The Walt Disney Company (DIS) Q1 2010 Earnings Report, Transcript and Summary

Good day ladies and gentlemen. Welcome to the Q1 2010 Walt Disney Earnings Conference Call. My name is Diana and I will be your operator for today. At this time all participants are in a listen only mode. Later we will conduct a question and answer session. (Operator Instructions). As a reminder this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Lowell Singer, Senior Vice President of Investor Relations. Please proceed.

Hey, thanks and good afternoon everyone. Welcome to the Walt Disney Company's First Quarter 2010 Earnings Call. Our press release was issued a few minutes ago. It’s now available on our website at www.disney.com/investors. Today’s call is being webcast and that webcast will also be available on our website. Following the call we will post a transcript of today's call and a replay to our website. Joining me in Burbank for today’s call are Bob Iger, Disney’s President and Chief Executive Officer and Jay Rasulo, Senior Executive Vice President and Chief Financial Officer. Bob is going to lead, followed by Jay and then we will of course be happy to take your questions. So with that, let me turn the call over to Bob and we'll get started.

Thank you, Lowell and good afternoon. We're pleased with our first quarter performance which was better than last years due in part to improved advertising and affiliate revenue in our immediate networks and better attendance in our Parks and Resorts. At this point we have limited visibility regarding the economy and its impact on our businesses and thus we will continue to focus on controlling costs by creating great content and experiences and building our brands. We are also maintaining our focus on long term growth strategies in a world of rapid technological change and evolving consumer behavior. Our movie studio under its new leadership is focused on proving its creative performance through high quality branded films Disney, Pixar and Marvel. The studio has also restructured its organization to produce, market and distribute movies more efficiently in light of the challenges the movie business is facing. This will help reduce costs and better position the studio with regard to the timing, pricing and distribution of its films. Through our long term commitment for 3-D, we and others in the film industry have proved that a better experience can draw more people to the theatre and increase box office. We're excited about our upcoming live action slate including Alice in Wonderland, Prince of Persia, Sorcerer’s Apprentice and Iron Man 2, the first Marvel film to be released since we completed our acquisition. Tron, our December live action release is looking very promising and we're about to start production Pirates 4 which will be released in May of 2011. On the animation side we're thrilled with Toy story 3 which is not only a terrific film from a creative perspective but represents the essence of our franchise strategy. With a great new story filled with beloved characters, this highly anticipated film has…

Thanks Bob and good afternoon everyone. I'm excited to be here. In my comments this afternoon I'm going to address three important topics. First, the drivers of our Q1 results. Second, some of the key swing factors that will influence our performance for the remainder of the year and last, though visibility remains limited across our businesses, I'm going to talk a little bit about the trends that we're currently seeing in the marketplace. I will begin with studio entertainment. Operating income improved over the prior year driven by domestic home entertainment. Lower marketing, distribution and packaging costs in addition to decreased amortization expense were the main reasons for this improvement. Results in the quarter were reduced somewhat by higher film write downs and lower music album sales compared to the prior year. Bob talked about our important upcoming theatrical releases. I am sure it’s obvious that the performance of these films will be a key swing factor in our full year financial results. At our media networks higher affiliate revenue at Disney Channel worldwide contributed to increased profits for the segment additionally ESPN delivered higher affiliate and advertising revenue in Q1 which more than offset increases in programming cost due to college football, premier league football in the UK and NFL. Ad revenues for ESPN came in mid single digit percentage points above the prior year Q1 notably ESPN enjoyed record ratings in Q1 up over 7% from prior year driven by Monday night football and college football. We recorded lower income in Q1 from our equity networks due to higher programming expenses in addition to restructuring costs. Broadcasting operating income was higher compared to prior year largely as a result of the bad debt expense associated with the Tribune bankruptcy filing that was incurred in last years first…

Thanks Jay. Operator we are ready to take our first question.

(Operator Instructions). We have a question from the line of Ben Swinburne with Morgan Stanley. Please proceed.

Jay just following up on your comments on ESPN, could you, you didn’t mention any deferrals in the quarter just wanted to check and see if there were any meaningfully positive or negative year on year on the affiliate side, and then on the parks you took a lot of action last year in terms of head count and rationalizing the cost structure some of that seems to flow through this quarter I am wondering if you could help size that up for us we think about 2010 versus 2009 and then just a bigger picture question, Bob if you could talk about how you are thinking about ESPN as you start to enter in some renegotiations on affiliate fees. I think from talking with investors a lot of the concerns around Disney as a stock and ESPN as a business is whether there is significant upside to the affiliate fees you're currently generating in the U.S. Can you talk philosophically about how you think about approaching those negotiations and positioning the business as you look for potential increases on the fee front? Thank you.

