Tampa Bay Buccaneers, and the NBA’s Orlando Magic. The Amateur Athletic Union hosts approximately 30 championship events per year at the facility.

      In the Downtown Disney Resort area, seven independently operated hotels are situated on property leased from the Company. These hotels have a capacity of approximately 3,700 rooms. Additionally, two hotels, the Walt Disney World Swan and the Walt Disney World Dolphin, with an aggregate capacity of approximately 2,300 rooms, are independently operated on property leased from the Company near Epcot.

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      Nearing completion of development is Celebration, an innovative planned community that combines architecture, education, health and technology in ways intended to promote a strong sense of community. Founded in 1994, Celebration is home to more than 8,000 residents, public and private schools, a health facility, an 18-hole public golf course, a private university center, park and recreation areas and a town center featuring a variety of shops, restaurants and the Celebration Hotel.

Disneyland Resort

      The entire Disneyland Resort is marketed through international, national and local advertising and promotional activities as a destination resort. A number of the attractions and restaurants at each of the theme parks are sponsored by other corporations through long-term agreements.

      Disneyland – Disneyland, which opened in 1955, consists of Main Street USA and seven principal areas: Adventureland, Critter Country, Fantasyland, Frontierland, New Orleans Square, Tomorrowland and Toontown. These areas feature themed rides and attractions, restaurants, refreshment stands and merchandise shops.

      Disney’s California Adventure – Disney’s California Adventure, which opened in 2001, is adjacent to Disneyland and includes four principal areas: Golden State, Hollywood Pictures Backlot, Paradise Pier and “a bug’s land”. These areas include rides, attractions, shows, restaurants, merchandise shops and refreshment stands.

      Resort Facilities – Disneyland Resort includes three Company-owned hotels: the 1,000-room Disneyland Hotel, 500-room Disney’s Paradise Pier Hotel and Disney’s Grand Californian Hotel, a deluxe 750-room hotel located adjacent to Disney’s California Adventure.

      The Resort also includes Downtown Disney, a themed 310,000 square foot outdoor complex of entertainment, dining and shopping venues, located adjacent to both Disneyland Park and Disney’s California Adventure.

Disneyland Resort Paris

      Disneyland Park, which opened in 1992, consists of Main Street and four principal themed areas: Adventureland, Discoveryland, Fantasyland and Frontierland. These areas include themed rides, attractions, shows, restaurants, merchandise shops and refreshment stands.

      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: Front Lot, Animation Courtyard, Production Courtyard and Backlot. These areas each include themed rides, attractions, shows, restaurants, merchandise shops and refreshment stands.

      Development of the site also continues with the Val d’Europe project, a newly constructed planned community being built near Disneyland Resort Paris. The first two phases of the city of Val d’Europe include a town center, which consists of an international shopping center; a 150 room hotel; office, commercial and residential space; and a regional train station. These new developments are operated by third parties on land leased or purchased from Euro Disney. In July 2003 Euro Disney signed an agreement with a third party developer beginning the third phase of Val d’Europe. Included

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      In addition, several new on-site hotels opened in 2003 that are owned and operated by third party developers providing approximately 1,400 rooms. Agreements have been signed with additional third party developers to provide approximately 800 additional on-site hotel rooms and/or time share units over the next three years.

      Of the 4,800 acres comprising the site, 2,100 acres have been developed to date. The project is being developed pursuant to a 1987 master agreement between French governmental authorities and Euro Disney, a publicly held French company in which the Company currently holds a 39% equity interest and which is managed by a subsidiary of the Company. Euro Disney is obligated to pay the Company quarterly royalties on revenues generated by the Disneyland Resort Paris theme parks and management fees. As a result of Euro Disney’s financial difficulties, discussed in Note 4 to the Company’s Consolidated Financial Statements, certain fees for fiscal 2003 were waived, and the payment of fees for fiscal 2004 was deferred. The Company did not recognize waived fees for fiscal 2003 and likely will not recognize revenues from royalties and management fees in fiscal 2004. The financial results of the Company’s investment in Euro Disney are reported under the heading “Equity in the income of investees” in the Company’s Consolidated Statements of Income.

