To the Shareholders and Cast Members of The Walt Disney Company:

As I was drafting this letter, word came about the passing of a true Disney legend, Roy E. Disney. Roy devoted the better part of his life to our Company, and during his 56 year tenure, he was involved on many levels with many businesses, most notably animation.

No one was a bigger champion of this art form than Roy, and it was at his urging that we returned to a full commitment to animation in the mid-1980s. Roy also introduced us to Pixar in the 1990s, a relationship that has proven vital to our success. Roy understood the essence of Disney, and his passion for the Company, his appreciation of its past and his keen interest in its future will be sorely missed.

Last year was both an interesting and challenging one for your Company. On the positive side, we released two animated films, Up and The Princess and the Frog, that exemplify the very best of what we do. We received the go-ahead from China's government to build a new theme park in Shanghai. We acquired Marvel Entertainment, whose portfolio of great stories and characters and talented creative staff complement and strengthen our own. And we reached an agreement to distribute live-action films made by Steven Spielberg's DreamWorks SKG. 

At the same time, we faced a severe global economic downturn and an acceleration of secular challenges that affect several of our key businesses. Earnings per share for the year, excluding certain items affecting comparability between years (1), fell by 20 percent to $1.82 from the record $2.28 we reported in fiscal year 2008. Revenues were down 4 percent to $36.1 billion.

Throughout, we've remained focused on advancing our strategic objectives of building the Company's position as a leader in the creation of high quality branded content; of using technology to make that content more compelling and to reach more consumers in more ways; and of making Disney an even more prominent and successful provider of entertainment globally. We believe our strategy is the right one and I'm confident it will keep us competitive and enhance our ability to deliver long-term value to shareholders.

We're really pleased the Chinese government has given approval for a Disney theme park in Shanghai. We look forward to finalizing a deal with our partners in Shanghai to build a world-class resort. With 1.3 billion people, increasing affluence and one of the world's most unique and dynamic cultures, China is an important and promising country for Disney.

We're also excited to welcome to the Disney family the talented team at Marvel. Marvel's brand, characters and stories are well-known globally and their popularity cuts across age, gender and cultural boundaries. Marvel's business really complements ours and all that we've been doing to maximize and extend the value of Disney's creative properties across our businesses, media platforms and geographical markets.

In pursuing our expansion strategy, we've also focused on how to confront challenges to our media businesses brought about by advances in technology, the abundance of choice and changing consumer preference. We've really looked hard at how we could innovate and bring down the cost of making, marketing and distributing the content we create without sacrificing the quality that consumers have come to expect of us.

During the course of the last year, we took several steps in that direction. ABC Entertainment and ABC Studios merged into a single organization dedicated to producing and marketing compelling programming for ABC and other platforms. Walt Disney Studios streamlined its production, marketing and distribution teams to manage the release of motion pictures from theaters all the way to handheld devices. And we brought together under a new segment, Disney Interactive Media Group, our console and online game units so that we can adapt quickly as the gaming market evolves.

We are also reassessing our business models to make sure we continue to be competitive in this new environment. Decisions are being made on issues related to timing to market, pricing and scope of distribution that we believe can give us the necessary agility to respond to rapid technological change and to meet the expectations of consumers who increasingly enjoy entertainment how, when and where they want it.

Ultimately, though, what sets Disney apart more than anything else is the strength of our brands and the quality of our entertainment, a distinction we are determined to uphold. Last year, despite the downturn, and apart from our purchase of Marvel, we invested extensively in entertainment and experiences we believe will delight Disney, ABC and ESPN fans for years to come.

Our Parks and Resorts business is expanding with the addition of attractions and features that bring together great creativity, fantastic new technology and some of our most beloved characters and stories at Disney's California Adventure, at Hong Kong Disneyland and at the Magic Kingdom at Walt Disney World. We are also greatly expanding our geographical reach and type of experience available to vacationing families with the opening of our new family resort in Hawaii in 2011 and the launch of two magnificent new cruise ships in 2011 and 2012.

