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EX-23 - CONSENT OF PRICEWATERHOUSECOOPERS LLP - WALT DISNEY CO/fy2015_q4x10kxex23.htm
EX-21 - SUBSIDIARIES OF THE COMPANY - WALT DISNEY CO/fy2015_q4x10kxex21.htm
EX-32.A - SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - WALT DISNEY CO/fy2015_q4x10kxex32a.htm
EX-12.1 - RATIO OF EARNINGS TO FIXED CHARGES - WALT DISNEY CO/fy2015_q4x10kxex121.htm
EX-31.B - SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER - WALT DISNEY CO/fy2015_q4x10kxex31b.htm
EX-32.B - SECTION 906 CERTIFICATION OF CHIEF FINANCIAL OFFICER - WALT DISNEY CO/fy2015_q4x10kxex32b.htm
EX-31.A - SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - WALT DISNEY CO/fy2015_q4x10kxex31a.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 3, 2015
 
Commission File Number 1-11605
 
Incorporated in Delaware
500 South Buena Vista Street, Burbank, California 91521
(818) 560-1000
 
I.R.S. Employer Identification No.
95-4545390
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
 
 
Name of Each Exchange
on Which Registered
Common Stock, $.01 par value
 
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.  Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)
of the Act.  Yes  o  No  x
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  x   No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes x    No  o
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).
Large accelerated filer
 
x
 
Accelerated filer
 
 o
 
 
 
 
 
Non-accelerated filer (do not check if smaller reporting company)
 
o
 
Smaller reporting company
 
 o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes  o No x
The aggregate market value of common stock held by non-affiliates (based on the closing price on the last business day of the registrant’s most recently completed second fiscal quarter as reported on the New York Stock Exchange-Composite Transactions) was $178.9 billion. All executive officers and directors of the registrant and all persons filing a Schedule 13D with the Securities and Exchange Commission in respect to registrant’s common stock have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant.
There were 1,653,177,887 shares of common stock outstanding as of November 18, 2015.
Documents Incorporated by Reference
Certain information required for Part III of this report is incorporated herein by reference to the proxy statement for the 2016 annual meeting of the Company’s shareholders.



THE WALT DISNEY COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
 
 
 
Page
PART I
 
 
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 1B.
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
ITEM 4.
 
 
 
PART II
 
 
 
ITEM 5.
 
 
 
ITEM 6.
 
 
 
ITEM 7.
 
 
 
ITEM 7A.
 
 
 
ITEM 8.
 
 
 
ITEM 9.
 
 
 
ITEM 9A.
 
 
 
ITEM 9B.
 
PART III
 
 
 
ITEM 10.
 
 
 
ITEM 11.
 
 
 
ITEM 12.
 
 
 
ITEM 13.
 
 
 
ITEM 14.
 
PART IV
 
 
 
ITEM 15.
 
 
 
 



PART I
ITEM 1. Business
The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in five business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive. In June 2015, the Company announced the combination of its Consumer Products and Interactive segments into a single segment. The Company will begin reporting the financial results of the combined segment in fiscal 2016. For convenience, the terms “Company” and “we” are used to refer collectively to the parent company and the subsidiaries through which our various businesses are actually conducted.
Information on the Company’s revenues, segment operating income and identifiable assets appears in Note 1 to the Consolidated Financial Statements included in Item 8 hereof. The Company employed approximately 185,000 people as of October 3, 2015.
MEDIA NETWORKS
The Media Networks segment includes cable and broadcast television networks, television production operations, television distribution, domestic television stations and radio networks and stations.
The businesses in the Media Networks segment generate revenue from fees charged to cable, satellite and telecommunications service providers (Multi-channel Video Programming Distributors or MVPDs) and television stations affiliated with our domestic broadcast television network for the right to deliver our programs to their customers/subscribers ("affiliate fees"), from the sale to advertisers of time in programs for commercial announcements ("ad sales") and from other sources such as the sale and distribution of television programming ("program sales"). Significant operating expenses include programming and production costs, participations and residuals expense, technical support costs, operating labor and distribution costs.
Cable Networks
Our cable networks include ESPN, the Disney Channels and ABC Family. We also operate the Hungama and UTV/Bindass networks in India. The cable networks group produces its own programs or acquires rights from third parties to air programs on our networks. The Company also has interests in joint ventures that operate cable and broadcast programming services and are accounted for under the equity method of accounting.
Cable networks derive the majority of their revenues from affiliate fees and, for certain networks (primarily ESPN and ABC Family), ad sales. Generally, the Company’s cable networks provide programming and other services under multi-year agreements with MVPDs that include contractually determined fees. The amounts that we can charge to MVPDs for our cable network services are largely dependent on the quality and quantity of programming that we can provide and the competitive market. The ability to sell time for commercial announcements and the rates received are primarily dependent on the size and nature of the audience that the network can deliver to the advertiser as well as overall advertiser demand. We also sell programming developed by our cable networks in television markets worldwide, to subscription video-on-demand (SVOD) services, such as Netflix, Hulu and Amazon, and in electronic and physical (DVD and Blu-ray) formats.

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The Company’s significant cable networks, along with the estimated number of subscribers as of October 3, 2015 are set forth in the following table: 
 
Estimated
Subscribers
(in millions) (1)
ESPN (80% owned)
 
ESPN
92

ESPN2
92

ESPNU
72

ESPNEWS
70

SEC Network
62

ESPN Classic
25

ESPN channels – International
127

Disney Channels (100% owned)
 
Disney Channel – Domestic
95

Disney Channels – International
195

Disney Junior – Domestic
74

Disney Junior – International
130

Disney XD – Domestic
78

Disney XD – International
123

ABC Family (100% owned)
93

A&E Television Networks (A&E) (50% owned)
 
A&E
94

HISTORY
95

Lifetime
94

Lifetime Movie Network (LMN)
82

H2
70

FYI
69

 
(1) 
Estimated domestic subscriber counts are according to Nielsen Media Research, except for the SEC Network, which is not measured by Nielsen Media Research. For our international channels and the SEC Network, subscriber counts are based on internal management reports.
ESPN
ESPN is a multimedia sports entertainment company that operates eight 24-hour domestic television sports networks: ESPN, ESPN2, ESPNU (a network devoted to college sports), ESPNEWS, SEC Network (a sports programming network dedicated to Southeastern Conference college athletics), ESPN Classic, the regionally focused Longhorn Network (a network dedicated to The University of Texas athletics) and ESPN Deportes (a Spanish language network), which are all simulcast in high definition except ESPN Classic. ESPN programs the sports schedule on the ABC Television Network, which is branded ESPN on ABC. ESPN owns 17 television networks outside of the United States (primarily in Latin America) that allow ESPN to reach sports fans in over 60 countries and territories in four languages. In addition, ESPN holds a 30% equity interest in CTV Specialty Television, Inc., which owns television networks in Canada, including The Sports Network, The Sports Network 2, Le Réseau des Sports (RDS), RDS2, RDS Info, ESPN Classic Canada, the NHL Network and Discovery Canada.
ESPN holds rights for various professional and college sports programming including the National Football League (NFL), college football (including bowl games and the College Football Playoff) and basketball, Major League Baseball (MLB), the National Basketball Association (NBA), the Wimbledon Championships, US Open Tennis, soccer and the Masters golf tournament.
ESPN also operates:
ESPN.com – which delivers comprehensive sports news, information and video on computers and mobile and other connected devices

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WatchESPN – which delivers live streams of most of ESPN’s domestic networks on computers and mobile and other connected devices to authenticated MVPD subscribers. Non-subscribers have limited access to certain content on select Watch platforms
ESPN3 and SEC Network + – which are ESPN’s live multi-screen sports networks that deliver exclusive sports events. ESPN3 and SEC Network + are accessible on WatchESPN
ESPN Events – which owns and operates a portfolio of collegiate sporting events including bowl games, football pre-game shows and basketball games
ESPN Radio – which distributes talk and play by play programming and is one of the largest sports radio networks in the U.S. ESPN Radio network programming is carried on more than 500 terrestrial stations including four ESPN owned stations in New York, Los Angeles, Chicago and Dallas and on satellite and internet radio
ESPN The Magazine – which is a bi-weekly sports magazine
ESPN Enterprises – which develops branded licensing opportunities
espnW – which provides an online destination for female sports fans
Disney Channels
The Disney Channels includes over 100 channels available in 34 languages and 163 countries/territories. Branded channels include Disney Channel, Disney Junior, Disney XD, Disney Cinemagic, Disney Cinema and DLife. Disney Channels also operates Radio Disney and provides content through subscription and video-on-demand services and online through our websites: DisneyChannel.com, DisneyXD.com, DisneyJunior.com and RadioDisney.com. Programming for these networks includes internally developed and acquired programming.
WatchDisneyChannel, WatchDisneyJunior and WatchDisneyXD deliver live or on-demand channel programming on computers and mobile and other connected devices to authenticated MVPD subscribers. Non-subscribers have limited access to select content on the Watch platforms.
Disney Channel - Disney Channel is a cable network airing original series and movie programming targeted to kids ages 2 to 14. In the U.S., Disney Channel airs 24 hours a day. Disney Channel develops and produces shows for exhibition on its network, including live-action comedy series, animated programming and preschool series as well as original movies. Disney Channel also airs programming and content from Disney’s theatrical film and television programming library.
Disney Junior - Disney Junior is a cable network that airs programming targeted to kids ages 2 to 7 and their parents and caregivers, featuring animated and live-action programming that blends Disney’s storytelling and characters with learning. In the U.S., Disney Junior airs 24 hours a day. Programming focuses on early math and language skills, healthy eating and social skills. Disney Junior also airs as a programming block on the Disney Channel.
Disney XD - Disney XD is a cable channel airing a mix of live-action and animated original programming targeted to kids ages 6 to 14. In the U.S., Disney XD airs 24 hours a day.
Disney Cinemagic and Disney Cinema - Disney Cinemagic and Disney Cinema are premium subscription services available in certain countries in Europe airing a selection of Disney movies, classic and newer Disney cartoons and shorts as well as animated television series.
Radio Disney - Radio Disney is a 24-hour radio network targeted to kids, tweens and families reaching listeners through a national broadcast on Sirius XM, RadioDisney.com, TuneIn, the Radio Disney iOS and Android apps, iTunes Radio Tuner, HD Radio, Aha Radio and Slacker. Radio Disney operates from an owned terrestrial radio station in Los Angeles. Radio Disney is also available throughout Latin America on two owned terrestrial stations and through agreements with third-party radio stations.
Seven TV - The Company has a 49% interest in Seven TV, which operates an advertising-supported, free-to-air Disney Channel in Russia. In October 2014, regulations were adopted in Russia that prohibit more than 20% foreign ownership of media companies. The regulations become effective in January 2016. The Company is in the process of restructuring its investment in a way that we believe will comply with these regulations. We understand that the Russian government will review the new structure for compliance during calendar year 2016 and, depending on the outcome, we could have an impairment of some or all of our approximately $300 million investment related to the Disney Channel in Russia. The Company’s share of the financial results of Seven TV is reported as “Equity in the income of investees” in the Company’s Consolidated Statements of Income.

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ABC Family
ABC Family, which will be renamed "Freeform" in January 2016, is a domestic cable network targeted to viewers in the 14 to 34 age demographic. ABC Family produces original live-action programming. ABC Family also acquires programming from third parties, airs content from our owned theatrical film library and features branded holiday programming events such as “13 Nights of Halloween” and “25 Days of Christmas”.
WatchABCFamily delivers either live or on-demand channel programing on computers and mobile and other connected devices to authenticated MVPD subscribers. Non-subscribers have limited access to select ABC Family programming.
Hungama
Hungama is a kids general entertainment cable network in India, which features a mix of anime, Hindi-language series and game shows.
UTV/Bindass Networks
UTV and Bindass are cable television networks in India. UTV Action and UTV Movies are movie channels that offer Hollywood movies dubbed in Hindi, Bollywood movies and other local regional language movies dubbed in Hindi. Bindass is a youth entertainment channel and Bindass Play is a music channel.
A&E
A&E Television Networks (A&E) is a joint venture owned 50% by the Company and 50% by the Hearst Corporation. A&E operates a variety of cable networks including:

• A&E – which offers entertainment programming including original reality and scripted series
• HISTORY – which offers original non-fiction series and event-driven specials
• Lifetime – which is devoted to female-focused programming
• LMN – which is a 24-hour movie channel
• H2 – which focuses on the culture and history of countries throughout the world from a local perspective. In November 2015, A&E acquired a 9% ownership interest in Vice Media (Vice) in exchange for a 49.9% interest in H2, which will be rebranded with Vice content. Vice is a media company targeting a millennial audience through edgy news, pop culture content and creative brand integration
• FYI – which offers contemporary lifestyle programming
• Lifetime Real Women – which is a 24-hour cable network with programming focusing on women
Internationally, A&E programming is available in over 150 countries. The Company’s share of A&E’s financial results is reported as “Equity in the income of investees” in the Company’s Consolidated Statements of Income.
Broadcasting
Our broadcasting business includes a domestic broadcast network, television production and distribution operations, and eight owned domestic television stations. The Company also has a 33% interest in Hulu LLC (Hulu), a venture that acquires and produces film and television content and distributes it on the internet, and a 50% effective interest in Fusion Media Networks LLC (Fusion), a news, pop culture and lifestyle television and digital network targeted at millennials.
Domestic Broadcast Television Network
The Company operates the ABC Television Network (ABC), which as of October 3, 2015, had affiliation agreements with 242 local television stations reaching almost 100% of all U.S. television households. ABC broadcasts programs in the following “dayparts”: primetime, daytime, late night, news and sports.
ABC produces its own programs and also acquires programming rights from third parties as well as entities that are owned by or affiliated with the Company. ABC derives the majority of its revenues from ad sales. The ability to sell time for commercial announcements and the rates received are primarily dependent on the size and nature of the audience that the network can deliver to the advertiser as well as overall advertiser demand for time on network broadcasts. ABC also receives fees for its broadcast feed from affiliated television stations.
WatchABC delivers local ABC TV stations’ linear feed, as well as access to on-demand episodes of certain ABC programming on computers and mobile and other connected devices to authenticated MVPD subscribers. Non-subscribers have a more limited access to on-demand episodes.