Hong Kong Disneyland

      Construction and operation of the project will be the responsibility of Hongkong International Theme Parks Limited, an entity in which the Hong Kong Government owns a 57% interest and a subsidiary of the Company owns the remaining 43%. A separate Hong Kong subsidiary of the Company is responsible for managing Hong Kong Disneyland. Based on the current exchange rate between the Hong Kong and U.S. dollars, the Company’s equity contribution obligation is limited to U.S. $316 million. As of September 30, 2003 the Company had contributed U.S. $73 million and the remaining $243 million is payable over the next three years. Once Hong Kong Disneyland commences operations, Company subsidiaries will be entitled to receive management fees and royalties in addition to the Company’s equity interest.

Tokyo Disney Resort

      Tokyo Disneyland, which opened in 1983, was the first Disney theme park to open outside the United States. Tokyo Disneyland consists of seven principal areas: Adventureland, Critter Country, Fantasyland, Tomorrowland, Toontown, Westernland and World Bazaar.

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      Tokyo DisneySea adjacent to Tokyo Disneyland, opened in 2001. The park is divided into seven unique “ports of call,” including Mediterranean Harbor, American Waterfront, Port Discovery, Lost River Delta, Mermaid Lagoon, Mysterious Island and Arabian Coast. The recent resort expansion also includes the addition of the 502-room Hotel MiraCosta, the 504-room Disney Ambassador Hotel, the Disney Resort Line monorail and the Bon Voyage merchandise location.

Disney Cruise Line

Disney Regional Entertainment

Walt Disney Imagineering

Anaheim Sports, Inc.

Seasonality and Competition

      The Company’s theme parks and resorts compete with all other forms of entertainment, lodging, tourism and recreational activities. The profitability of the leisure-time industry is 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. As a result, the Company’s theme park and resort operations were adversely affected during fiscal 2003 by significant reductions in domestic and international travel.

STUDIO ENTERTAINMENT

      The Studio Entertainment segment produces and acquires live-action and animated motion pictures, animated direct-to-video programming, musical recordings and live stage plays.

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      The Company is an industry leader in the distribution of films (including its film and television library) to the theatrical, home entertainment, pay-per-view, video-on-demand, pay television and free-to-air television markets. Each of these markets is discussed in more detail below.

Theatrical Distribution

      During fiscal 2004, we expect to distribute in domestic markets approximately 21 feature films under the Walt Disney Pictures and Touchstone Pictures banners and approximately 15 films under the Miramax and Dimension banners. These expected releases include several live-action family films and full-length animated films, with the remainder targeted to teenagers, families and/or adults. In addition, the Company periodically reissues previously released animated films. As of September 30, 2003, the Company had released 798 full-length live-action features (primarily color), 66 full-length animated color features, and approximately 539 cartoon shorts and 53 live action shorts under the Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures, Miramax and Dimension banners.

      We distribute and market our filmed products principally through our own distribution and marketing companies in the United States and major foreign markets. Films released theatrically in the U.S. can be released theatrically in international territories simultaneously or generally up to six 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 significant operating income in the home entertainment and other ancillary markets. These costs are expensed as incurred, and therefore we typically incur losses in the theatrical markets on a film in any given quarter, including quarters before the theatrical release of the film.

Home Entertainment

      The domestic and international home entertainment window typically starts four to six months after each theatrical release with the issuance of DVD and VHS versions of each title. Domestically, most titles are sold simultaneously to both “rentailers,” such as Blockbuster Inc., and retailers, such as Best Buy Co., Inc. Upon a title’s release, consumers are afforded the option to rent for a limited period of time typically, two to seven days, or purchase the titles outright (“sell-through”). Depending on consumer demand, certain titles may be released first exclusively to retailers and then to rentailers (“rental window”).

      In the international home entertainment market, titles are either released simultaneously in the rental and sell-through channels or with a rental window before sell-through, depending on local market regulations, DVD hardware penetration and DVD software demand.