Movies remain at the core of what we do, providing many of the rich stories, memorable characters and compelling worlds that are Disney's hallmarks. Going forward, we will focus almost exclusively on making branded films from Disney, Pixar and Marvel. Consumers know and love these brands and this gives us a competitive advantage. A high quality Disney, Pixar or Marvel film can be of great value to the entire company over many years. We will also be distributing DreamWorks films, taking advantage of our Disney global studio infrastructure without much additional risk.

At our media networks, ABC got off to a solid start in the fall season with several of the most watched shows, including new offerings we are proud of like Modern Family, FlashForward, The Middle and Cougar Town. These shows are attracting the viewers most coveted by advertisers, both on TV and the Web, and affirm the benefit of investing in content that's smartly written and presented, universal in appeal and adaptable to different technology platforms. The same holds true of Disney Channel, which last year had its best ever domestic ratings, and successfully launched the new boy-focused Disney XD Channel.

Now thirty years old, ESPN remains an incredible innovator, both technologically and in the quality and scope of its content, and in doing so has built and maintains a truly great brand. Last year, it made a major move internationally with its purchase of Premier League television rights in the United Kingdom and has deepened its relationship with its most avid fans by setting up local sports online portals in key cities including Chicago, Dallas, Boston and Los Angeles with New York coming in April. ESPN's emphasis on cutting-edge platforms, ranging from ESPN360.com to the popular ScoreCenter iPhone app, insures its content is relevant and easily accessible no matter what sport you love or where you happen to be.

We've been investing in our future in other ways as well. Disney has always had a strong culture, rooted in our deep pride in what we do every day and a firm understanding of the enormous responsibility that comes with being stewards of a top global brand. As such, we've intensified our corporate social responsibility efforts to make them even more integral to the way we do business.

Last March, we published our first comprehensive Corporate Responsibility Report, a detailed multimedia portrait of our approach to everything from charitable giving to workplace diversity, and from environmental measures to online safety for kids. The scope of our activities is truly impressive, in large part due to the enthusiastic participation of our Cast Members and employees, and the report has helped solidify Disney's reputation as one of the world's most admired companies.

We're particularly proud of the ambitious long-range environmental goals we have set and with the accompanying three to five year targets to reduce emissions, waste, electricity and fuel use, as well as impact on water and eco-systems. We are also committed to using our skills as a media company to inspire kids to take more personal responsibility for preserving the planet we share.

These programs are practical from a business perspective and in keeping with our heritage. People all over the world have high expectations of Disney and meeting these standards requires that we not only deliver entertainment people love, but also behave responsibly in everything we do. When we do so effectively, we are admired by our employees, shareholders and consumers and that's good for our businesses and brands.

It's also positive from a business perspective when our employees and Cast Members have the opportunity to gain experience in various parts of the organization. It gives them a new set of challenges, new perspectives and a great opportunity for continued growth. Longer term, the practice of motivating and developing Cast Members and employees by providing new or expanding opportunities will help us attract and retain talented people and will serve this Company well.

Over the last year, we've been putting into motion such an approach and have started with changes at the senior management level. On January 1, 2010 Tom Staggs, our chief financial officer for the last decade, became Chairman, Walt Disney Parks and Resorts, while Jay Rasulo, who held that position for seven years, became our CFO. In Europe, we've consolidated our lines of business under the leadership of Diego Lerner, who has very effectively built our Latin American operations over the last decade. And Rich Ross has become Chairman of Walt Disney Studios in the wake of his first-rate performance as head of Disney Channel's global operations.

Last year was a demanding one. But it's also been a period that's reinforced some key themes: that quality must remain at the forefront of what we do; that we must not be afraid to take risks and challenge the status quo; and that the passion and creativity of our employees and Cast Members are the heart and soul of the Company and I personally want to thank them for the incredible work they do every day to delight consumers around the world.