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ABC.com provides online extensions to ABC programming including episodes and clips. ABCNews.com provides in-depth worldwide news coverage online and video-on-demand news reports from ABC News broadcasts. ABC News also has an agreement to provide news content to Yahoo! News.
Television Production
The Company produces the majority of its original live-action television programming under the ABC Studios label. Program development is carried out in collaboration with independent writers, producers and creative teams, with a focus on one-hour dramas and half-hour comedies, primarily for primetime broadcasts. Primetime programming produced either for our networks or for third parties for the 2015/2016 television season includes twelve returning and eight new one-hour dramas and five new and two returning half-hour comedies. Additionally, ABC Studios and Marvel are producing three drama series for Netflix. The Company also produces the late night show, Jimmy Kimmel Live, a variety of primetime specials for network television, as well as syndicated, news and daytime programming.
Television Distribution
We distribute the Company’s productions in television markets worldwide, to SVOD services, such as Netflix, Hulu and Amazon, and in electronic and physical (DVD and Blu-ray) formats.
Domestic Television Stations
The Company owns eight television stations, six of which are located in the top-ten markets in the U.S. in terms of television households. The television stations derive the majority of their revenues from ad sales. The stations also receive affiliate fees. All of our television stations are affiliated with ABC and collectively reach 23% of the nation’s television households. Each owned station broadcasts three digital channels: the first consists of local, ABC and syndicated programming; the second is the Live Well Network; and the third is the LAFF Network.
Details for the stations we own are as follows: 
TV Station
 
Market
  
Television
Market
Ranking(1)
WABC
 
New York, NY
  
1
KABC
 
Los Angeles, CA
  
2
WLS
 
Chicago, IL
  
3
WPVI
 
Philadelphia, PA
  
4
KGO
 
San Francisco, CA
  
6
KTRK
 
Houston, TX
  
10
WTVD
 
Raleigh-Durham, NC
  
25
KFSN
 
Fresno, CA
  
54
(1) 
Based on Nielsen Media Research, U.S. Television Household Estimates, January 1, 2015
Hulu
Hulu is a joint venture owned one-third each by the Company, Fox Entertainment Group and NBCUniversal. Hulu aggregates acquired television and film entertainment content and original content produced by Hulu for viewing on internet-connected devices. Hulu offers a free service with commercials, a subscription-based service with limited commercials and a subscription-based service with no commercials. The Company’s share of Hulu’s financial results is reported as “Equity in the income of investees” in the Company’s Consolidated Statements of Income.
Fusion
Fusion is a joint venture owned 50% by the Company and 50% by Univision. Fusion operates a television and digital network featuring news, pop culture and lifestyle programming targeted at millennials. The Company’s share of Fusion’s financial results is reported as "Equity in the income of investees" in the Company’s Consolidated Statements of Income.
Competition and Seasonality
The Company’s Media Networks businesses compete for viewers primarily with other television and cable networks, independent television stations and other media, such as online video services and video games. With respect to the sale of advertising time, we compete with other television networks and radio stations, independent television stations, MVPDs and other advertising media such as internet delivered content, newspapers, magazines and billboards. Our television and radio stations primarily compete for audiences and advertisers in individual market areas.

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The growth in the number of networks distributed by MVPDs has resulted in increased competitive pressures for advertising revenues for our broadcast and cable networks. The Company’s cable networks also face competition from other cable networks for carriage by MVPDs. The Company’s contractual agreements with MVPDs are renewed or renegotiated from time to time in the ordinary course of business. Consolidation and other market conditions in the cable and satellite distribution industry and other factors may adversely affect the Company’s ability to obtain and maintain contractual terms for the distribution of its various cable programming services that are as favorable as those currently in place.
The Company’s Media Networks businesses also compete for the acquisition of sports and other programming. The market for programming is very competitive, particularly for live sports programming. The Company currently has sports rights agreements with the NFL, college football (including bowl games and the College Football Playoff) and basketball, MLB, NBA, the Wimbledon Championships, US Open Tennis, soccer and the Masters golf tournament.
The Company’s internet websites and digital products compete with other websites and entertainment products.
Advertising revenues at Media Networks are subject to seasonal advertising patterns and changes in viewership levels. Revenues are typically somewhat higher during the fall and somewhat lower during the summer months. Affiliate fees are collected ratably throughout the year.
Federal Regulation
Television and radio broadcasting are subject to extensive regulation by the Federal Communications Commission (FCC) under federal laws and regulations, including the Communications Act of 1934, as amended. Violation of FCC regulations can result in substantial monetary forfeitures, limited renewals of licenses and, in egregious cases, denial of license renewal or revocation of a license. FCC regulations that affect our Media Networks segment include the following:

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 (and the acquiring entity in the case of a divestiture) must also obtain FCC approval whenever we seek to have a license transferred in connection with the acquisition or divestiture of a station. The FCC may decline to renew or approve the transfer of a license in certain circumstances and may delay renewals while permitting a licensee to continue operating. Although we have received such renewals and approvals in the past or have been permitted to continue operations when renewal is delayed, there can be no assurance that this will be the case in the future.
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. Currently:
FCC regulations may restrict our ability to own more than one television station in a market, depending on the size and nature of the market. We do not own more than one television station in any market.
Federal statutes permit our television stations in the aggregate to reach a maximum of 39% of the national audience (for this purpose, FCC regulations attribute UHF television stations with 50% of the television households in their market). For purposes of the FCC’s rules, our eight stations reach approximately 21% of the national audience. Although the FCC has an open rulemaking on whether to repeal or revise the UHF discount, the outcome of that rulemaking would not affect our operations because our eight stations would only be deemed to reach approximately 23% of the national audience if the UHF discount did not apply.
FCC regulations 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 operating plans.
Dual networks. FCC rules currently prohibit any of the four major broadcast television networks — ABC, CBS, Fox and NBC — from being under common ownership or control.
Regulation of programming. The FCC regulates broadcast programming by, among other things, banning “indecent” programming, regulating political advertising and imposing commercial time limits during children’s programming. Penalties for broadcasting indecent programming can range up to $350,000 per indecent utterance or image per station.
Federal legislation and FCC rules also limit the amount of commercial matter that may be shown on broadcast or cable channels during programming designed for children 12 years of age and younger. In addition, broadcast channels are generally required to provide a minimum of three hours per week of programming that has as a “significant purpose” meeting the educational and informational needs of children 16 years of age and younger. FCC rules also give

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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 operating within a television station’s Designated Market Area, FCC rules require that every three years each television station elect either “must carry” status, pursuant to which cable operators generally must carry a local television station in the station’s market, or “retransmission consent” status, pursuant to which the cable operator must negotiate with the television station to obtain the consent of the television station prior to carrying its signal. Under the Satellite Home Viewer Improvement Act and its successors, including most recently the STELA Reauthorization Act (STELAR), which also requires the “must carry” or “retransmission consent” election, satellite carriers are permitted to retransmit a local television station’s signal into its local market with the consent of the local television station. Portions of these satellite laws are set to expire on December 31, 2019.
Cable and satellite carriage of programming. The Communications Act and FCC rules regulate some aspects of negotiations regarding cable and satellite retransmission consent, and some cable and satellite companies have sought regulation of additional aspects of the carriage of programming on cable and satellite systems. New legislation, court action or regulation in this area could have an impact on the Company’s operations.
The foregoing is a brief summary of certain provisions of the Communications Act, other legislation and specific FCC rules and policies. Reference should be made to the Communications Act, other legislation, FCC rules and public notices and rulings of the FCC for further information concerning the nature and extent of the FCC’s regulatory authority.
FCC laws and regulations are subject to change, and the Company generally cannot predict whether new legislation, court action or regulations, or a change in the extent of application or enforcement of current laws and regulations, would have an adverse impact on our operations.
PARKS AND RESORTS
The Company owns and operates the Walt Disney World Resort in Florida; the Disneyland Resort in California; Aulani, a Disney Resort & Spa in Hawaii; the Disney Vacation Club; the Disney Cruise Line; and Adventures by Disney. The Company manages and has effective ownership interests of 81% in Disneyland Paris (see recapitalization discussion below), 47% in Hong Kong Disneyland Resort and 43% in Shanghai Disney Resort, each of which is consolidated in our financial statements. The Company also licenses our intellectual property to a third party for the operations of the Tokyo Disney Resort in Japan. The Company’s Walt Disney Imagineering unit designs and develops new theme park concepts and attractions as well as resort properties.
The businesses in the Parks and Resorts segment generate revenues from the sale of admissions to theme parks, sales of food, beverage and merchandise, charges for room nights at hotels, sales of cruise and other vacation packages and sales and rentals of vacation club properties. Significant costs include labor, infrastructure costs, depreciation, costs of merchandise, food and beverage sold, marketing and sales expense and cost of vacation club units. Infrastructure costs include repairs and maintenance, information systems expense, utilities, property taxes, insurance and transportation.
Walt Disney World Resort
The Walt Disney World Resort is located 22 miles southwest of Orlando, Florida, on approximately 25,000 acres of land. The resort includes theme parks (the Magic Kingdom, Epcot, Disney’s Hollywood Studios and Disney’s Animal Kingdom); hotels; vacation club properties; a retail, dining and entertainment complex; a sports complex; conference centers; campgrounds; golf courses; water parks; and other recreational facilities designed to attract visitors for an extended stay.
The Walt Disney World Resort is marketed through a variety of international, national and local advertising and promotional activities. A number of attractions and restaurants in each of the theme parks are sponsored by other corporations through long-term agreements.
MyMagic+, a program available to all guests at Walt Disney World Resort, is a series of technology-based tools that include: the My Disney Experience app and website, which help guests personalize their experience; MagicBand, which a guest may use as their admission pass, hotel room key or method of payment; and FastPass+, which is a reservation system for attractions and entertainment experiences.
Magic Kingdom — The Magic Kingdom consists of six themed areas: Adventureland, Fantasyland, Frontierland, Liberty Square, Main Street USA and Tomorrowland. Each land provides a unique guest experience featuring themed attractions, live Disney character interactions, restaurants, refreshment areas and merchandise shops. Additionally, there are daily parades and a nighttime fireworks extravaganza, Wishes.

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Epcot — Epcot consists of two major themed areas: Future World and World Showcase. Future World dramatizes certain historical developments and addresses the challenges facing the world today through pavilions devoted to showcasing science and technology innovations, communication, energy, transportation, use of imagination, nature and food production, the ocean environment and space. World Showcase presents a community of nations focusing on the culture, traditions and accomplishments of people around the world. Countries represented with pavilions include Canada, China, France, Germany, Italy, Japan, Mexico, Morocco, Norway, the United Kingdom and the United States. Both areas feature themed attractions, restaurants and merchandise shops. Epcot also features Illuminations: Reflections of Earth, a nighttime entertainment spectacular.
Disney’s Hollywood Studios — Disney’s Hollywood Studios consists of eight themed areas: Animation Courtyard, Commissary Lane, Echo Lake, Hollywood Boulevard, Mickey Avenue, Pixar Place, Streets of America and Sunset Boulevard. The eight areas provide behind-the-scenes glimpses of Hollywood-style action through various shows and attractions and offer themed food service and merchandise facilities. The park also features Fantasmic!, a nighttime entertainment spectacular. In August 2015, the Company announced two new themed lands coming to the park based on the Star Wars and Toy Story franchises.
Disney’s Animal Kingdom — Disney’s Animal Kingdom consists of a 145-foot tall Tree of Life centerpiece surrounded by six themed areas: Africa, Asia, Dinoland U.S.A., Discovery Island, Oasis and Rafiki’s Planet Watch. Each themed area contains attractions, entertainment, restaurants and merchandise shops. The park features more than 300 species of mammals, birds, reptiles and amphibians and 3,000 varieties of vegetation. The Company has a long-term agreement for the exclusive global theme park rights to build AVATAR-themed lands and plans to open Pandora - The World of AVATAR at Disney’s Animal Kingdom in 2017.
Hotels and Other Resort Facilities — As of October 3, 2015, the Company owned and operated 18 resort hotels at the Walt Disney World Resort, with a total of approximately 23,000 rooms and 3,000 vacation club units. Resort facilities include 468,000 square feet of conference meeting space and Disney’s Fort Wilderness camping and recreational area, which offers approximately 800 campsites.
The Walt Disney World Resort also hosts a 127-acre retail, dining and entertainment complex, Disney Springs (formerly Downtown Disney). Disney Springs is home to Cirque du Soleil, the House of Blues and the World of Disney retail store, which features Disney-branded merchandise. A number of the Disney Springs facilities are operated by third parties that pay rent to the Company. Disney Springs is undergoing an expansion that is expected to be completed in 2016.
Nine independently-operated hotels with approximately 6,000 rooms are situated on property leased from the Company.
ESPN Wide World of Sports Complex is a 230-acre sports center that hosts professional caliber training and competitions, festival and tournament events and interactive sports activities. The complex, which welcomes both amateur and professional athletes, accommodates multiple sporting events, including baseball, basketball, football, soccer, softball, tennis and track and field. Its stadium, which has a seating capacity of approximately 9,500, is the current spring training site for MLB’s Atlanta Braves.
Other recreational amenities and activities available at the Walt Disney World Resort include three championship golf courses, miniature golf courses, full-service spas, tennis, sailing, water skiing, swimming, horseback riding and a number of other noncompetitive sports and leisure time activities. The resort also includes two water parks: Disney’s Blizzard Beach and Disney’s Typhoon Lagoon.
Disneyland Resort
The Company owns 486 acres and has the rights under long-term lease for use of an additional 55 acres of land in Anaheim, California. The Disneyland Resort includes two theme parks (Disneyland and Disney California Adventure), three hotels and Downtown Disney, a retail, dining and entertainment complex.
The Disneyland Resort is marketed as a destination through international, national and local advertising and promotional activities. A number of the attractions and restaurants in the theme parks are sponsored by other corporations through long-term agreements.
Disneyland — Disneyland consists of eight themed areas: Adventureland, Critter Country, Fantasyland, Frontierland, Main Street USA, Mickey’s Toontown, New Orleans Square and Tomorrowland. These areas feature themed attractions, shows, restaurants, merchandise shops and refreshment stands. Additionally, Disneyland offers daily parades, a nighttime fireworks extravaganza and a nighttime entertainment spectacular, Fantasmic!. In August 2015, the Company announced it will be constructing a new Star Wars-themed land at Disneyland.