      As of September 30, 2003, under the banners Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures, Miramax and Dimension, 1,039 produced and acquired titles, including 848 live

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Television Distribution

      Pay Television (Pay 1): Effective with theatrical releases beginning January 1, 2003, there are two pay windows. The first window is generally fifteen months in duration and follows the PPV/ VOD window. The Company has licensed to the Encore pay television services, over a multi-year period, exclusive domestic pay television rights to certain films released under the Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures, Miramax and Dimension banners. In addition, the Company has licensed exclusive domestic pay television rights to certain films released under the Dimension banner to the Showtime pay television services over a multi-year period.

      Free Television (Free 1): Following the Pay 1 window is a free television window wherein telecasts are accessible to consumers without charge. This free window may last up to 84 months. Motion pictures are usually sold in the first free window on an ad hoc basis to major networks and basic cable services. The Company maintains only one output deal, with the ABC Network Television and its affiliates, covering branded live action and animated product broadcast in the Wonderful World of Disney slot.

      Pay Television 2 (Pay 2) and Free Television 2 (Free 2): In the U.S., Free 1 is generally followed by a twelve month Pay 2 window, included under our license arrangement with Encore, and finally by a second Free window (Free 2). The Free 2 window is a syndication window where films are licensed both to basic cable networks and to station groups, such as Tribune Co. Major packages of the Company’s feature films and animated television programming have been licensed for broadcast under multi-year agreements.

      International Television: The Company also licences its theatrical and television properties outside of the US. The typical windowing sequence is broadly consistent with the domestic cycle such that titles premiere on television in PPV/ VOD then air in pay TV before airing in free TV. Certain properties may then be re-licensed to one or more of the above windows. 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.

Audio Products and Music Publishing

      In addition, Walt Disney Records and Music Publishing commissions new music for the Company’s motion pictures and television programs, and records the songs and licenses the song copyrights to others for printed music, records, audiovisual devices and public performances.

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Buena Vista Theatrical Group

      Disney Theatrical Productions develops, produces and licenses stage musicals. To date, the Company’s shows have included Beauty and the Beast, The Lion King and Elton John and Tim Rice’s Aida. The Company generally elects to produce its own shows in the United States, the United Kingdom and Australia and licenses its shows to local producers in other territories. As of September 30, 2003, Disney Theatrical Production had twelve productions running worldwide. Five new productions opening in fiscal 2004 include: Beauty and the Beast in Seoul in July 2004; The Lion King in Sydney in October 2003 and Holland in April 2004; and Aida in Essen in October 2003 and Osaka in December 2003.

      Through a license to Feld Entertainment, Disney Live Family Entertainment has seven shows of Disney on Ice, touring in more than 40 countries worldwide. Disney/ Pixar’s Monsters, Inc. opened in August 2003.

Relationship with Pixar

Competition and Intellectual Property Protection

      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, broadcast rights and market share, which are essential to the success of our Studio Entertainment businesses.

      The Company’s ability to distribute and exploit its motion picture and television programming is affected by the strength and effectiveness of intellectual property protections in both the United States and abroad. Emerging technologies, regulatory limitations on intellectual property protection, lack of enforcement of protective laws in some jurisdictions and claims of intellectual property infringement all create risks and added costs that can adversely affect the operation and results of the Company’s Studio Entertainment operations, despite the Company’s strong efforts to protect its intellectual property rights throughout the United States and in other key markets. See further discussion under “Consumer Products – Competition and Intellectual Property Protection” below.

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CONSUMER PRODUCTS

      The Consumer Products segment licenses the Company’s characters and other intellectual property to manufacturers, retailers, show promoters and publishers throughout the world. Character merchandising and publications licensing engages in promoting the Company’s films and television programs, as well as developing new properties. The Company also engages in retail, direct mail and online distribution of products based on the Company’s characters and films through the Disney Store, Disney Catalog and DisneyStore.com, respectively. We also publish books, magazines and comics worldwide; and produce and license computer software and video games for the entertainment market.

Character Merchandise and Publications Licensing

      Licensed publication categories include children’s books, continuity-series books, book sets, art and picture books and magazines.