We have many challenges ahead, but I like how we are positioned, who we are and what we stand for. It's truly been an honor serving as the President and CEO for the last four years with each new day bringing new challenges and opportunities for our Company. So, on behalf of all of us at Disney, I'd like to thank you for your continued support and the faith you show in us to keep exceeding your expectations in everything we do.

Robert A. Iger
President and Chief Executive Officer
The Walt Disney Company
January 10, 2010

Download The Walt Disney Company 2009 Annual Report

PDF format, 428KB, 120Pages.

Download The Walt Disney Company 2009 Year in Review

PDF format, 90MB, 66Pages.

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 Media. For convenience, the terms “Company” and “we” are used to refer collectively to the parent company and the subsidiaries through which our various businesses are actually conducted. Information on the Company’s revenues, operating income, and identifiable assets appears in Note 1 to the Consolidated Financial Statements included in Item 8 hereof. The Company employed approximately 144,000 people as of October 3, 2009.

MEDIA NETWORKS
The Media Networks segment is comprised of a domestic broadcast television network, television production and distribution operations, domestic television stations, international and domestic cable networks, domestic broadcast radio networks and stations, and publishing and digital operations.

Domestic Broadcast Television Network
The Company operates the ABC Television Network, which as of October 3, 2009, had affiliation agreements with 233 local stations reaching 99% of all U.S. television households. The ABC Television Network broadcasts programs in the following “dayparts”: early morning, daytime, primetime, late night, news, children and sports.

The ABC Television Network produces its own programs or acquires broadcast rights from other third-parties, as well as entities that are owned by or affiliated with the Company and pays varying amounts of compensation to affiliated stations for broadcasting the programs and commercial announcements included therein. The ABC Television Network derives substantially all of its revenues from the sale to advertisers of time in network programs for commercial announcements. The ability to sell time for commercial announcements and the rates received are primarily dependent on the size and nature of the audience that the network can deliver to the advertiser as well as overall advertiser demand for time on network broadcasts.

ABC.com is the official web site of the ABC Television Network and provides access to full length episodes of ABC shows online. ABCNews.com provides in-depth worldwide news coverage online. ABCNews.com also offers broadband subscriptions to the 24-hour live internet news channel, ABC News Now and to video-on-demand news reports from all ABC News broadcasts.

Television Production and Distribution
The Company produces and distributes live action and animated television programming under the ABC Studios, ABC Media Productions, and ABC Family Productions labels. Program development is carried out in collaboration with independent writers, producers, and creative teams, with a focus on half-hour comedies, one-hour dramas, and reality series primarily for primetime broadcasts.

Primetime programming produced either for our networks or for third parties in the 2009/2010 television season include the returning one-hour dramas Army Wives, Brothers & Sisters, Castle, Criminal Minds, Desperate Housewives, Ghost Whisperer, Grey’s Anatomy, Lost, Private Practice, Raising the Bar, and Ugly Betty; the returning half-hour comedies Gary Unmarried and Scrubs; and new primetime series that premiered in the fall of 2009 which included the one-hour drama Flash Forward, and the half-hour comedies Cougar Town and Ruby & The Rockits. Grey’s Anatomy, Criminal Minds, and Ghost Whisperer entered the domestic syndication market during 2009.

We also produce Jimmy Kimmel Live for late night and a variety of primetime specials for network television and live-action syndicated programming. Syndicated programming includes Live! with Regis and Kelly, a daily talk show, At the Movies, a weekly motion picture review program; Who Wants to Be a Millionaire, a game show; and Legend of the Seeker, a one-hour drama.

Disney-ABC Domestic Television and Disney-ABC-ESPN Television International distribute the Company’s productions domestically and internationally, respectively. The Company’s productions are also distributed in DVD format by the Studio Entertainment segment and online. ...

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