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Disney California Adventure — Disney California Adventure is adjacent to Disneyland and includes seven themed areas: Buena Vista Street, Cars Land, Grizzly Peak, Hollywood Land, Pacific Wharf, Paradise Pier and “a bug’s land”. These areas include attractions, shows, restaurants, merchandise shops and refreshment stands. Additionally, Disney California Adventure offers a nighttime water spectacular, World of Color.
Hotels and Other Resort Facilities — Disneyland Resort includes three Company-owned and operated hotels with a total of approximately 2,400 rooms, 50 vacation club units and 180,000 square feet of conference meeting space.
Downtown Disney, a themed 15-acre outdoor complex of entertainment, dining and shopping venues, is located adjacent to both Disneyland and Disney California Adventure. A number of the Downtown Disney facilities are operated by third parties that pay rent to the Company.
Aulani, a Disney Resort & Spa
Aulani, a Disney Resort & Spa, is a Company operated family resort on a 21-acre oceanfront property on Oahu, Hawaii featuring 351 hotel rooms, an 18,000-square-foot spa and 12,000 square feet of conference meeting space. The resort also has 481 Disney Vacation Club units.
Disneyland Paris
The Company has an 81% effective ownership interest in Disneyland Paris (see recapitalization discussion below), a 5,510-acre development located in Marne-la-Vallée, approximately 20 miles east of Paris, France, which has been developed pursuant to a master agreement with French governmental authorities. The Company manages and has a 77% equity interest in Euro Disney S.C.A., a publicly-traded French entity that is the holding company for Euro Disney Associés S.C.A., the primary operating company of Disneyland Paris. The Company also has a direct 18% ownership interest in Euro Disney Associés S.C.A. Disneyland Paris includes two theme parks (Disneyland Park and Walt Disney Studios Park); seven themed hotels; two convention centers; a shopping, dining and entertainment complex (Disney Village); and a 27-hole golf facility. Of the 5,510 acres comprising the site, approximately half have been developed to date, including the Val d’Europe development discussed below. An indirect, wholly-owned subsidiary of the Company is responsible for managing Disneyland Paris. Euro Disney Associés S.C.A. is required to pay royalties and management fees to the Company based on the operating performance of the resort.
Disneyland Park — Disneyland Park consists of five themed areas: Adventureland, Discoveryland, Fantasyland, Frontierland and Main Street USA. These areas include themed attractions, shows, restaurants, merchandise shops and refreshment stands. Disneyland Park also features a daily parade and a nighttime entertainment spectacular, Disney Dreams!.
Walt Disney Studios Park — Walt Disney Studios Park takes guests into the worlds of cinema, animation and television and includes four themed areas: Backlot, Front Lot, Production Courtyard and Toon Studio. These areas each include themed attractions, shows, restaurants, merchandise shops and refreshment stands.
Hotels and Other Facilities — Disneyland Paris operates seven resort hotels, with approximately 5,800 rooms and 210,000 square feet of conference meeting space. In addition, several on-site hotels that are owned and operated by third parties provide approximately 2,300 rooms.
Disney Village is a 500,000-square-foot retail, dining and entertainment complex located between the theme parks and the hotels. A number of the Disney Village facilities are operated by third parties that pay rent to a subsidiary of Euro Disney S.C.A.
Val d’Europe is a planned community near Disneyland Paris that is being developed in phases. Val d’Europe currently includes a regional train station, hotels and a town center consisting of a shopping center as well as office, commercial and residential space. Third parties operate these developments on land leased or purchased from Euro Disney S.C.A. and its subsidiaries.
Euro Disney Associés S.C.A. along with 50% joint venture partner, Pierre & Vacances-Center Parcs, is developing Villages Nature, a European eco-tourism destination adjacent to Disneyland Paris, which is targeted to open in 2017.
Disneyland Paris Recapitalization — In order to improve Disneyland Paris’ financial position, during calendar 2015, Euro Disney S.C.A. completed a €1.0 billion recapitalization through a €0.4 billion equity rights offering and the conversion of €0.6 billion of loans from the Company into equity. The recapitalization process was finalized in November 2015, and the Company’s effective ownership interest increased from 51% to 81% (See Note 6 to the Consolidated Financial Statements).
As of October 3, 2015, Euro Disney Associés S.C.A. had €1.0 billion in outstanding loans from the Company.

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Hong Kong Disneyland Resort
The Company owns a 47% interest in Hong Kong Disneyland Resort through Hongkong International Theme Parks Limited, an entity in which the Government of the Hong Kong Special Administrative Region (HKSAR) owns a 53% majority interest. The resort is located on 310 acres on Lantau Island and is in close proximity to the Hong Kong International Airport. Hong Kong Disneyland Resort includes one theme park and two themed hotels. A separate Hong Kong subsidiary of the Company is responsible for managing Hong Kong Disneyland Resort. The Company is entitled to receive royalties and management fees based on the operating performance of Hong Kong Disneyland Resort.
Hong Kong Disneyland — Hong Kong Disneyland consists of seven themed areas: Adventureland, Fantasyland, Grizzly Gulch, Main Street USA, Mystic Point, Tomorrowland and Toy Story Land. These areas feature themed attractions, shows, restaurants, merchandise shops and refreshment stands. Additionally, there are daily parades and a nighttime fireworks extravaganza, Disney in the Stars. A new themed area based on Marvel’s Iron Man franchise is under construction and expected to open in late 2016.
Hotels — Hong Kong Disneyland Resort includes two themed hotels with a total of 1,000 rooms. A third hotel with 750 rooms is under construction and expected to open in 2017. (See Note 6 to the Consolidated Financial Statements for more information on hotel financing.)
Shanghai Disney Resort
The Company and Shanghai Shendi (Group) Co., Ltd (Shendi) are constructing a Disney resort (Shanghai Disney Resort) in the Pudong district of Shanghai, which will be located on approximately 1,000 acres and will initially include the Shanghai Disneyland theme park; two themed hotels with a total of 1,220 rooms; a retail, dining and entertainment complex; and an outdoor recreational area. Construction on the project began in April 2011, with the resort opening date planned for spring 2016. The total investment will be funded in accordance with each shareholder’s equity ownership percentage, with approximately 67% from equity contributions and 33% from shareholder loans. Shanghai Disney Resort is owned through two joint venture companies, in which Shendi owns 57% and the Company owns 43%. A management company, in which the Company has a 70% interest and Shendi a 30% interest, is responsible for designing, constructing and operating Shanghai Disney Resort. The management company will be entitled to receive management fees based on operating performance of the resort. The Company is also entitled to royalties based on resort revenues.
Tokyo Disney Resort
Tokyo Disney Resort is located on 494 acres of land, six miles east of downtown Tokyo, Japan. The resort includes two theme parks (Tokyo Disneyland and Tokyo DisneySea); three Disney-branded hotels; six independently operated hotels; Ikspiari, a retail, dining and entertainment complex; and Bon Voyage, a Disney-themed merchandise location.
The Company earns royalties on revenues generated by the Tokyo Disney Resort, which is owned and operated by Oriental Land Co., Ltd. (OLC), a Japanese corporation in which the Company has no equity interest.
Tokyo Disneyland — Tokyo Disneyland consists of seven themed areas: Adventureland, Critter Country, Fantasyland, Tomorrowland, Toontown, Westernland and World Bazaar.
Tokyo DisneySea — Tokyo DisneySea, adjacent to Tokyo Disneyland, is divided into seven “ports of call,” including American Waterfront, Arabian Coast, Lost River Delta, Mediterranean Harbor, Mermaid Lagoon, Mysterious Island and Port Discovery.
Hotels and Other Resort Facilities — The resort includes three Disney-branded hotels with a total of more than 1,700 rooms and a monorail, which links the theme parks and resort hotels with Ikspiari.
OLC has announced a 10-year investment plan for Tokyo Disney Resort. The plan includes the expansion of Fantasyland at Tokyo Disneyland and the addition of a Scandinavian-themed area at Tokyo DisneySea that will feature Frozen. OLC also announced the development of a fourth Disney-branded hotel, Tokyo Disney Celebration Hotel.
Disney Vacation Club
Disney Vacation Club (DVC) offers ownership interests in 13 resort facilities located at the Walt Disney World Resort; Disneyland Resort; Vero Beach, Florida; Hilton Head Island, South Carolina; and Oahu, Hawaii. Available units at each facility are offered for sale under a vacation ownership plan and are operated as hotel rooms when not occupied by vacation club members. The Company’s vacation club units consist of a mix of units ranging from deluxe studios to three-bedroom grand

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villas. Unit counts in this document are presented in terms of two-bedroom equivalents. DVC had 3,807 vacation club units as of October 3, 2015. In September 2015, the Company announced that its next planned vacation project will be at Disney’s Wilderness Lodge at the Walt Disney World Resort.
Disney Cruise Line
Disney Cruise Line (DCL) is a four-ship vacation cruise line, which operates out of ports in North America and Europe. The Disney Magic and the Disney Wonder are 85,000-ton 877-stateroom ships, and the Disney Dream and the Disney Fantasy are 130,000-ton 1,250-stateroom ships. DCL caters to families, children, teenagers and adults, with distinctly-themed areas and activities for each group. Many cruise vacations include a visit to Disney’s Castaway Cay, a 1,000-acre private Bahamian island.
Adventures by Disney
Adventures by Disney offers all-inclusive guided vacation tour packages predominantly at non-Disney sites around the world. The Company offered 29 different tour packages during 2015.
Walt Disney Imagineering
Walt Disney Imagineering provides master planning, real estate development, attraction, entertainment and show design, engineering support, production support, project management and other development services, including research and development for the Company’s Parks and Resorts operations.
Competition and Seasonality
The Company’s theme parks and resorts as well as Disney Cruise Line and Disney Vacation Club compete with other forms of entertainment, lodging, tourism and recreational activities. The profitability of the leisure-time industry may be influenced by various factors that are not directly controllable, such as economic conditions including business cycle and exchange rate fluctuations, travel industry trends, amount of available leisure time, oil and transportation prices, weather patterns and natural disasters.
All of the theme parks and the associated resort facilities are operated on a year-round basis. Typically, the theme parks and resorts business experiences fluctuations in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and local entertainment excursions. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early-winter and spring-holiday periods.
STUDIO ENTERTAINMENT
The Studio Entertainment segment produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings and live stage plays.
The businesses in the Studio Entertainment segment generate revenue from the distribution of films in the theatrical, home entertainment and television markets, stage play ticket sales, the distribution of recorded music and licensing revenues from live entertainment events. Significant operating expenses include film cost amortization, which consists of production cost and participations and residuals expense amortization, distribution expenses and costs of sales.
The Company distributes films primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm and Touchstone banners. The Company produces and distributes Indian movies through its UTV banner.
In August 2009, the Company entered into an agreement with DreamWorks Studios (DreamWorks) to distribute live-action motion pictures produced by DreamWorks for seven years under the Touchstone Pictures banner for which the Company receives a distribution fee. As of October 3, 2015, the Company has distributed eleven DreamWorks films. As part of the agreement, the Company provided loans to DreamWorks, which as of October 3, 2015 totaled $159 million. There is an additional $90 million available to DreamWorks.
Prior to the Company’s acquisition of Marvel, Marvel had licensed the rights to third-party studios to produce and distribute feature films based on certain Marvel properties including Spider-Man, The Fantastic Four and X-Men. Under the licensing arrangements, the third-party studios incur the costs to produce and distribute the films and the Company retains the merchandise licensing rights. Under the licensing arrangement for Spider-Man, the Company pays the third-party studio a licensing fee based on each film’s box office receipts, subject to specified limits. Under the licensing arrangements for The

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Fantastic Four and X-Men, the third-party studio pays the Company a licensing fee, and the third-party studio receives a share of the Company’s merchandise revenue on these properties. The Company distributes all Marvel-produced films with the exception of The Incredible Hulk, which is distributed by a third-party studio.
Prior to the Company’s acquisition of Lucasfilm, Lucasfilm produced six Star Wars films (Episodes 1 through 6). Lucasfilm retained the rights to consumer products related to all of those films and the rights related to television and electronic distribution formats for all of those films, with the exception of the rights for Episode 4, which are owned by a third-party studio. All of the films are distributed by a third-party studio in the theatrical and home entertainment markets. The theatrical and home entertainment distribution rights for these films revert back to Lucasfilm in May 2020 with the exception of Episode 4, for which these distribution rights are retained in perpetuity by the third-party studio.
Lucasfilm also includes Industrial Light & Magic and Skywalker Sound, which provide visual and audio effects and other post-production services to the Company and third-party producers.
Theatrical Market
We produce and distribute both live-action films and full-length animated films. In the domestic theatrical market, we generally distribute and market our filmed products directly. In most major international markets, we distribute our filmed products directly while in other markets our films are distributed by independent distribution companies or joint ventures. During fiscal 2016, we expect to distribute ten of our own produced feature films and three DreamWorks feature films domestically. Cumulatively through October 3, 2015 the Company has released domestically approximately 1,000 full-length live-action features and 100 full-length animated features.
The Company incurs significant marketing and advertising costs before and throughout the theatrical release of a film in an effort to generate public awareness of the film, to increase the public’s intent to view the film and to help generate consumer interest in the subsequent home entertainment and other ancillary markets. These costs are expensed as incurred. Therefore, we typically incur losses on a film in the theatrical markets, including in periods prior to the theatrical release of the film.
Home Entertainment Market
In the domestic market, we distribute home entertainment releases directly under each of our motion picture banners. In international markets, we distribute home entertainment releases under each of our motion picture banners both directly and through independent distribution companies. In addition, we acquire and produce original content for direct-to-video release.
Domestic and international home entertainment distribution typically starts three to six months after the theatrical release in each market. Home entertainment releases may be distributed in both physical (DVD and Blu-ray) and electronic formats. Electronic formats may be released one to four weeks ahead of physical release. Titles are generally sold to retailers, such as Wal-Mart and Best Buy and physical rental channels, such as Netflix. However, distribution in the rental channels may be delayed up to 28 days after the start of home entertainment distribution.
As of October 3, 2015, we had approximately 1,400 active produced and acquired titles, including 1,000 live-action titles and 400 animated titles, in the domestic home entertainment marketplace and approximately 2,500 active produced and acquired titles, including 1,900 live-action titles and 600 animated titles, in the international marketplace.
Television Market
Pay-Per-View (PPV)/Video-on-Demand (VOD) — Concurrently with physical home entertainment distribution, we license titles to PPV/VOD service providers for electronic delivery to consumers for a specified rental period.
Pay Television (Pay 1) — There are generally three pay television windows. The first window is generally eighteen months in duration and follows the PPV/VOD window. The Company has licensed exclusive domestic pay television rights to substantially all films released theatrically through calendar year 2015 under the Walt Disney Pictures, Pixar and Touchstone Pictures banners, along with films released under the Marvel banner starting with Iron Man 3 to the Starz pay television service. DreamWorks titles distributed by the Company are licensed to Showtime under a separate agreement.
Free Television (Free 1) — The Pay 1 window is followed by a television window that may last up to 84 months. Motion pictures are usually sold in the Free 1 window to major broadcast networks, including ABC, and basic cable services.
Pay Television 2 (Pay 2) and Free Television 2 (Free 2) — In the U.S., Free 1 is generally followed by a twelve-month Pay 2 window under our license arrangements with Starz and Showtime, and then by a Free 2 window that generally lasts up to 84 months. Packages of the Company’s feature films have been licensed for broadcast under multi-year agreements within the

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Free 2 window. The Free 2 window is a syndication window where films are licensed to basic cable networks, subscription video on demand (SVOD) services and to third-party television station groups.
Pay Television 3 (Pay 3) and Free Television 3 (Free 3) — In the U.S., Free 2 is generally followed by a seven-month Pay 3 window under our license arrangements with Starz and Showtime, and then by a Free 3 window. Packages of the Company’s feature films have been licensed for broadcast under multi-year agreements within the Free 3 window. The Free 3 window is a syndication window where films are licensed to basic cable networks and SVOD services.
Following the conclusion of Starz’s exclusive domestic Pay 1, Pay 2 and Pay 3 television rights for films released theatrically through the end of calendar year 2015, Netflix will have exclusive domestic pay television rights for the Pay 1 and Pay 2 windows for films released theatrically through calendar year 2018.
International Television — The Company also licenses its films outside of the U.S. The typical windowing sequence is consistent with the domestic cycle such that titles premiere on television in PPV/VOD and then air in pay TV before airing in free TV. Windowing strategies are developed in response to local market practices and conditions, and the exact sequence and length of each window can vary country by country.
Disney Music Group
The Disney Music Group (DMG) commissions new music for the Company’s motion pictures and television programs. DMG also licenses the songs and recording copyrights to others for printed music, records, audio-visual devices, public performances and digital distribution. DMG includes Walt Disney Records, Hollywood Records, Disney Music Publishing and Buena Vista Concerts.
Walt Disney Records and Hollywood Records develop, produce, market and distribute recorded music in the U.S. and license our music properties throughout the rest of the world. Walt Disney Records categories include infant, children’s read-along, teen, all-family and soundtracks from film and television properties distributed by Walt Disney Pictures and Disney Channel. Hollywood Records develops musical talent and produces and markets their recordings across a spectrum of music genres.
Disney Music Publishing is responsible for the worldwide management, protection and licensing of the Disney song catalog, which includes the copyrights of thousands of musical compositions derived from the Company’s motion picture, television and theme park properties as well as musical compositions written by songwriters under exclusive contract.
Buena Vista Concerts produces live musical concerts with the Company’s intellectual property and artists signed to the Disney Music Group record labels.
Disney Theatrical Group
Disney Theatrical Group develops, produces and licenses live entertainment events on Broadway and around the world, including The Lion King, Aladdin, Newsies, Mary Poppins (a co-production with Cameron Mackintosh Ltd), Beauty and the Beast, Elton John & Tim Rice’s Aida, TARZAN®, The Little Mermaid and more.
Disney Theatrical Group also licenses the Company’s intellectual property to Feld Entertainment, the producer of Disney On Ice and Disney Live!.
Competition and Seasonality
The Studio Entertainment businesses compete with all forms of entertainment. A significant number of companies produce and/or distribute theatrical and television films, exploit products in the home entertainment market, provide pay television programming services, produce music and sponsor live theater. We also compete to obtain creative and performing talents, story properties, advertiser support and broadcast rights that are essential to the success of our Studio Entertainment businesses.
The success of Studio Entertainment operations is heavily dependent upon public taste and preferences. In addition, Studio Entertainment operating results fluctuate due to the timing and performance of releases in the theatrical, home entertainment and television markets. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods.