      In addition to receiving licensing fees, the Company is actively involved in the development and approval of licensed merchandise and in the conceptualization, development, writing and illustration of licensed publications. We continually seek to create new characters to be used in licensed products.

Disney Stores

      The Company announced that it is pursuing strategic options for the Disney Store in North America and Europe including the possible sale of stores in North America and Europe, in order to focus on its core competencies and activities intended to increase capital returns. In connection with the proposed sale, the Company expects to close a certain number of under performing stores in North America and receive royalty payments from the buyer under a long-term licensing arrangement.

Books and Magazines

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Buena Vista Games

Direct Marketing

Competition, Seasonality, and Intellectual Property Protection

      The Company’s licensing businesses, as well as its studio entertainment and theme park and resort operations, are affected by the Company’s ability to exploit and protect its intellectual property, including trademarks, trade names, copyrights, patents and trade secrets, throughout the world. As a result, domestic and foreign laws promoting or limiting intellectual property rights may have significant impacts on the Company’s operations. In the United States, for example, the 1998 Sonny Bono Copyright Term Extension Act provided extended copyright protection for certain older properties currently licensed or otherwise exploited by the Company, which otherwise might lose such protection in the near future. Earlier this year, the constitutionality of this Act was upheld by the U.S. Supreme Court in Washington D.C. thus extending the term of copyright in the United States by twenty years.

      Copyright and trademark protections are limited or even unavailable in some foreign countries and preventing unauthorized use of the Company’s intellectual properties can be difficult even in countries with substantial legal protections. In addition, new technologies have facilitated piracy of the Company’s copyrighted works, including motion pictures, television programming and sound recordings, by such means as Internet peer-to-peer file sharing and personal video recorders that permit ad stripping and the unauthorized copying of motion pictures and television programs. The Company devotes significant resources to protecting its intellectual properties in the United States and other key foreign markets.

      In addition, the Company’s businesses that rely on the exploitation of intellectual property are subject to the risk of challenges by third parties claiming infringement of their proprietary rights.

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Available Information

ITEM 2. Properties

      The Walt Disney World Resort, Disneyland Park and other properties of the Company and its subsidiaries are described in Item 1 under the caption Parks and Resorts. Film library properties are described in Item 1 under the caption Studio Entertainment. Radio and television stations owned by the Company are described under the caption Media Networks.

      A subsidiary of the Company owns approximately 51 acres of land and 1.9 million square feet of office, studio and warehouse space in Burbank, California, on which the Company’s studios and executive and administrative offices are located. The studio facilities are used for the production of both live-action and animated motion pictures and television products. In addition, Company subsidiaries lease approximately 1.1 million square feet of office and warehouse space and own one 400,000 square foot building in Burbank, which are used for certain studio, media, and corporate activities.

      A subsidiary of the Company owns approximately 2.5 million square feet of office and warehouse buildings on approximately 115 acres in Glendale, California. The buildings are used for the Company’s operations and also contain space leased to third parties. Subsidiaries of the Company also lease approximately 316,000 square feet of office and warehouse space in Glendale, which is used for the Company’s operations.

      A subsidiary of the Company owns approximately 22 acres of land in Los Angeles, California, on which production, technical, and office facilities are located. A subsidiary of the Company also has a long-term lease on the el Capitan theater in Los Angeles.

      The Company’s Media Networks segment corporate offices and technical operations are located in buildings owned by a subsidiary of the Company in New York City, totaling approximately 1.5 million square feet. Other subsidiaries of the Company also have long-term leases on the New Amsterdam theater in New York City which is used for the Company’s live theatrical productions and a studio facility in Times Square which is used for television broadcasting. In addition, subsidiaries of the Company lease approximately 807,000 square feet of office, studio, and warehouse space in New York City. The Company’s 80%-owned subsidiary, ESPN, Inc., owns ESPN Plaza in Bristol, Connecticut, from which it conducts its technical operations. The Media Networks segment owns and leases other broadcast facilities, offices, and broadcast transmitter sites.

      Subsidiaries of the Company lease space in the United States and Canada, including retail space for The Disney Stores and office and warehouse space for the Company’s operations.