Let me start with your first question about deferrals at ESPN. There is nothing material in the first quarter that we need to talk about. Relative to parks costs, I talked about some specifics, the mark-to-market on fuel hedge from last year is about $40 million of the savings and then there is the group of savings that are simply related to the volume declines, particularly Walt Disney World where I mentioned a 1% volume decline and of course there are direct costs that go directly with those. Coming to the last part of your question about pulling forward the cost savings from 2009, so far the team has done an excellent job at pulling those savings forward. So you know we took a restructuring charge last year and we talked about the reduction in head count that we did and so far those costs seem to be well managed and continue to carry us forward for this year.

On the ESPN front Ben we're not engaged in what I call a major active negotiation right now and as you would expect, I wouldn’t attempt to in anyway predict certainty publicly where future negotiations may go. I will say that as evidenced by the fantastic ratings performance of ESPN in the quarter that we just announced, clearly our investment in its programming and its brand are paying off and with that we're delivering more value to advertisers and more value to distributors while the consumer is clearly paying heed as is evidenced by the great ratings. So we think that our position with ESPN going into a new round of negotiations is actually quite solid because of the value that we're generating. I also want to point out that the distributors do quite well with ESPN not just because of the overall value that we deliver but the ad that they sell on a local basis are worth a considerable amount to the local to the individual distributors and ESPN generates more advertising revenue then any other channel in the cable universe.

We have a question from the line of Michael Nathanson, Alliance Bernstein. Please proceed.

I have one for Jay. It was about, Jay, you talked about the pull forward or the change in calendar of New Years day in this quarter. Can you talk a bit about what the impacts and the profitability was by having a counter shift and is that week more profitable as people tend to probably book it without discounts. That’s one. There is one for Bob.

Yeah that is a very profitable week for us, round numbers. It's about a $60 million swing for us from that single week.

And lastly it's going to come out of the next quarter on a profit side.

Yeah it comes down in the next quarter although I'll hasten to add that there is the add back from one week of Easter. I am sorry to say that one week of Easter is not quite as profitable as one week of Christmas. So we wont add it all back to the second quarter. In fact only a third or so get added back.

And then one for Bob. I wonder on the game side, the interactivity side, I wonder if you believe like the game opportunity now is as big as you first thought it was when you started investing in the game side and how much of the savings this quarter do you think is recurring?

Well, I think that there is still a huge opportunity on the games front but I think it probably will be derived from a slightly changed strategy than the one that we began few years ago. It is pretty clear that the higher end console games are a little bit more challenged in the world where not only they are more costly to produce and market but there is just much more competition from casual games and games on platforms like the iPhone iTouch platform. We also learnt that the typical game that we set out to make which I'll call it Disney Branded game seems to perform better on the Nintendo Wii and DS platforms and on the platforms basically that are not to the high end console games. And so while we're going to continue to make games for the high end, we'll be very, very judicious in how many and which ones we choose. We're looking forward to our Toy Story III game which will come out basically on all platforms. We're looking forward to the one that we're in development for Mickey Mouse. We're looking forward to Tron. And then we have another really, really interesting racing game that also comes out relatively soon. And so called Split Second by the way which got some fair amount of potential that, when it was first brought out at E3. But I would say that our focus is going to be little bit more diverse and a little bit less reliant on highest end console games. We will still maintain a similar mix of roughly 80% that would be Disney branded. I want to also mention by the way we have some interesting opportunities with Marvel and that would be a brand that we think would do extremely well on the higher end consoles. And at the same time that we're looking to be a little bit more judicious in that area. We are looking to step up our efforts on the casual games front and on the Apple platforms including the iPad where, since this might come up later we're already talking about and in fact developing products for ABC, for Disney including a pretty cool digital books product for ESPN which would probably be an even better version of their Score Center App and also for Marvel.

We have a question from the line of Spencer Wang, Credit Suisse. Please proceed.

One for Bob and one for Jay. First for Bob. Some of your peers have been pretty aggressive in negotiating cash for returns fees, I was wondering if you could just speak philosophically about how aggressive you would be trying to get cash for re trends and then for Jay just a housekeeping question. Did the $66 million in restructuring charges include the restructuring at the minority owned channels like Amy and Lifetime?