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CONSUMER PRODUCTS
The Consumer Products segment engages with licensees, publishers and retailers throughout the world to design, develop, publish, promote and sell a wide variety of products based on the Company’s intellectual property through its Merchandise Licensing, Publishing and Retail businesses. In addition to using the Company’s film and television properties, Consumer Products also develops its own intellectual property, which can be used across the Company’s businesses.
The Consumer Products segment generates revenue from:
licensing characters from our film, television and other properties to third parties for use on consumer merchandise
publishing children’s books and magazines and comic books
selling merchandise through our retail stores, internet shopping sites and wholesale business; and
charging tuition at our English language learning centers in China
Significant costs include costs of goods sold and distribution expenses, operating labor and retail occupancy costs.
In June 2015, the Company announced the combination of its Consumer Products and Interactive segments into a single segment. The Company will begin reporting the financial results of the combined segment in fiscal 2016.
Merchandise Licensing
The Company’s merchandise licensing operations cover a diverse range of product categories, the most significant of which are: toys, apparel, home décor and furnishings, accessories, stationery, health and beauty, food, footwear and consumer electronics. The Company licenses characters from its film, television and other properties for use on third-party products in these categories and earns royalties, which are usually based on a fixed percentage of the wholesale or retail selling price of the products. Some of the major properties licensed by the Company include: Frozen; Mickey and Minnie; Marvel properties such as The Avengers and Spider-Man; Star Wars; Disney Channel properties including Mickey Mouse Club House, Sofia the First and Doc McStuffins; Disney Princess; Cars; Winnie the Pooh; and Disney Classics. The Company also provides input on the design of individual products and creates exclusive themed and seasonal promotional campaigns for retailers based on the Company’s characters, movies and TV shows.
Publishing
Disney Publishing Worldwide (DPW) creates, distributes, licenses and publishes children’s books, magazine and learning products in print and digital formats, and storytelling apps in multiple countries and languages based on the Company’s branded franchises. DPW also operates Disney English, which develops and delivers an English language learning curriculum for Chinese children using Disney content in 29 learning centers in nine cities across China.
Marvel Publishing creates and publishes comic books, and graphic novel collections of comic books, principally in North America in print and digital formats. Marvel Publishing also licenses the right to publish translated versions of these comic books, principally in Europe and Latin America.
Retail
The Company markets Disney-, Marvel- and Lucasfilm-themed products through retail stores operated under the Disney Store name and through internet sites in North America (DisneyStore.com and MarvelStore.com), Western Europe and Japan. The stores, which are generally located in leading shopping malls and other retail complexes, carry a wide variety of Disney merchandise and promote other businesses of the Company. The Company currently owns and operates 220 stores in North America, 74 stores in Europe, 47 stores in Japan and 1 in China. The Company also offers retailers merchandise that it designs and develops under wholesale arrangements.
Competition and Seasonality
The Company’s merchandise licensing, publishing and retail businesses compete with other licensors, publishers and retailers of character, brand and celebrity names. Operating results for the licensing and retail businesses are influenced by seasonal consumer purchasing behavior, consumer preferences, levels of marketing and promotion and by the timing and performance of theatrical releases and cable programming broadcasts.

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INTERACTIVE
The Interactive segment creates and delivers branded entertainment and lifestyle content across interactive media platforms. Interactive’s primary operations include the production and global distribution of multi-platform games, the licensing of content for games and mobile devices, website management and design for other Company businesses and the development of branded online services.
The Interactive segment also manages Maker Studios, Inc. (Maker), a leading network of online video content. Maker results are allocated primarily to the Media Networks and Studio Entertainment segments.
The Interactive segment generates revenue from:
selling of multi-platform games to retailers and distributors, the collection of fees through micro transactions in the games, and subscriptions
licensing content to third-party game publishers and for mobile devices; and
online advertising and sponsorships
Significant costs include cost of goods sold, product development, marketing expenses and distribution expenses.
In June 2015, the Company announced the combination of its Consumer Products and Interactive segments into a single segment. The Company will begin reporting the financial results of the combined segment in fiscal 2016.
Games
Interactive develops console, mobile and virtual world games, which are marketed and distributed on a worldwide basis. Disney Infinity features a game world based on Company properties that combines physical toys and story-driven gameplay. Mobile games are distributed on smartphones and tablets. Disney’s Club Penguin is an online virtual world game that contains a range of games and activities. Certain properties are also licensed to third-party video game publishers.
Other Content
Interactive licenses Disney properties and content to mobile phone carriers in Japan. In addition, Interactive develops, publishes and distributes interactive family content through a portfolio of platforms including Disney.com, Disney on YouTube and Babble.com and develop and publish apps for moms and families.
Competition and Seasonality
The Company’s game business competes primarily with other publishers of game software and other types of home entertainment. The Company’s online sites and products compete with a wide variety of other online sites and products. Operating results for the game business fluctuate due to the performance and timing of game releases, which are determined by several factors including theatrical releases and cable programming broadcasts, competition and the timing of holiday periods. Revenues from certain of the Company’s online and mobile operations are subject to similar seasonal trends.
INTELLECTUAL PROPERTY PROTECTION
The Company’s businesses throughout the world are affected by its ability to exploit and protect against infringement of its intellectual property, including trademarks, trade names, copyrights, patents and trade secrets. Important intellectual property includes rights in the content of motion pictures, television programs, electronic games, sound recordings, character likenesses, theme park attractions, books and magazines. Risks related to the protection and exploitation of intellectual property rights are set forth in Item 1A – Risk Factors.
AVAILABLE INFORMATION
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available without charge on our website, www.disney.com/investors, as soon as reasonably practicable after they are filed electronically with the Securities and Exchange Commission (SEC). We are providing the address to our internet site solely for the information of investors. We do not intend the address to be an active link or to otherwise incorporate the contents of the website into this report.

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ITEM 1A. Risk Factors
For an enterprise as large and complex as the Company, a wide range of factors could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in this report, the most significant factors affecting our operations include the following:
Changes in U.S., global, or regional economic conditions could have an adverse effect on the profitability of some or all of our businesses.
A decline in economic activity in the U.S. and other regions of the world in which we do business can adversely affect demand for any of our businesses, thus reducing our revenue and earnings. Past declines in economic conditions reduced spending at our parks and resorts, purchase of and prices for advertising on our broadcast and cable networks and owned stations, performance of our home entertainment releases, and purchases of Company-branded consumer products, and similar impacts can be expected should such conditions recur. A decline in economic conditions could also reduce attendance at our parks and resorts, prices that MVPDs pay for our cable programming or subscription levels for our cable programming. Recent instability in non-U.S. economies has had similar impacts on some of our U.S. operations. Economic conditions can also impair the ability of those with whom we do business to satisfy their obligations to us. In addition, an increase in price levels generally, or in price levels in a particular sector such as the energy sector, could result in a shift in consumer demand away from the entertainment and consumer products we offer, which could also adversely affect our revenues and, at the same time, increase our costs. Changes in exchange rates for foreign currencies may reduce international demand for our products or increase our labor or supply costs in non-U.S. markets, and recent changes have reduced the U.S. dollar value of revenue we receive and expect to receive from other markets. Economic or political conditions in a country could also reduce our ability to hedge exposure to currency fluctuations in the country or our ability to repatriate revenue from the country.
Changes in public and consumer tastes and preferences for entertainment and consumer products could reduce demand for our entertainment offerings and products and adversely affect the profitability of any of our businesses.
Our businesses create entertainment, travel and consumer products whose success depends substantially on consumer tastes and preferences that change in often unpredictable ways. The success of our businesses depends on our ability to consistently create and distribute filmed entertainment, broadcast and cable programming, online material, electronic games, theme park attractions, hotels and other resort facilities and travel experiences and consumer products that meet the changing preferences of the broad consumer market and respond to competition from an expanding array of choices facilitated by technological developments in the delivery of content. Many of our businesses increasingly depend on acceptance of our offerings and products by consumers outside the U.S., and their success therefore depends on our ability to successfully predict and adapt to changing consumer tastes and preferences outside as well as inside the U.S. Moreover, we must often invest substantial amounts in film production, broadcast and cable programming, electronic games, theme park attractions, cruise ships or hotels and other resort facilities before we learn the extent to which these products will earn consumer acceptance. If our entertainment offerings and products do not achieve sufficient consumer acceptance, our revenue from advertising sales (which are based in part on ratings for the programs in which advertisements air) or subscription fees for broadcast and cable programming and online services, from theatrical film receipts or home entertainment or electronic game sales, from theme park admissions, hotel room charges and merchandise, food and beverage sales, from sales of licensed consumer products or from sales of our other consumer products and services may decline or fail to grow to the extent we anticipate when making investment decisions and thereby adversely affect the profitability of one or more of our businesses.
Changes in technology and in consumer consumption patterns may affect demand for our entertainment products, the revenue we can generate from these products or the cost of producing or distributing products.
The media entertainment and internet businesses in which we participate increasingly depend on our ability to successfully adapt to shifting patterns of content consumption through the adoption and exploitation of new technologies. New technologies affect the demand for our products, the manner in which our products are distributed to consumers, the sources and nature of competing content offerings, the time and manner in which consumers acquire and view some of our entertainment products and the options available to advertisers for reaching their desired audiences. This trend has impacted the business model for certain traditional forms of distribution, as evidenced by the industry-wide decline in ratings for broadcast television, the reduction in demand for home entertainment sales of theatrical content, the development of alternative distribution channels for broadcast and cable programming and declines in subscriber levels for certain of our networks. In order to respond to these developments, we may be required to alter our business models and there can be no assurance that we will successfully respond to these changes, that we will not experience disruption as we develop responses to the changes, or that the business models we develop will be as profitable as our current business models. As a result, the income from our

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entertainment offerings may decline or increase at slower rates than our historical experience or our expectations when we make investments in products.
The success of our businesses is highly dependent on the existence and maintenance of intellectual property rights in the entertainment products and services we create.
The value to us of our intellectual property rights is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our intellectual property may decrease, or the cost of obtaining and maintaining rights may increase.
The unauthorized use of our intellectual property rights may increase the cost of protecting these rights or reduce our revenues. New technologies such as the convergence of computing, communication, and entertainment devices, the falling prices of devices incorporating such technologies, increased broadband internet speed and penetration and increased availability and speed of mobile data transmission have made the unauthorized digital copying and distribution of our films, television productions and other creative works easier and faster and enforcement of intellectual property rights more challenging. The unauthorized use of intellectual property in the entertainment industry generally continues to be a significant challenge for intellectual property rights holders. Inadequate laws or weak enforcement mechanisms to protect intellectual property in one country can adversely affect the results of the Company’s operations worldwide, despite the Company’s efforts to protect its intellectual property rights. These developments require us to devote substantial resources to protecting our intellectual property against unlicensed use and present the risk of increased losses of revenue as a result of unlicensed distribution of our content.
With respect to intellectual property developed by the Company and rights acquired by the Company from others, the Company is subject to the risk of challenges to our copyright, trademark and patent rights by third parties. Successful challenges to our rights in intellectual property may result in increased costs for obtaining rights or the loss of the opportunity to earn revenue from the intellectual property that is the subject of challenged rights.
Protection of electronically stored data is costly and if our data is compromised in spite of this protection, we may incur additional costs, lost opportunities and damage to our reputation.
We maintain information necessary to conduct our business, including confidential and proprietary information as well as personal information regarding our customers and employees, in digital form. Data maintained in digital form is subject to the risk of intrusion, tampering and theft. We develop and maintain systems in an effort to prevent intrusion, tampering and theft, but the development and maintenance of these systems is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Accordingly, despite our efforts, the possibility of intrusion, tampering and theft cannot be eliminated entirely, and risks associated with each of these remain. In addition, we provide confidential, proprietary and personal information to third parties when it is necessary to pursue business objectives. While we obtain assurances that these third parties will protect this information and, where we believe appropriate, monitor the protections employed by these third parties, there is a risk the confidentiality of data held by third parties may be compromised. If our data systems are compromised, our ability to conduct our business may be impaired, we may lose profitable opportunities or the value of those opportunities may be diminished and, as described above, we may lose revenue as a result of unlicensed use of our intellectual property. If personal information of our customers or employees is misappropriated, our reputation with our customers and employees may be injured resulting in loss of business or morale, and we may incur costs to remediate possible injury to our customers and employees or to pay fines or take other action with respect to judicial or regulatory actions arising out of the incident.
A variety of uncontrollable events may reduce demand for our products and services, impair our ability to provide our products and services or increase the cost of providing our products and services.
Demand for our products and services, particularly our theme parks and resorts, is highly dependent on the general environment for travel and tourism. The environment for travel and tourism, as well as demand for other entertainment products, can be significantly adversely affected in the U.S., globally or in specific regions as a result of a variety of factors beyond our control, including: adverse weather conditions arising from short-term weather patterns or long-term change, catastrophic events or natural disasters (such as excessive heat or rain, hurricanes, typhoons, floods, tsunamis and earthquakes); health concerns; international, political or military developments; and terrorist attacks. These events and others, such as fluctuations in travel and energy costs and computer virus attacks, intrusions or other widespread computing or telecommunications failures, may also damage our ability to provide our products and services or to obtain insurance coverage with respect to these events. In addition, we derive royalties from the sales of our licensed goods and services by third parties and the management of businesses operated under brands licensed from the Company, and we are therefore dependent on the successes of those third parties for that portion of our revenue. A wide variety of factors could influence the success of those