      A U.K. subsidiary of the Company owns buildings on a four-acre parcel under a long-term lease in London, England. The mixed-use development consists of office space occupied by subsidiary operations and office and retail space leased by third parties. Company subsidiaries also lease office and retail space in other parts of Europe and in Asia, Australia, and Latin America.

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ITEM 3. Legal Proceedings

      In re The Walt Disney Company Derivative Litigation. William and Geraldine Brehm and thirteen other individuals filed an amended and consolidated complaint on May 28, 1997 in the Delaware Court of Chancery seeking, among other things, a declaratory judgment against each of the Company’s directors as of December 1996 that the Company’s 1995 employment agreement with its former president, Michael S. Ovitz, was void, or alternatively that Mr. Ovitz’s termination should be deemed a termination “for cause” and any severance payments to him forfeited. On October 8, 1998, the Delaware Court of Chancery dismissed all counts of the amended complaint. Plaintiffs appealed, and on February 9, 2000, the Supreme Court of Delaware affirmed the dismissal but ruled also that plaintiffs should be permitted to file an amended complaint in accordance with the Court’s opinion. The plaintiffs filed their amended complaint on January 3, 2002. On February 6, 2003, the Company’s directors’ motion to dismiss the amended complaint was converted by the Court to a motion for summary judgment and the plaintiffs were permitted to take discovery. The Company and its directors answered the amended complaint on April 1, 2003. On May 28, 2003, the Court (treating as a motion to dismiss the motion for summary judgment into which it had converted the original motion on February 6, 2003) denied the directors’ motion to dismiss the amended complaint. The parties are conducting discovery.

      Similar or identical claims have also been filed by the same plaintiffs (other than William and Geraldine Brehm) in the Superior Court of the State of California, Los Angeles County, beginning with a claim filed by Richard and David Kaplan on January 3, 1997. On May 18, 1998, an additional claim was filed in the same California court by Dorothy L. Greenfield. On September 25, 2001, Ms. Greenfield sought leave to amend her claim, but withdrew her request to amend on January 3, 2002. All of the California claims have been consolidated and stayed pending final resolution of the Delaware proceedings.

      Stephen Slesinger, Inc. v. The Walt Disney Company. In this lawsuit, filed on February 27, 1991 and pending in the Los Angeles County Superior Court, the plaintiff claims that a Company subsidiary defrauded it and breached a 1983 licensing agreement with respect to certain Winnie the Pooh properties, by failing to account for and pay royalties on revenues earned from the sale of Winnie the Pooh movies on videocassette and from the exploitation of Winnie the Pooh merchandising rights. The plaintiff seeks damages for the licensee’s alleged breaches as well as confirmation of the plaintiff’s interpretation of the licensing agreement with respect to future activities. The plaintiff also seeks the right to terminate the agreement on the basis of the alleged breaches. The Company disputes that the plaintiff is entitled to any damages or other relief of any kind, including termination of the licensing agreement. If each of the plaintiff’s claims were to be confirmed in a final judgment, damages as argued by the plaintiff could total as much as several hundred million dollars and adversely impact the value to the Company of any future exploitation of the licensed rights. However, given the number of outstanding issues and the uncertainty of their ultimate disposition, management is unable to predict the magnitude of any potential determination of the plaintiff’s claims. On April 24, 2003, the matter was removed to the United States District Court for the Central District of California, which, on May 19, 2003, dismissed certain claims and remanded the matter to the Los Angeles Superior Court. The Company has appealed from the District Court’s order to the Court of Appeals for the Ninth Circuit. In the meanwhile, the Superior Court has assigned the case to a different judge in the Court’s Complex Litigation Pilot Program. Pre-trial proceedings continue in the state court.

      Milne and Disney Enterprises, Inc. v. Stephen Slesinger, Inc. On November 5, 2002, Clare Milne, the granddaughter of A. A. Milne, author of the Winnie the Pooh books, and the Company’s subsidiary Disney Enterprises, Inc. filed a complaint against Stephen Slesinger, Inc. (“SSI”) in the United States District Court for the Central District of California. On November 4, 2002, Ms. Milne served notices to SSI and the Company’s subsidiary terminating A. A. Milne’s prior grant of rights to Winnie the Pooh, effective November 5, 2004, and granted all of those rights to the Company’s

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      Management believes that it is not currently possible to estimate the impact, if any, that the ultimate resolution of these matters will have on the Company’s results of operations, financial position or cash flows.