17


third parties and if negative factors significantly impacted a sufficient number of our licensees, that could adversely affect the profitability of one or more of our businesses. We obtain insurance against the risk of losses relating to some of these events, generally including physical damage to our property and resulting business interruption, certain injuries occurring on our property and some liabilities for alleged breach of legal responsibilities. When insurance is obtained it is subject to deductibles, exclusions, terms, conditions and limits of liability. The types and levels of coverage we obtain vary from time to time depending on our view of the likelihood of specific types and levels of loss in relation to the cost of obtaining coverage for such types and levels of loss.
Changes in our business strategy or restructuring of our businesses may increase our costs or otherwise affect the profitability of our businesses.
As changes in our business environment occur we may need to adjust our business strategies to meet these changes or we may otherwise find it necessary to restructure our operations or particular businesses or assets. In addition, external events including acceptance of our theatrical offerings and changes in macroeconomic conditions may impair the value of our assets. When these changes or events occur, we may incur costs to change our business strategy and may need to write down the value of assets. We also make investments in existing or new businesses, including investments in international expansion of our business and in new business lines. In recent years, such investments have included expansion and renovation of certain of our theme park attractions and investment in Shanghai Disney Resort. Some of these investments may have short-term returns that are negative or low and the ultimate business prospects of the businesses may be uncertain. In any of these events, our costs may increase, we may have significant charges associated with the write-down of assets or returns on new investments may be lower than prior to the change in strategy or restructuring.
Turmoil in the financial markets could increase our cost of borrowing and impede access to or increase the cost of financing our operations and investments.
Past disruptions in the U.S. and global credit and equity markets made it difficult for many businesses to obtain financing on acceptable terms. These conditions tended to increase the cost of borrowing and if they recur, our cost of borrowing could increase and it may be more difficult to obtain financing for our operations or investments. In addition, our borrowing costs can be affected by short- and long-term debt ratings assigned by independent rating agencies that are based, in part, on the Company’s performance as measured by credit metrics such as interest coverage and leverage ratios. A decrease in these ratings would likely increase our cost of borrowing and/or make it more difficult for us to obtain financing. Past disruptions in the global financial markets also impacted some of the financial institutions with which we do business. A similar decline in the financial stability of financial institutions could affect our ability to secure credit-worthy counterparties for our interest rate and foreign currency hedging programs and could affect our ability to settle existing contracts.
Increased competitive pressures may reduce our revenues or increase our costs.
We face substantial competition in each of our businesses from alternative providers of the products and services we offer and from other forms of entertainment, lodging, tourism and recreational activities. We also must compete to obtain human resources, programming and other resources we require in operating our business. For example: 
Our broadcast and cable networks, stations and online offerings compete for viewers with other broadcast, cable and satellite services as well as with home entertainment products, new sources of broadband delivered content and internet usage.
Our broadcast and cable networks and stations compete for the sale of advertising time with other broadcast, cable and satellite services, and internet delivered content, as well as with newspapers, magazines, billboards and radio stations.
Our cable networks compete for carriage of their programming with other programming providers.
Our studio operations, broadcast and cable networks compete to obtain creative and performing talent, sports and other programming, story properties, advertiser support and market share with other studio operations, broadcast and cable networks and new sources of broadband delivered content.
Our theme parks and resorts compete for guests with all other forms of entertainment, lodging, tourism and recreation activities.
Our studio operations compete for customers with all other forms of entertainment.
Our consumer products segment competes with other licensors, publishers and retailers of character, brand and celebrity names.
Our interactive media operations compete with other publishers of console, online and mobile games and other types of home entertainment.

18


Competition in each of these areas may increase as a result of technological developments and changes in market structure, including consolidation of suppliers of resources and distribution channels. Increased competition may divert consumers from our creative or other products, or to other products or other forms of entertainment, which could reduce our revenue or increase our marketing costs. Such competition may also reduce, or limit growth in, prices for our products and services, including advertising rates and subscription fees at our media networks, parks and resorts admissions and room rates, and prices for consumer products from which we derive license revenues. Competition for the acquisition of resources can increase the cost of producing our products and services.
Sustained increases in costs of pension and postretirement medical and other employee health and welfare benefits may reduce our profitability.
With approximately 185,000 employees, our profitability is substantially affected by costs of pension benefits and current and postretirement medical benefits. We may experience significant increases in these costs as a result of macro-economic factors, which are beyond our control, including increases in the cost of health care. In addition, changes in investment returns and discount rates used to calculate pension expense and related assets and liabilities can be volatile and may have an unfavorable impact on our costs in some years. These macroeconomic factors as well as a decline in the fair value of pension and postretirement medical plan assets may put upward pressure on the cost of providing pension and postretirement medical benefits and may increase future funding requirements. Although we have actively sought to control increases in these costs, there can be no assurance that we will succeed in limiting cost increases, and continued upward pressure could reduce the profitability of our businesses.
Our results may be adversely affected if long-term programming or carriage contracts are not renewed on sufficiently favorable terms.
We enter into long-term contracts for both the acquisition and the distribution of media programming and products, including contracts for the acquisition of programming rights for sporting events and other programs, and contracts for the distribution of our programming to content distributors. As these contracts expire, we must renew or renegotiate the contracts, and if we are unable to renew them on acceptable terms, we may lose programming rights or distribution rights. Even if these contracts are renewed, the cost of obtaining programming rights may increase (or increase at faster rates than our historical experience) or programming distributors, facing pressures resulting from increased subscription fees and alternative distribution challenges, may demand terms (including pricing and the breadth of distribution) that reduce our revenue from distribution of programs (or increase revenue at slower rates than our historical experience). With respect to the acquisition of programming rights, particularly sports programming rights, the impact of these long-term contracts on our results over the term of the contracts depends on a number of factors, including the strength of advertising markets, effectiveness of marketing efforts and the size of viewer audiences. There can be no assurance that revenues from programming based on these rights will exceed the cost of the rights plus the other costs of producing and distributing the programming.
Changes in regulations applicable to our businesses may impair the profitability of our businesses.
Our broadcast networks and television stations are highly regulated, and each of our other businesses is subject to a variety of U.S. and overseas regulations. These regulations include: 
U.S. FCC regulation of our television and radio networks, our national programming networks, and our owned television stations. See Item 1 — Business — Media Networks, Federal Regulation.
Federal, state and foreign privacy and data protection laws and regulations.
Regulation of the safety of consumer products and theme park operations.
Environmental protection regulations.
Imposition by foreign countries of trade restrictions, restrictions on the manner in which content is currently licensed and distributed, ownership restrictions, currency exchange controls or motion picture or television content requirements or quotas.
Domestic and international wage laws, tax laws or currency controls.
Changes in any of these regulations or regulatory activities in any of these areas may require us to spend additional amounts to comply with the regulations, or may restrict our ability to offer products and services in ways that are profitable.
Our operations outside the United States may be adversely affected by the operation of laws in those jurisdictions.
Our operations in non-U.S. jurisdictions are in many cases subject to the laws of the jurisdictions in which they operate rather than U.S. law. Laws in some jurisdictions differ in significant respects from those in the U.S., and these differences can affect our ability to react to changes in our business and our rights or ability to enforce rights may be different than would be

19


expected under U.S. law. Moreover, enforcement of laws in some overseas jurisdictions can be inconsistent and unpredictable, which can affect both our ability to enforce our rights and to undertake activities that we believe are beneficial to our business. In addition, the business and political climate in some jurisdictions may encourage corruption, which could reduce our ability to compete successfully in those jurisdictions while remaining in compliance with local laws or United States anti-corruption laws applicable to our businesses. As a result, our ability to generate revenue and our expenses in non-U.S. jurisdictions may differ from what would be expected if U.S. law governed these operations.
Labor disputes may disrupt our operations and adversely affect the profitability of any of our businesses.
A significant number of employees in various of our businesses are covered by collective bargaining agreements, including employees of our theme parks and resorts as well as writers, directors, actors, production personnel and others employed in our media networks and studio operations. In addition, the employees of licensees who manufacture and retailers who sell our consumer products, and employees of providers of programming content (such as sports leagues) may be covered by labor agreements with their employers. In general, a labor dispute involving our employees or the employees of our licensees or retailers who sell our consumer products or providers of programming content may disrupt our operations and reduce our revenues, and resolution of disputes may increase our costs.
The seasonality of certain of our businesses could exacerbate negative impacts on our operations.
Each of our businesses is normally subject to seasonal variations, as follows: 
Revenues in our Media Networks segment are subject to seasonal advertising patterns and changes in viewership levels. In general, advertising revenues are somewhat higher during the fall and somewhat lower during the summer months. Affiliate fees are typically collected ratably throughout the year.
Revenues in our Parks and Resorts segment fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early-winter and spring-holiday periods.
Revenues in our Studio Entertainment segment fluctuate due to the timing and performance of releases in the theatrical, home entertainment and television markets. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods.
Revenues in our Consumer Products and Interactive Media segments are influenced by seasonal consumer purchasing behavior, which generally results in higher revenues during the Company’s first fiscal quarter, and by the timing and performance of theatrical releases and cable programming broadcasts.
Accordingly, if a short-term negative impact on our business occurs during a time of high seasonal demand (such as hurricane damage to our parks during the summer travel season), the effect could have a disproportionate effect on the results of that business for the year.
ITEM 1B.
Unresolved Staff Comments
The Company has received no written comments regarding its periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of its 2015 fiscal year and that remain unresolved.

20


ITEM 2.
Properties
The Walt Disney World Resort, Disneyland Resort 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. Television stations owned by the Company are described in Item 1 under the caption Media Networks. Retail store locations leased by the Company are described in Item 1 under the caption Consumer Products.
The Company and its subsidiaries own and lease properties throughout the world. In addition to the properties noted above, the table below provides a brief description of other significant properties and the related business segment. 
Location
 
Property /
Approximate Size
 
Use
 
Business Segment(1)
Burbank, CA
 
Land (52 acres) & Buildings (1,982,000 ft2)
 
Owned Office/Production/Warehouse
 
Corp/Studio/Media/CP/P&R/Interactive
 
 
 
 
Burbank, CA & surrounding cities(2)
 
Buildings (1,291,000 ft2)
 
Leased Office/Warehouse
 
Corp/Studio/Media/CP/ Interactive
 
 
 
 
Glendale, CA & surrounding cities(2)
 
Land (149 acres) & Buildings (2,756,000 ft2)
 
Owned Office/Warehouse (includes 255,000 ft2 sublet to third-party tenants)
 
Corp/Studio/Media/CP/ P&R/Interactive
 
 
 
 
Glendale, CA
 
Buildings (210,000 ft2)
 
Leased Office/Warehouse
 
Corp/Media/P&R
 
 
 
 
Los Angeles, CA
 
Land (22 acres) & Buildings (600,000 ft2)
 
Owned Office/Production/Technical
 
Media/Studio
 
 
 
 
Los Angeles, CA
 
Buildings (471,000 ft2)
 
Leased Office/Production/Technical/Theater (includes 10,000 ft2 sublet to third-party tenants)
 
Media/Studio
 
 
 
 
New York, NY
 
Land (5 acres) & Buildings (1,418,000 ft2)
 
Owned Office/Production/Technical
 
Media/Corp
 
 
 
 
New York, NY
 
Buildings (265,000 ft2)
 
Leased Office/Production/Theater/Warehouse (includes 23,000 ft2 sublet to third-party tenants)
 
Corp/Studio/Media/Interactive
 
 
 
 
Bristol, CT
 
Land (117 acres) & Buildings (1,174,000 ft2)
 
Owned Office/Production/Technical
 
Media
 
 
 
 
Bristol, CT
 
Buildings (512,000 ft2)
 
Leased Office/Warehouse/Technical
 
Media/Corp
 
 
 
 
Emeryville, CA
 
Land (20 acres) & Buildings (430,000 ft2)
 
Owned Office/Production/Technical
 
Studio
 
 
 
 
Emeryville, CA
 
Buildings (89,000 ft2)
 
Leased Office/Storage (includes 16,000 ft2 sublet to third party tenants)
 
Studio
 
 
 
 
San Francisco, CA
 
Buildings (542,000 ft2)
 
Leased Office/Production/Technical/Theater
 
Corp/Studio/Media/CP/P&R/Interactive
 
 
 
 
 
 
 
USA & Canada
 
Land and Buildings (Multiple sites and sizes)
 
Owned and Leased Office/ Production/Transmitter/Theaters/Warehouse
 
Corp/Studio/Media/CP/ P&R/Interactive
 
 
 
 
Hammersmith, England
 
Building (279,500 ft2)
 
Leased Office
 
Corp/Studio/Media/CP/ P&R/Interactive
 
 
 
 
Europe, Asia, Australia & Latin America
 
Buildings (Multiple sites and sizes)
 
Leased Office/Warehouse
 
Corp/Studio/Media/CP/ P&R/Interactive
 
(1) 
Corp – Corporate, CP – Consumer Products, P&R – Parks and Resorts
(2) 
Surrounding cities include North Hollywood, CA and Sun Valley, CA

21


ITEM 3. Legal Proceedings
As disclosed in Note 14 to the Consolidated Financial Statements, the Company is engaged in certain legal matters, and the disclosure set forth in Note 14 relating to certain legal matters is incorporated herein by reference.
The Company, together with, in some instances, certain of its directors and officers, is a defendant or codefendant 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 these actions.
ITEM 4. Mine Safety Disclosures
Not applicable.
Executive Officers of the Company
The executive officers of the Company are elected each year at the organizational meeting of the Board of Directors, which follows the annual meeting of the shareholders, and at other Board of Directors meetings, as appropriate. Each of the executive officers has been employed by the Company in the position or positions indicated in the list and pertinent notes below. Each of the executive officers has been employed by the Company for more than five years.
At October 3, 2015, the executive officers of the Company were as follows:
Name
 
Age
 
Title
 
Executive
Officer Since
Robert A. Iger
 
64
 
Chairman and Chief Executive Officer(1)
 
2000
Thomas O. Staggs
 
55
 
Chief Operating Officer(2)
 
2015
Alan N. Braverman
 
67
 
Senior Executive Vice President, General Counsel and Secretary
 
2003
Kevin A. Mayer
 
53
 
Senior Executive Vice President and Chief Strategy Officer(3)
 
2005
Christine M. McCarthy
 
60
 
Senior Executive Vice President and Chief Financial Officer(4)
 
2005
Mary Jayne Parker
 
54
 
Executive Vice President and Chief Human Resources Officer
 
2009
 
(1) 
Mr. Iger was appointed Chairman of the Board and Chief Executive Officer effective March 13, 2012. He was President and Chief Executive Officer from October 2, 2005 through that date.
(2) 
Mr. Staggs was appointed Chief Operating Officer effective February 5, 2015. He was previously Chairman, Walt Disney Parks and Resorts from 2010 to 2015 and Senior Executive Vice President and Chief Financial Officer of the Company from 1998 to 2010.
(3) 
Mr. Mayer was appointed Senior Executive Vice President and Chief Strategy Officer effective June 30, 2015. He was previously Executive Vice President, Corporate Strategy and Business Development of the Company from 2005 to 2015.
(4) 
Ms. McCarthy was appointed Senior Executive Vice President and Chief Financial Officer effective June 30, 2015. She was previously Executive Vice President, Corporate Real Estate, Alliances and Treasurer of the Company from 2000 to 2015.


22


PART II
ITEM 5. Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock is listed on the New York Stock Exchange 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.
 