      Kohn v. The Walt Disney Company, et al. On August 15, 2002, Aaron Kohn filed a class action lawsuit against the Company, its Chief Executive Officer and its Chief Financial Officer in the United States District Court for the Central District of California on behalf of a putative class consisting of purchasers of the Company’s common stock between August 15, 1997 and May 15, 2002. Subsequently, at least nine substantially identical lawsuits were also filed in the same court, each alleging that the defendants violated federal securities laws by not disclosing the pendency and potential implications of the Stephen Slesinger, Inc. lawsuit described above prior to the Company’s filing of its quarterly report on Form 10-Q in May 2002. The plaintiffs claim that this alleged nondisclosure constituted a fraud on the market that artificially inflated the Company’s stock price, and contend that a decline in the stock price resulted from the May 2002 disclosure. The plaintiffs seek compensatory damages and/or rescission for themselves and all members of their defined class. Several of the plaintiffs have filed motions asking the court to appoint lead plaintiffs and counsel, and to consolidate the related actions into a single case. On December 10, 2002, plaintiffs’ motion to consolidate the related actions into a single case was granted, and their motion for appointment of lead plaintiffs and counsel was granted on February 21, 2003. On or about April 7, 2003, plaintiffs filed a consolidated amended class action complaint and on May 22, 2003, defendants moved to dismiss the complaint. The court granted defendants’ motion and the case was dismissed with prejudice on October 24, 2003.

      The Company, together with, in some instances, certain of its directors and officers, is a defendant or co-defendant in various other legal actions involving copyright, breach of contract and various other claims incident to the conduct of its businesses. Management does not expect the Company to suffer any material liability by reason of such actions.

      SEC Proceeding. The U.S. Securities and Exchange Commission is conducting an investigation into an amendment of the Company’s Form 10-K for the fiscal year 2001, certain related matters and other related party transactions that have been previously disclosed by the Company. The investigation does not relate to the Company’s financial statements.

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ITEM 4. Submission of Matters to a Vote of Security Holders

      No matters were submitted to a vote of shareholders during the fourth quarter of the fiscal year covered by this report.

Executive Officers of the Company

      At September 30, 2003, the executive officers of the Company were as follows:

(1)	Mr. Iger was appointed to his present position in January 2000, having served (from February 1999 until January 2000) as President of Walt Disney International and Chairman of the ABC Group. Mr. Iger previously held a number of increasingly responsible positions at ABC, Inc. and its predecessor Capital Cities/ ABC, Inc., culminating in service as President and Chief Operating Officer of ABC, Inc. from 1994 to 1999.
(2)	Mr. Braverman was named Executive Vice President and General Counsel of the Company in January 2003 and promoted to Senior Executive Vice President and General Counsel of the Company in October 2003. Prior to his appointment as General Counsel of the Company, Mr. Braverman had been Executive or Senior Vice President and General Counsel of ABC, Inc. since August 1996 and also Deputy General Counsel of the Company since August 2001.
(3)	Mr. Disney resigned as an executive officer on November 30, 2003.

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PART II

ITEM 5. Market for the Company’s Common Stock and Related Stockholder Matters

      The Company’s common stock is listed on the New York and Pacific stock exchanges under the ticker symbol “DIS”. The following table shows, for the periods indicated, the high and low sales prices per share of common stock as reported in the Bloomberg Financial markets services.

      The Company declared a dividend of $0.21 per Disney share on December 2, 2003 with respect to fiscal 2003, and a dividend of $0.21 per Disney share on December 3, 2002, with respect to fiscal 2002.

      As of September 30, 2003, the approximate number of common shareholders of record was 1,026,000.