Sales Price
 
High
 
Low
2015
 
 
 
4th Quarter

$122.08

 

$90.00

3rd Quarter
115.28

 
104.25

2nd Quarter
108.94

 
90.06

1st Quarter
95.31

 
78.54

2014
 
 
 
4th Quarter
91.20

 
84.87

3rd Quarter
85.86

 
76.31

2nd Quarter
83.65

 
69.85

1st Quarter
74.78

 
63.10

On December 3, 2014, the Company declared a $1.15 per share dividend ($1.9 billion) related to fiscal 2014 for shareholders of record on December 15, 2014, which was paid on January 8, 2015.
On June 24, 2015, the Company declared a $0.66 per share dividend ($1.1 billion) for the first half of fiscal 2015 for shareholders of record on July 6, 2015, which was paid on July 29, 2015. The Board of Directors has not declared a dividend related to the last half of fiscal 2015 as of the date of this report.
As of October 3, 2015, the approximate number of common shareholders of record was 903,854.
The following table provides information about Company purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended October 3, 2015:
Period
 
Total Number
of Shares
Purchased (1)
 
Weighted
Average Price
Paid per Share
 
Total Number 
of Shares 
Purchased
as Part of 
Publicly
Announced 
Plans or 
Programs
 
Maximum 
Number of 
Shares that 
May Yet Be 
Purchased
Under the
Plans or
Programs(2)
June 28, 2015 – July 31, 2015
 
3,220,177

 
$116.11
 
3,193,500

 
383 million
August 1, 2015 – August 31, 2015
 
18,638,362

 
106.43
 
18,439,000

 
365 million
September 1, 2015 – October 3, 2015
 
9,295,725

 
101.60
 
9,259,300

 
355 million
Total
 
31,154,264

 
105.99
 
30,891,800

 
355 million
  
(1) 
262,463 shares were purchased on the open market to provide shares to participants in the Walt Disney Investment Plan (WDIP). These purchases were not made pursuant to a publicly announced repurchase plan or program.
(2) 
Under a share repurchase program implemented effective June 10, 1998, the Company is authorized to repurchase shares of its common stock. On January 30, 2015, the Company’s Board of Directors increased the repurchase authorization to a total of 400 million shares as of that date. The repurchase program does not have an expiration date.

23


ITEM 6. Selected Financial Data
(in millions, except per share data)
 
2015 (1)
 
2014 (2)
 
2013 (3)
 
2012 (4)
 
2011 (5)
Statements of income
 
 
 
 
 
 
 
 
 
Revenues
$
52,465

 
$
48,813

 
$
45,041

 
$
42,278

 
$
40,893

Net income
8,852

 
8,004

 
6,636

 
6,173

 
5,258

Net income attributable to Disney
8,382

 
7,501

 
6,136

 
5,682

 
4,807

Per common share
 
 
 
 
 
 
 
 
 
Earnings attributable to Disney
 
 
 
 
 
 
 
 
 
Diluted
$
4.90

 
$
4.26

 
$
3.38

 
$
3.13

 
$
2.52

Basic
4.95

 
4.31

 
3.42

 
3.17

 
2.56

Dividends
1.81

 
0.86

 
0.75

 
0.60

 
0.40

Balance sheets
 
 
 
 
 
 
 
 
 
Total assets
$
88,182

 
$
84,141

 
$
81,197

 
$
74,863

 
$
72,097

Long-term obligations
19,142

 
18,573

 
17,293

 
17,841

 
17,690

Disney shareholders’ equity
44,525

 
44,958

 
45,429

 
39,759

 
37,385

Statements of cash flows
 
 
 
 
 
 
 
 
 
Cash provided (used) by:
 
 
 
 
 
 
 
 
 
Operating activities
$
10,909

 
$
9,780

 
$
9,452

 
$
7,966

 
$
6,994

Investing activities
(4,245
)
 
(3,345
)
 
(4,676
)
 
(4,759
)
 
(3,286
)
Financing activities
(5,514
)
 
(6,710
)
 
(4,214
)
 
(2,985
)
 
(3,233
)

(1) 
The fiscal 2015 results include the write-off of a deferred tax asset as a result of the Disneyland Paris recapitalization ($0.23 per diluted share) (see Note 6 to the Consolidated Financial Statements) and restructuring and impairment charges ($0.02 per diluted share), which collectively resulted in a net adverse impact of $0.25 per diluted share.
(2) 
The fiscal 2014 results include a loss resulting from the foreign currency translation of net monetary assets denominated in Venezuelan currency ($0.05 per diluted share) (see Note 4 to the Consolidated Financial Statements), restructuring and impairment charges ($0.05 per diluted share), a gain on the sale of property ($0.03 per diluted share) and a portion of a settlement of an affiliate contract dispute ($0.01 per diluted share). These items collectively resulted in a net adverse impact of $0.06 per diluted share.
(3) 
During fiscal 2013, the Company completed a cash and stock acquisition for the outstanding capital stock of Lucasfilm for $4.1 billion (see Note 3 to the Consolidated Financial Statements for further discussion). In addition, results for the year include a charge related to the Celador litigation ($0.11 per diluted share), restructuring and impairment charges ($0.07 per diluted share), a charge related to an equity redemption by Hulu (Hulu Equity Redemption) ($0.02 per diluted share) (see Note 3 to the Consolidated Financial Statements), favorable tax adjustments related to an increase in the amount of prior-year foreign earnings considered to be indefinitely reinvested outside of the United States and favorable tax adjustments related to pre-tax earnings of prior years ($0.12 per diluted share) and gains in connection with the sale of our equity interest in ESPN STAR Sports and certain businesses ($0.08 per diluted share) (See Note 4 to the Consolidated Financial Statements). These items collectively resulted in a net adverse impact of $0.01 per diluted share.
(4) 
The fiscal 2012 results include a non-cash gain in connection with the acquisition of a controlling interest in UTV ($0.06 per diluted share), a recovery of a previously written-off receivable from Lehman Brothers ($0.03 per diluted share), restructuring and impairment charges ($0.03 per diluted share) and costs related to the Disneyland Paris debt refinancing (rounded to $0.00 per diluted share). These items collectively resulted in a net positive benefit of $0.06 per diluted share.
(5) 
The fiscal 2011 results include restructuring and impairment charges that rounded to $0.00 per diluted share and a net after tax loss on the sales of businesses including Miramax ($0.02 per diluted share), which collectively resulted in a net adverse impact of $0.02 per diluted share.

24


ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CONSOLIDATED RESULTS
(in millions, except per share data)
 
 
 
 
 
 
 
% Change
Better/(Worse)
 
 
2015
 
2014
 
2013
 
2015
vs.
2014
 
2014
vs.
2013
 
Revenues:
 
 
 
 
 
 
 
 


 
Services
$
43,894

 
$
40,246

 
$
37,280

 
9
 %
 
8
 %
 
Products
8,571

 
8,567

 
7,761

 
 %
 
10
 %
 
Total revenues
52,465

 
48,813

 
45,041

 
7
 %
 
8
 %
 
Costs and expenses:
 
 
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization)
(23,191
)
 
(21,356
)
 
(20,090
)
 
(9
)%
 
(6
)%
 
Cost of products (exclusive of depreciation and amortization)
(5,173
)
 
(5,064
)
 
(4,944
)
 
(2
)%
 
(2
)%
 
Selling, general, administrative and other
(8,523
)
 
(8,565
)
 
(8,365
)
 
 %
 
(2
)%
 
Depreciation and amortization
(2,354
)
 
(2,288
)
 
(2,192
)
 
(3
)%
 
(4
)%
 
Total costs and expenses
(39,241
)
 
(37,273
)
 
(35,591
)
 
(5
)%
 
(5
)%
 
Restructuring and impairment charges
(53
)
 
(140
)
 
(214
)
 
62
 %
 
35
 %
 
Other expense, net

 
(31
)
 
(69
)
 
100 %
55
 %
 
Interest income/(expense), net
(117
)
 
23

 
(235
)
 
nm

 
nm

 
Equity in the income of investees
814

 
854

 
688

 
(5
)%
 
24
 %
 
Income before income taxes
13,868

 
12,246

 
9,620

 
13
 %
 
27
 %
 
Income taxes
(5,016
)
 
(4,242
)
 
(2,984
)
 
(18
)%
 
(42
)%
 
Net income
8,852

 
8,004

 
6,636

 
11
 %
 
21
 %
 
Less: Net income attributable to noncontrolling interests
(470
)
 
(503
)
 
(500
)
 
7
 %
 
(1
)%
 
Net income attributable to The Walt Disney Company (Disney)
$
8,382

 
$
7,501

 
$
6,136

 
12
 %
 
22
 %
 
Earnings per share attributable to Disney:
 
 
 
 
 
 
 
 


 
Diluted
$
4.90

 
$
4.26

 
$
3.38

 
15
 %
 
26
 %
 
Basic
$
4.95

 
$
4.31

 
$
3.42

 
15
 %
 
26
 %
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common and common equivalent shares outstanding:
 
 
 
 
 
 
 
 
 
 
Diluted
1,709

 
1,759

 
1,813

 
 
 
 
 
Basic
1,694

 
1,740

 
1,792

 
 
 
 
 

25


Organization of Information
Management’s Discussion and Analysis provides a narrative on the Company’s financial performance and condition that should be read in conjunction with the accompanying financial statements. It includes the following sections: 
Consolidated Results and Non-Segment Items
Business Segment Results — 2015 vs. 2014
Business Segment Results — 2014 vs. 2013
Corporate and Unallocated Shared Expenses
Pension and Postretirement Medical Benefit Costs
Significant Developments
Liquidity and Capital Resources
Contractual Obligations, Commitments and Off Balance Sheet Arrangements
Critical Accounting Policies and Estimates
Forward-Looking Statements
CONSOLIDATED RESULTS AND NON-SEGMENT ITEMS
2015 vs. 2014
Revenues for fiscal 2015 increased 7%, or $3.7 billion, to $52.5 billion; net income attributable to Disney increased 12%, or $881 million, to $8.4 billion; and diluted earnings per share attributable to Disney (EPS) for the year increased 15%, or $0.64 to $4.90. The EPS increase in fiscal 2015 reflected improved operating performance and a decrease in the weighted average shares outstanding as a result of our share repurchase program, partially offset by the write-off of a deferred tax asset (discussed below) and lower investment gains. The current year results also include the benefit from a fifty-third week of operations due to the timing of our fiscal period end. Fiscal 2016 will include fifty-two weeks of operations. The impact of the additional week of operations was the most significant at our cable networks, domestic parks and consumer products businesses.
Revenues
Service revenues for fiscal 2015 increased 9%, or $3.7 billion, to $43.9 billion primarily due to higher MVPD fees (Affiliate Fees), volume growth and higher average guest spending at our domestic parks and resorts, higher SVOD sales of our television and film properties, an increase in merchandise licensing and advertising revenue growth. These increases were partially offset by an adverse impact from foreign currency translation due to the strengthening of the U.S. dollar against major currencies.
Product revenues for fiscal 2015 were comparable to the prior year as higher food, beverage and merchandise volumes and average guest spending at our domestic parks and resorts and increased revenues at our retail business were offset by lower worldwide home entertainment and console game volumes and an adverse impact from foreign currency translation due to the strengthening of the U.S. dollar against major currencies.
Costs and expenses
Cost of services for fiscal 2015 increased 9%, or $1.8 billion, to $23.2 billion primarily due to higher sports
programming costs, inflation and operations support costs at our domestic parks and resorts, partially offset by a favorable impact from foreign currency translation due to the strengthening of the U.S. dollar against major currencies.
Cost of products for fiscal 2015 increased 2%, or $109 million, to $5.2 billion driven by volume growth at domestic parks and resorts and our retail business and inflation at our domestic parks and resorts. These increases were partially offset by lower home entertainment and console game unit sales and the impact from foreign currency translation due to the strengthening of the U.S. dollar against major currencies.
Selling, general, administrative and other costs were comparable to the prior year as higher labor costs driven by the ABC Television Network, ESPN and Corporate and higher information technology costs at domestic parks and resorts were offset by lower marketing costs and the impact from foreign currency translation due to the strengthening of the U.S. dollar against major currencies. The decrease in marketing costs was due to lower spending for theatrical and home entertainment marketing, partially offset by increases at ABC, ESPN and our merchandise licensing business.

26


Depreciation and amortization costs increased 3%, or $66 million, to $2.4 billion driven by new theme park attractions and, to a lesser extent, new broadcast facilities and equipment, partially offset by the impact from foreign currency translation due to the strengthening of the U.S. dollar against the euro.
Restructuring and Impairment Charges
The Company recorded $53 million and $140 million of restructuring and impairment charges in fiscal years 2015 and 2014, respectively. Charges in fiscal 2015 were primarily due to a contract termination and severance. Charges in 2014 were primarily due to severance costs across various of our segments and radio FCC license impairments, which were determined in connection with a plan to sell Radio Disney stations.
Other Expense, net
Other expense, net is as follows (see Note 4 to the Consolidated Financial Statements): 
(in millions)
2015
 
2014
Venezuelan foreign currency translation loss
$

 
$
(143
)
Gain on sale of property and other

 
112

Other expense, net
$

 
$
(31
)
Interest Income/(Expense), net
Interest income/(expense), net is as follows: 
(in millions)
 
2015
 
2014
 
% Change
 Better/(Worse) 
Interest expense
 
$
(265
)
 
$
(294
)
 
10
 %
 
Interest and investment income
 
148

 
317

 
(53
)%
 
Interest income/(expense), net
 
$
(117
)
 
$
23

 
nm

 
The decrease in interest expense was due to higher capitalized interest driven by the continued development of the Shanghai Disney Resort and lower average debt balances, partially offset by the impact of an additional week and higher effective interest rates.
The decrease in interest and investment income was due to lower gains on sales of investments and income on late payments recognized in the prior year in connection with the settlement of an affiliate contract dispute.
Equity in the Income of Investees
Equity in the income of investees decreased 5%, or $40 million, to $0.8 billion primarily due to a decrease at Hulu, partially offset by an increase at A&E.
Effective Income Tax Rate 
 
2015
 
2014
 
Change
Better/(Worse)
Effective income tax rate
36.2
%
 
34.6
%
 
(1.6
)
ppt
The increase in the effective income tax rate was primarily due to a write-off of a $399 million deferred income tax asset as a result of the increase in the Company’s ownership of Euro Disney S.C.A. in connection with the Disneyland Paris recapitalization. This increase was partially offset by a benefit from an increase in earnings from foreign operations indefinitely reinvested outside the United States, which are subject to tax rates lower than the federal statutory income tax rate.

27


Noncontrolling Interests
Net income attributable to noncontrolling interests for the year decreased $33 million to $470 million due to lower operating results at Hong Kong Disneyland Resort and higher pre-opening expenses at Shanghai Disney Resort, partially offset by an increase at Disneyland Paris. The increase at Disneyland Paris was driven by higher net income, partially offset by the impact of the Company’s change in ownership interest.
Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes.
2014 vs. 2013
Revenues for fiscal 2014 increased 8%, or $3.8 billion, to $48.8 billion; net income attributable to Disney increased 22%, or $1.4 billion, to $7.5 billion; and diluted earnings per share attributable to Disney (EPS) for the year increased 26% or $0.88 to $4.26. The EPS increase in fiscal 2014 reflected improved operating performance, a decrease in the weighted average shares outstanding as a result of our share repurchase program and higher investment gains.
Revenues
Service revenues for fiscal 2014 increased 8%, or $3.0 billion, to $40.2 billion driven by the strong worldwide theatrical performance of Frozen, higher Affiliate Fees at ESPN, Broadcasting and the domestic Disney Channels, increased average guest spending for admissions and occupancy at our domestic parks and resorts operations, higher advertising revenues at ESPN and an increase in merchandise licensing revenue driven by Frozen and Disney Channel properties.
Product revenues for fiscal 2014 increased 10%, or $0.8 billion, to $8.6 billion reflecting higher worldwide home entertainment revenues driven by Frozen, increased guest spending on food, beverage and merchandise and higher volumes at our domestic parks and resorts operations and growth at our console games business driven by the success of Disney Infinity.
Costs and expenses
Cost of services for fiscal 2014 increased 6%, or $1.3 billion, to $21.4 billion driven by higher programming costs at ESPN and the ABC Television Network and an increase at our domestic parks and resorts due to MyMagic+, higher volumes and labor cost inflation.
Cost of products for fiscal 2014 increased 2%, or $120 million, to $5.1 billion driven by higher home entertainment unit sales, higher costs at our console games business driven by Disney Infinity and labor and other cost inflation and higher volumes at our domestic parks and resorts operations, partially offset by lower average home entertainment per unit costs.
Selling, general, administrative and other costs increased 2%, or $200 million, to $8.6 billion primarily due to higher theatrical marketing expenses driven by more titles in wide release.
Depreciation and amortization costs increased 4%, or $96 million, to $2.3 billion driven by MyMagic+ at our domestic parks and resorts operations.
Restructuring and Impairment Charges
The Company recorded $214 million of restructuring and impairment charges in fiscal 2013 for severance, contract and lease terminations and intangible and other asset impairments.
Other Expense, net
Other expense, net is as follows (see Note 4 to the Consolidated Financial Statements): 
(in millions)
2014
 
2013
Venezuelan foreign currency translation loss
$
(143
)
 
$

Celador litigation charge

 
(321
)
Gain on sale of equity interest in ESPN STAR Sports (ESS)

 
219

Gain on sale of property and other
112

 
33

Other expense, net
$
(31
)
 
$
(69
)

28


Interest Income/(Expense), net
Interest income/(expense), net is as follows: 
(in millions)
 
2014
 
2013
 
% Change
 Better/(Worse) 
Interest expense
 
$
(294
)
 
$
(349
)
 
16
%
 
Interest and investment income
 
317

 
114

 
>100 %
Interest income/(expense), net
 
$
23

 
$
(235
)
 
nm

 
The decrease in interest expense was due to lower effective interest rates, partially offset by higher average debt balances.
The increase in interest and investment income was primarily due to gains on sales of investments. Interest income also benefited from income on late payments recognized in connection with the settlement of an affiliate contract dispute.
Equity in the Income of Investees
Equity in the income of investees increased 24%, or $166 million, to $0.9 billion driven by the absence of a charge in the prior year for our share of expense related to an equity redemption at Hulu LLC (Hulu Equity Redemption).
Effective Income Tax Rate
 
2014
 
2013
 
Change
 Better/(Worse) 
Effective income tax rate
34.6
%
 
31.0
%
 
(3.6
)
ppt
The increase in the effective income tax rate was primarily due to tax benefits recognized in fiscal 2013, which included an increase in prior-year earnings from foreign operations indefinitely reinvested outside the United States, which are subject to tax rates lower than the federal statutory income tax rate.
Noncontrolling Interests
Net income attributable to noncontrolling interests for the year increased $3 million to $503 million driven by improved operating results at Hong Kong Disneyland Resort, partially offset by a lower impact related to ESPN driven by after-tax gains recognized in fiscal 2013 on the sales of ESS and the ESPN UK business.
Certain Items Impacting Comparability
Results for fiscal 2015 were impacted by the following:
A non-cash charge in connection with the write-off of a deferred tax asset as a result of the increase in the Company’s ownership of Euro Disney S.C.A. in connection with the Disneyland Paris recapitalization ($399 million). See Note 6 to the Consolidated Financial Statements for further discussion
Restructuring and impairment charges totaling $53 million
Results for fiscal 2014 were impacted by the following:
A Venezuelan foreign currency translation loss of $143 million
Restructuring and impairment charges totaling $140 million
A $77 million gain on the sale of a property
Income of $29 million representing a portion of a settlement of an affiliate contract dispute
Results for fiscal 2013 were impacted by the following:
A $321 million charge related to the Celador litigation
Restructuring and impairment charges totaling $214 million
A $55 million charge for our share of expense related to the Hulu Equity Redemption. See Note 3 to the Consolidated Financial Statements for further discussion
A $219 million gain on the sale of our 50% interest in ESS and gains of $33 million on the sale of certain businesses

29


A tax benefit related to an increase in the amount of prior-year foreign earnings considered to be indefinitely reinvested outside of the United States and favorable tax adjustments related to pre-tax earnings in prior years, which together totaled $207 million
A summary of the impact of these items on EPS is as follows:
(in millions, except per share data)
Pre-Tax Income/(Loss)
 
Tax Benefit/(Expense)
 
After-Tax Income/(Loss)
 
EPS Favorable/(Adverse) (1)
Year Ended October 3, 2015:
 
 
 
 
 
 
 
Write-off of deferred tax asset(2)
$

 
$
(399
)
 
$
(399
)
 
$
(0.23
)
Restructuring and impairment charges
(53
)
 
20

 
(33
)
 
(0.02
)
Total
$
(53
)
 
$
(379
)
 
$
(432
)
 
$
(0.25
)
 
 
 
 
 
 
 
 
Year Ended September 27, 2014:
 
 
 
 
 
 
 
Venezuela foreign currency translation loss(3)
$
(143
)
 
$
53

 
$
(90
)
 
$
(0.05
)
Restructuring and impairment charges
(140
)
 
48

 
(92
)
 
(0.05
)
Gain on sale of property(3)
77

 
(28
)
 
49

 
0.03

Settlement income(3)
29

 
(11
)
 
18

 
0.01

Other(3)
6

 
(2
)
 
4

 

Total
$
(171
)
 
$
60

 
$
(111
)
 
$
(0.06
)
 
 
 
 
 
 
 
 
Year Ended September 28, 2013:
 
 
 
 
 
 
 
Celador litigation charge(3)
$
(321
)
 
$
119

 
$
(202
)
 
$
(0.11
)
Restructuring and impairment charges
(214
)
 
78

 
(136
)
 
(0.07
)
Hulu Equity Redemption charge(4)
(55
)
 
20

 
(35
)
 
(0.02
)
Gain on sale of businesses and equity interest in ESS(3)
252

 
(48
)
 
204

 
0.08

Favorable tax adjustments

 
207

 
207

 
0.12

Total
$
(338
)
 
$
376

 
$
38

 
$
(0.01
)

(1) 
EPS is net of noncontrolling interest share, where applicable. Total may not equal the sum of the column due to rounding.
(2) 
See Notes 6 and 9 to the Consolidated Financial Statements for discussion.
(3) 
Recorded in "Other expense, net" in the Consolidated Statements of Income. See Note 4 to the Consolidated Financial Statements.
(4) 
See Note 3 to the Consolidated Financial Statements for discussion of the Hulu Equity Redemption Charge.
BUSINESS SEGMENT RESULTS — 2015 vs. 2014
Below is a discussion of the major revenue and expense categories for our business segments. Costs and expenses for each segment consist of operating expenses, selling, general, administrative and other costs and depreciation and amortization. Selling, general, administrative and other costs include third-party and internal marketing expenses.
Our Media Networks segment generates revenue from affiliate fees, ad sales and other revenues, which include the sale and distribution of television programming. Significant operating expenses include amortization of programming, production, participations and residuals costs, technical support costs, operating labor and distribution costs.
Our Parks and Resorts segment generates revenue from the sale of admissions to theme parks, the sale of food, beverage and merchandise, charges for room nights at hotels, sales of cruise vacation packages and sales and rentals of vacation club properties. Significant operating expenses include operating labor, infrastructure costs, costs of sales and other operating expenses. Infrastructure costs include repairs and maintenance, information systems expense, utilities, property taxes, insurance and transportation and other operating expenses include costs for such items as supplies, commissions and entertainment offerings.
Our Studio Entertainment segment generates revenue from the distribution of films in the theatrical, home entertainment and television and SVOD markets (TV/SVOD), ticket sales for live stage plays, music distribution and licensing of live

30


entertainment events. Significant operating expenses include amortization of production, participations and residuals costs, distribution expenses and costs of sales.
Our Consumer Products segment generates revenue from licensing characters from our film, television and other properties to third parties for use on consumer merchandise, publishing children’s books and magazines and comic books, operating retail stores and internet shopping sites, the sale of merchandise to retailers and operating English language learning centers. Significant operating expenses include cost of goods sold and distribution expenses, operating labor and retail occupancy costs.
Our Interactive segment generates revenue from the development and sale of multi-platform games, micro transactions for and subscriptions to online and mobile games, licensing content for Disney-branded mobile phones in Japan, and online advertising and sponsorships. We also license our properties to third-party game publishers. Significant operating expenses include cost of goods sold, product development and distribution expense.
  
 
 
 
 
 
 
% Change
Better/(Worse)
 
(in millions)
2015
 
2014
 
2013
 
2015
vs.
2014
 
2014
vs.
2013
 
Revenues:
 
 
 
 
 
 
 
 
 
 
Media Networks
$
23,264

 
$
21,152

 
$
20,356

 
10
 %
 
4
%
 
Parks and Resorts
16,162

 
15,099

 
14,087

 
7
 %
 
7
%
 
Studio Entertainment
7,366

 
7,278

 
5,979

 
1
 %
 
22
%
 
Consumer Products
4,499

 
3,985

 
3,555

 
13
 %
 
12
%
 
Interactive
1,174

 
1,299

 
1,064

 
(10
)%
 
22
%
 
 
$
52,465

 
$
48,813

 
$
45,041

 
7
 %
 
8
%
 
Segment operating income (loss):
 
 
 
 
 
 
 
 
 
 
Media Networks
$
7,793

 
$
7,321

 
$
6,818

 
6
 %
 
7
%
 
Parks and Resorts
3,031

 
2,663

 
2,220

 
14
 %
 
20
%
 
Studio Entertainment
1,973

 
1,549

 
661

 
27
 %
 
>100 %
Consumer Products
1,752

 
1,356

 
1,112

 
29
 %
 
22
%
 
Interactive
132

 
116

 
(87
)
 
14
 %
 
nm

 
 
$
14,681

 
$
13,005

 
$
10,724

 
13
 %
 
21
%
 
The Company evaluates the performance of its operating segments based on segment operating income, and management uses aggregate segment operating income as a measure of the overall performance of the operating businesses. The Company believes that information about aggregate segment operating income assists investors by allowing them to evaluate changes in the operating results of the Company’s portfolio of businesses separate from factors other than business operations that affect net income. The following table reconciles segment operating income to income before income taxes. 
  
 
 
 
 
 
 
% Change
Better/(Worse)
 
(in millions)
2015
 
2014
 
2013
 
2015
vs.
2014
 
2014
vs.
2013
 
Segment operating income
$
14,681

 
$
13,005

 
$
10,724

 
13
 %
 
21
 %
 
Corporate and unallocated shared expenses
(643
)
 
(611
)
 
(531
)
 
(5
)%
 
(15
)%
 
Restructuring and impairment charges
(53
)
 
(140
)
 
(214
)
 
62
 %
 
35
 %
 
Other expense, net

 
(31
)
 
(69
)
 
100 %
55
 %
 
Interest income/(expense), net
(117
)
 
23

 
(235
)
 
nm

 
nm

 
Hulu Equity Redemption charge

 

 
(55
)
 
nm

 
100 %
Income before income taxes
$
13,868

 
$
12,246

 
$
9,620

 
13
 %
 
27
 %
 

31


Media Networks
Operating results for the Media Networks segment are as follows: 
 
Year Ended
 
% Change
Better /
(Worse)
(in millions)
October 3, 2015
 
September 27, 2014
 
Revenues
 
 
 
 
 
 
Affiliate Fees
$
12,029

 
$
10,632

 
13
 %
 
Advertising
8,361

 
8,031

 
4
 %
 
TV/SVOD distribution and other
2,874

 
2,489

 
15
 %
 
Total revenues
23,264

 
21,152

 
10
 %
 
Operating expenses
(13,150
)
 
(11,794
)
 
(11
)%
 
Selling, general, administrative and other
(2,869
)
 
(2,643
)
 
(9
)%
 
Depreciation and amortization
(266
)
 
(250
)
 
(6
)%
 
Equity in the income of investees
814

 
856

 
(5
)%
 
Operating Income
$
7,793

 
$
7,321

 
6
 %
 
Revenues
The 13% increase in Affiliate Fee revenue was due to an increase of 8% from higher contractual rates, 3% from an increase in subscribers, 2% from the benefit of an additional week of operations, and 1% from new contractual provisions. These increases were partially offset by a decrease of 2% due to an unfavorable impact from foreign currency translation as a result of the strengthening of the U.S. dollar against major currencies. The increase in subscribers was due to the launch of the SEC Network in the fourth quarter of the prior year, partially offset by a decline in subscribers at certain of our cable networks.
The 4% increase in advertising revenues was due to an increase of $206 million at Cable Networks, from $4,128 million to $4,334 million, and an increase of $124 million at Broadcasting, from $3,903 million to $4,027 million. The increase at Cable Networks was due to a 6% increase from units sold, a 3% increase from rates and 1% from the benefit of an additional week of operation, partially offset by a 6% decrease from ratings. The increase at Broadcasting was due to a 2% increase from network rates and a 2% increase from an additional week of operations.
TV/SVOD distribution and other revenue increased $385 million from $2,489 million to $2,874 million due to higher SVOD sales in the current year.
Costs and Expenses
Operating expenses include programming and production costs, which increased $1,149 million from $10,229 million to $11,378 million. At Cable Networks, programming and production costs increased $868 million due to higher rights costs for NFL programming (including a wild card playoff game) and college football, and the addition of the SEC Network, partially offset by the end of the NASCAR contract in the first quarter of the current year. At Broadcasting, programming and production costs increased $281 million primarily due to higher program sales and programming costs for an additional week of operations.
Selling, general, administrative and other costs increased $226 million from $2,643 million to $2,869 million driven by higher labor and marketing costs.
Equity in the Income of Investees
Income from equity investees decreased $42 million from $856 million to $814 million primarily due to a decrease at Hulu driven by higher programming and marketing costs, partially offset by an increase at A&E. The increase at A&E was due to lower programming and marketing costs, partially offset by a decrease in advertising revenue.
Segment Operating Income
Segment operating income increased 6%, or $472 million, to $7,793 million due to increases at the Disney Channels, ESPN, the owned television stations and the ABC Television Network.