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ITEM 6. Selected Financial Data

(In millions, except per share data)

(1)	The 2003 results include the write-off of our aircraft leveraged lease investment with United Airlines of $114 million pre-tax and a benefit from the favorable settlement of certain state tax issues of $56 million. These items had a ($0.04) and $0.03 impact on diluted earnings per share, respectively. The amounts do not reflect the cumulative effect of adopting EITF 00-21 which was a charge of $71 million or ($0.03) per diluted share. See Notes 4, 8 and 2 to the Consolidated Financial Statements.
(2)	The 2002 results include a $216 million pre-tax gain on the sale of investments and a $34 million pre-tax gain on the sale of the Disney Stores in Japan. These items had a $0.06 and $0.01 impact on diluted earnings per share, respectively. See Notes 4 and 3 to the Consolidated Financial Statements. During fiscal 2002, the Company acquired Fox Family Worldwide, Inc. for $5.2 billion. See Note 3 to the Consolidated Financial Statements.
(3)	The 2001 results include restructuring and impairment charges totaling $1.5 billion pre-tax. The diluted earnings per Disney share impact of these charges was $0.52. The amounts do not reflect the cumulative effect of accounting changes related to film and derivative accounting changes which were charges of $228 million and $50 million, respectively or ($0.11) and ($0.02) per diluted share, respectively. See Notes 15 and 2 to the Consolidated Financial Statements.
(4)	The 2000 results include pre-tax gains of $243 million, $93 million and $153 million from the sale of Fairchild Publications, Eurosport and Ultraseek, respectively. The impact of income taxes substantially offset certain of the gains. The diluted earnings per Disney share impacts of these items were $0.00, $0.02 and $0.01, respectively. The results also include a $92 million pre-tax restructuring and impairment charge. The diluted earnings per Disney share impact of the charge was $0.01.
(5)	The 1999 results include a pre-tax gain from the sale of Starwave Corporation of $345 million, equity in Infoseek loss of $322 million and restructuring and impairment charges of $172 million pre-tax. The diluted earnings per Disney share impacts of these items were $0.10, ($0.09) and ($0.05), respectively.
(6)	Effective the beginning of fiscal 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets and, accordingly, ceased amortization of goodwill and substantially all intangible assets.

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CONSOLIDATED RESULTS

(1)	Disney’s retained interest in the Internet Group was approximately 72% through January 28, 2001 (the last date prior to the announcement of the conversion of the Internet Group common stock) and 100% thereafter. Loss and loss per share attributed to the Internet Group in fiscal year 2001 were $(117) million and $(2.72), respectively.
(2)	The calculation of diluted earnings per share assumes the conversion of the Company’s convertible senior notes and adds back related after-tax interest expense of $10 million for fiscal year 2003.

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Organization of Information

	•	Consolidated Results
	•	Business Segment Results
	•	Stock Option Accounting
	•	Liquidity and Capital Resources
	•	Contractual Obligations, Commitments and Off Balance Sheet Arrangements
	•	Accounting Policies and Estimates
	•	Accounting Changes
	•	Forward-Looking Statements

CONSOLIDATED RESULTS

2003 vs. 2002

Overview

      Results for the current year included a write-off of an aircraft leveraged lease investment with United Airlines ($114 million pre-tax or $0.04 per share), a pre-tax gain of $16 million on the sale of the Anaheim Angels and restructuring and impairment charges of $16 million at The Disney Store, as described more fully under Consumer Products, below. Additionally, the current year included a benefit from the favorable settlement of certain state tax issues ($56 million or $0.03 per share). Results for the prior year included a pre-tax gain on the sale of shares of Knight-Ridder, Inc. ($216 million or $0.06 per share) and a pre-tax gain on the sale of the Disney Store business in Japan ($34 million or $0.01 per share).

      Excluding the aforementioned items, the increase in net income for fiscal 2003 was primarily the result of increased segment operating income at our Studio Entertainment and Media Networks segments and increased equity in the income of cable investees, partially offset by lower segment operating income at our Parks and Resorts segment and Consumer Products segment, higher corporate and unallocated shared expenses and increased net interest expense. Changes in segment operating income are discussed in detail in the separate sections below.

Net Interest Expense