32


The following table provides supplemental revenue and operating income detail for the Media Networks segment: 
 
Year Ended
 
% Change
Better /
(Worse)
(in millions)
October 3, 2015
 
September 27, 2014
 
Revenues
 
 
 
 
 
 
Cable Networks
$
16,581

 
$
15,110

 
10
%
 
Broadcasting
6,683

 
6,042

 
11
%
 
 
$
23,264

 
$
21,152

 
10
%
 
Segment operating income
 
 
 
 
 
 
Cable Networks
$
6,787

 
$
6,467

 
5
%
 
Broadcasting
1,006

 
854

 
18
%
 
 
$
7,793

 
$
7,321

 
6
%
 
Restructuring and impairment charges and Other expense, net
The Company recorded charges of $62 million, $78 million and $85 million related to Media Networks for fiscal years 2015, 2014 and 2013, respectively, that were reported in “Restructuring and impairment charges” in the Consolidated Statements of Income. The charges in fiscal 2015 were due to a contract termination and severance. The charges in fiscal 2014 were due to radio FCC license and investment impairments and severance. The charges in fiscal 2013 were primarily for severance and contract settlement costs.
The Company recorded a $100 million loss related to Cable Networks in fiscal 2014 resulting from the foreign currency translation of net monetary assets denominated in Venezuelan currency, which was reported in "Other expense, net" in the Consolidated Statements of Income.
Parks and Resorts
Operating results for the Parks and Resorts segment are as follows: 
 
Year Ended
 
% Change
Better /
(Worse)
(in millions)
October 3, 2015
 
September 27, 2014
 
Revenues
 
 
 
 
 
 
Domestic
$
13,611

 
$
12,329

 
10
 %
 
International
2,551

 
2,770

 
(8
)%
 
Total revenues
16,162

 
15,099

 
7
 %
 
Operating expenses
(9,730
)
 
(9,106
)
 
(7
)%
 
Selling, general, administrative and other
(1,884
)
 
(1,856
)
 
(2
)%
 
Depreciation and amortization
(1,517
)
 
(1,472
)
 
(3
)%
 
Equity in the loss of investees

 
(2
)
 
100 %
Operating Income
$
3,031

 
$
2,663

 
14
 %
 
Revenues
Parks and Resorts revenues increased 7%, or $1.1 billion, to $16.2 billion due to an increase of $1.3 billion at our domestic operations, partially offset by a decrease of $219 million at our international operations.
Revenue growth of 10% at our domestic operations reflected increases of 5% from higher volumes and 5% from higher average guest spending. Higher volumes were due to attendance growth and higher occupied room nights. Increased guest spending was primarily due to higher average ticket prices for admissions at our theme parks and for sailings at our cruise line, increased food, beverage and merchandise spending and higher average hotel room rates. Revenues also benefited from an additional week of operations in the current year.
Revenues at our international operations reflected an 11% decrease from foreign currency translation, partially offset by a 4% increase from higher average guest spending. Guest spending growth was due to higher food, beverage and merchandise spending, an increase in average ticket prices and higher average hotel room rates. Volumes at our international operations were essentially flat, as higher attendance and occupied room nights at Disneyland Paris were offset by lower attendance and occupied room nights at Hong Kong Disneyland Resort.

33


The following table presents supplemental attendance, per capita theme park guest spending and hotel statistics: 
 
Domestic
 
International (2)
 
Total
 
Fiscal Year 2015
 
Fiscal Year 2014
 
Fiscal Year 2015
 
Fiscal Year 2014
 
Fiscal Year 2015
 
Fiscal Year 2014
Parks
 
 
 
 
 
 
 
 
 
 
 
Increase/ (decrease)
 
 
 
 
 
 
 
 
 
 
 
Attendance
7
%
 
3
%
 
%
 
(3
)%
 
5
%
 
1
%
Per Capita Guest Spending
4
%
 
7
%
 
5
%
 
7
 %
 
4
%
 
7
%
Hotels (1)
 
 
 
 
 
 
 
 
 
 
 
Occupancy
87
%
 
83
%
 
79
%
 
78
 %
 
86
%
 
82
%
Available Room Nights
(in thousands)
10,644

 
10,470

 
2,473

 
2,466

 
13,117

 
12,936

Per Room Guest Spending

$295

 

$280

 

$335

 

$328

 

$302

 

$289

 
(1)
Per room guest spending consists of the average daily hotel room rate as well as guest spending on food, beverage and merchandise at the hotels. Hotel statistics include rentals of Disney Vacation Club units.
(2)
Per capita guest spending growth rate is stated on a constant currency basis. Per room guest spending is stated at the fiscal 2014 average foreign exchange rate. The euro to U.S. dollar weighted average foreign currency exchange rate was $1.15, $1.36 and $1.31 for fiscal years 2015, 2014 and 2013, respectively.
Costs and Expenses
Operating expenses include operating labor, which increased $347 million from $4,233 million to $4,580 million, cost of sales, which increased $80 million from $1,425 million to $1,505 million, and infrastructure costs, which increased $27 million from $1,854 million to $1,881 million. The increase in operating labor was due to inflation, higher employee benefit costs and increased labor hours. The increase in employee benefit costs included higher pension and postretirement medical costs. The increase in labor hours was driven by higher volumes and new guest offerings, such as the 60th Anniversary Celebration at Disneyland Resort. Higher cost of sales was due to volume growth and inflation. Infrastructure cost increases were driven by higher information technology expense and operations support costs, partially offset by costs incurred in the prior year in connection with the launch of MyMagic+. Other operating expenses, which include costs for such items as supplies, commissions and entertainment offerings, increased primarily due to inflation, higher operations support costs and pre-opening costs for Shanghai Disney Resort. Operating expenses included a 2% decrease from foreign currency translation due to the strengthening of the U.S. dollar against the euro, partially offset by a 2% increase as a result of an additional week of operations, both of which had similar impacts on operating labor, cost of sales and infrastructure costs.
Selling, general, administrative and other costs increased $28 million from $1,856 million to $1,884 million primarily due to information technology initiatives, partially offset by the impact of foreign currency translation due to the strengthening of the U.S. dollar against the euro.
The increase in depreciation and amortization was driven by new attractions, partially offset by the impact of foreign currency translation due to the strengthening of the U.S. dollar against the euro.
Segment Operating Income
Segment operating income increased 14%, or $368 million, to $3.0 billion due to growth at our domestic operations, partially offset by a decrease at our international operations.

34


Studio Entertainment
Operating results for the Studio Entertainment segment are as follows: 
 
Year Ended
 
% Change
Better /
(Worse)
(in millions)
October 3, 2015
 
September 27, 2014
 
Revenues
 
 
 
 
 
 
Theatrical distribution
$
2,321

 
$
2,431

 
(5
)%
 
Home entertainment
1,799

 
2,094

 
(14
)%
 
TV/SVOD distribution and other
3,246

 
2,753

 
18
 %
 
Total revenues
7,366

 
7,278

 
1
 %
 
Operating expenses
(3,050
)
 
(3,137
)
 
3
 %
 
Selling, general, administrative and other
(2,204
)
 
(2,456
)
 
10
 %
 
Depreciation and amortization
(139
)
 
(136
)
 
(2
)%
 
Operating Income
$
1,973

 
$
1,549

 
27
 %
 
 Revenues
The 5% decrease in theatrical distribution revenue was due to unfavorable foreign currency translation impacts driven by the strengthening of the U.S. dollar against major currencies and the impact of having no DreamWorks titles in the current year compared to four in the prior year. These decreases were partially offset by the performance of Inside Out and Big Hero 6 in the current year compared to Frozen and Planes: Fire and Rescue in the prior year, as well as one additional Disney live-action release in the current year. Significant Disney live-action releases in the current year included Cinderella and Into the Woods, whereas the prior year included Maleficent. The performance of Marvel’s Avengers: Age of Ultron and Marvel’s Ant-Man in the current year was comparable to the prior-year performance of Marvel’s Guardians of the Galaxy, Marvel’s Captain America: The Winter Soldier and Marvel’s Thor: The Dark World.
The 14% decrease in home entertainment revenue was due to decreases of 9% from lower unit sales and 4% from lower average net effective pricing, both of which reflected the strong performance of Frozen in the prior year. Net effective pricing is the wholesale selling price adjusted for discounts, sales incentives and returns.
The 18% increase in TV/SVOD distribution and other revenue was due to increases of 9% from higher revenue share with the Consumer Products segment due to the success of merchandise based on Frozen and 7% from TV/SVOD distribution. TV/SVOD distribution revenue growth was primarily due to worldwide pay television, which included the benefit of more titles available domestically and sales of Star Wars titles internationally, and international SVOD sales.
Costs and Expenses
Operating expenses include a decrease of $12 million in film cost amortization, from $1,802 million to $1,790 million, primarily due to decreased film cost impairments, partially offset by the impact of higher revenues and a higher average film cost amortization rate for theatrical releases in the current year due to the success of Frozen in the prior year. Operating expenses also include cost of goods sold and distribution costs, which decreased $75 million, from $1,335 million to $1,260 million due to lower home entertainment per unit costs and unit sales.
Selling, general, administrative and other costs decreased $252 million from $2,456 million to $2,204 million due to lower theatrical and home entertainment marketing expense. Lower theatrical marketing expense was primarily due to four DreamWorks titles in release in the prior year compared to none in the current year and the impact of foreign currency translation. The decrease in home entertainment marketing expense was driven by spending on Monsters University in the prior year compared to no Pixar title in the current year.
Segment Operating Income
Segment operating income increased $424 million to $2.0 billion due to higher revenue share with the Consumer Products segment, increases in TV/SVOD and theatrical distribution and lower film cost impairments, partially offset by a decrease in home entertainment.
Restructuring and impairment charges and Other expense, net
The Company recorded charges of $0, $7 million and $18 million related to Studio Entertainment for fiscal years 2015, 2014 and 2013, respectively, that were reported in “Restructuring and impairment charges” in the Consolidated Statements of Income. The charges in fiscal 2013 were primarily for severance costs.

35


The Company recorded a $31 million loss related to Studio Entertainment in fiscal 2014 resulting from the foreign currency translation of net monetary assets denominated in Venezuelan currency, which was reported in "Other expense, net" in the Consolidated Statements of Income.
Consumer Products
Operating results for the Consumer Products segment are as follows: 
 
Year Ended
 
% Change
Better /
(Worse)
(in millions)
October 3, 2015
 
September 27, 2014
 
Revenues
 
 
 
 
 
 
Licensing and publishing
$
2,882

 
$
2,538

 
14
 %
 
Retail and other
1,617

 
1,447

 
12
 %
 
Total revenues
4,499

 
3,985

 
13
 %
 
Operating expenses
(1,753
)
 
(1,683
)
 
(4
)%
 
Selling, general, administrative and other
(835
)
 
(778
)
 
(7
)%
 
Depreciation and amortization
(159
)
 
(168
)
 
5
 %
 
Operating Income
$
1,752

 
$
1,356

 
29
 %
 
Revenues
The 14% increase in licensing and publishing revenues was driven by a 13% increase from our merchandise licensing business due to the performance of merchandise based on Frozen, Avengers and Star Wars classic, partially offset by unfavorable foreign currency translation impacts due to the strengthening of the U.S. dollar against major currencies.
The 12% increase in retail and other revenue was driven by a 10% increase from our retail business, due to comparable store and online sales growth in our key markets, growth in our wholesale distribution business and the benefit of an additional week of operations, partially offset by unfavorable foreign currency translation.
Costs and Expenses
Operating expenses include an increase of $93 million in cost of goods sold, from $680 million to $773 million due to higher sales at our retail business, partially offset by the impact of foreign currency translation. Operating expenses also include labor, distribution and occupancy costs, which decreased $17 million from $870 million to $853 million. The decrease was due to lower third-party royalty expense at our merchandise licensing business and the impact of foreign currency translation, partially offset by higher labor and distribution costs at our retail business.
Selling, general, administrative and other costs increased $57 million from $778 million to $835 million primarily due to higher marketing costs.
Segment Operating Income
Segment operating income increased 29% to $1.8 billion due to an increase at our merchandise licensing business and, to a lesser extent, at our retail business.
Restructuring and impairment charges and Other expense, net
The Company recorded charges of $0, $0 and $49 million related to Consumer Products for fiscal years 2015, 2014 and 2013, respectively, that were reported in “Restructuring and impairment charges” in the Consolidated Statements of Income. The charges in fiscal 2013 were primarily due to severance costs.
The Company recorded a $16 million loss related to Consumer Products in fiscal 2014 resulting from the foreign currency translation of net monetary assets denominated in Venezuelan currency, which was reported in "Other expense, net" in the Consolidated Statements of Income.

36


Interactive
Operating results for the Interactive segment are as follows: 
 
Year Ended
 
% Change
Better /
(Worse)
(in millions)
October 3, 2015
 
September 27, 2014
 
Revenues
 
 
 
 
 
 
Games
$
968

 
$
1,056

 
(8
)%
 
Other content
206

 
243

 
(15
)%
 
Total revenues
1,174

 
1,299

 
(10
)%
 
Operating expenses
(681
)
 
(700
)
 
3
 %
 
Selling, general, administrative and other
(337
)
 
(460
)
 
27
 %
 
Depreciation and amortization
(24
)
 
(23
)
 
(4
)%
 
Operating Income
$
132

 
$
116

 
14
 %
 
Revenues
Games revenues decreased $88 million from $1,056 million to $968 million due to decreases of 7% from sales of console games and 2% from lower Club Penguin subscribers, partially offset by an increase of 2% from mobile games. The decrease in sales of console games was due to lower unit sales of catalog titles and Disney Infinity and lower licensing revenues reflecting the performance of Lego Marvel Super Heroes in the prior year. The increase at our mobile games business was driven by the success of Tsum Tsum, Star Wars Commander, Marvel Universe titles and Knights of the Old Republic, partially offset by lower performance of catalog titles and Avengers Alliance.
Revenue from other content decreased $37 million from $243 million to $206 million due to unfavorable foreign currency translation impacts due to the strengthening of the U.S. dollar against the Japanese yen, a decrease at our mobile phone business in Japan driven by lower subscriptions, and lower online advertising revenues.
Costs and Expenses
Operating expenses include a $4 million increase in cost of sales from $418 million to $422 million and a $23 million decrease in product development from $282 million to $259 million. The increase in cost of sales was primarily due to higher per unit costs for Disney Infinity, which included the impact of inventory obsolescence charges, and a higher cost mix of Disney Infinity products sold, partially offset by lower unit sales of console games catalog titles. Lower product development costs were due to fewer titles in development and the benefit of previous restructuring activities.
Selling, general, administrative and other costs decreased $123 million from $460 million to $337 million driven by lower marketing and selling costs. The decrease was primarily due to our mobile phone business in Japan and our mobile games business due to fewer titles in release.
Segment Operating Income
Segment operating results improved from $116 million to $132 million primarily due to growth at our mobile games business partially offset by a decrease at our console games business.
Restructuring and Impairment Charges
The Company recorded credits of $4 million and charges of $44 million and $11 million related to Interactive for fiscal years 2015, 2014 and 2013, respectively. Charges in fiscal year 2014 were primarily due to severance costs. These charges were reported in “Restructuring and impairment charges” in the Consolidated Statements of Income.


37


BUSINESS SEGMENT RESULTS – 2014 vs. 2013
Media Networks
Operating results for the Media Networks segment are as follows: 
 
Year Ended
 
% Change
Better /
(Worse)
(in millions)
September 27, 2014
 
September 28, 2013
 
Revenues
 
 
 
 
 
 
Affiliate Fees
$
10,632

 
$
10,018

 
6
 %
 
Advertising
8,031

 
7,923

 
1
 %
 
TV/SVOD distribution and other
2,489

 
2,415

 
3
 %
 
Total revenues
21,152

 
20,356

 
4
 %
 
Operating expenses
(11,794
)
 
(11,261
)
 
(5
)%
 
Selling, general, administrative and other
(2,643
)
 
(2,768
)
 
5
 %
 
Depreciation and amortization
(250
)
 
(251
)
 
 %
 
Equity in the income of investees
856

 
742

 
15
 %
 
Operating Income
$
7,321

 
$
6,818

 
7
 %
 
Revenues
The 6% increase in Affiliate Fee revenue was due to an increase of 8% from higher c