Well, as you know Spencer, we run some of the best stations in the country. They are market leaders in the markets that they are operated in and we think that its time to recognize the value that they provide to distributors and their importance to local communities as well as their importance to our viewers in those communities. And so we believe that it would be appropriate for us to seek cash for retransmission consent and we believe that the same would be the case for our affiliates. I won’t say how much and I won’t describe any discussions we are having with the distribution community but clearly there’s a trend that we're observing that we fully intend to participate in.

I appreciate the confusion, as I did use the restructuring charges relative to that you need but those are not included in the global line restructuring cost very up in the expensive side.

And how big were they Jay

They weren’t material they were on the order of $10 million.

We have a question from Imran Khan, JPMorgan please proceed

One question is on cable and another question is on studio, on cable can you please give us some idea how much in the quarter you expensed for UK soccer right and how much for marketing for the new channel launch in the international market and how should we think about the cost going forward, and on the film side you are making changes at the film studio, what areas of the film operations do you think you need to most change now and how long do you think it will take to see some of the benefits from that? Thank you.

I will answer the second part of the question, and let Jay address the first part on the film side. We have restructured virtually all areas of our studio business expect for animation which we had restructured when we acquired PIXAR back in 2006, I would say that the primary, we restructured all areas but if you look at one that I would consider the most important it would be on the creative front and that starts really with the change that was made at the top Rich Ross because the number one priority of the studio is to improve the quality of their output and I would say that you really wont see real results of that until 2011 although I will say that Rich is applying his considerable creative talent to making sure that the films that inherited that were not finished are finished to a level in a quality level that is that we are really excited about and we are in fact quite excited about the films that are coming up Alice in Wonderland, which is our March title Toy story 3 of course this summer, Prince of Persia, Sorcerer’s Apprentice and Tron. On the other side of the reorganization we have also consolidated a fair amount in terms of our approach to distributing and marketing our product we had separate groups that were doing those things for theatrical window and then for the home video window and we thought that it would be really wise and everything really just kind of related that we put them together and then doing so we believe not only will that enable us to save cost but we think we will operate it much more effectively in the market place. Relative to ESPN and the UK premier league this is a business adventure that’s very much in the startup and although the increase programming course were a driver I don’t think its useful to go into the details of what the additional programming cost were there.

We have a question from the line of Doug Mitchelson, Deutsche Bank. Please proceed.

Thanks very much good afternoon so Bob a clarification and a question. Clarification on ABC retransmission negotiations are you prepared to pull your broadcast signal if needed I know you hope that’s not the outcome but to get a fair value for the ABC network and the reason I ask is do your focus on brand and the impact a publicity battle can have on brand perception thus you are resolved to see negotiations sort of through to bitter end so to speak and then you know separately be I am always interested to hear your update on evolving digital business models since your iPad comments are interesting you said ABC content is this I guess if you can give us more details on what you think ABC might be offering on the iPad and is this a step in the direction of retailing or wholesaling your cable and broadcast now its online that would be helpful. Thanks.

Two easy ones. On the retrans front we are pretty resolute because we know the value of these stations and the importance of these stations in their local markets and we know that there are stations some cases our affiliates who have been compensated for retransmission consent and we feel that we should be compensated as well, it clearly would not be our preference to see that our signal is taking down. And we will do whatever we possibly can through negotiation to avoid that. But we also believe that we have obligation to derive value from the great investment that we make in these programs whether they are local in nature or whether they are a national in nature. We have every intension of doing just that. On the digital front, clearly it’s still evolving although I took note that our digital revenues as a company had nicely exceeded $2 billion in 2009. Some of that is commerce and some of that just comes from the distribution of our film and entertainment. We find that iPad has a lot of potential, we think it’s a really compelling device. We think it could be a game changer in terms of enabling us to create essentially new forms of content. Obviously it will be a great device to play games on and to watch videos because of the clarity of the screen. But the interactivity that it will allow on a portable device with such a high quality screen is going to enable us to really start developing products that is different than the product that you typically see on an internet connected computer or on a television set. And digital reader that we are talking about we’ve put in a marketplace a digibooks product through our Disney publishing group just…

The next question from the line of Jessica Reif-Cohen with Banc of America Merrill Lynch. Please proceed.

I have a couple of questions, one on the theme parks it looks like hotel discounting is coming down to the 30% to 40% range versus may be 40% to 45% a year ago. So I was just hoping you could give us your current thoughts on what do you need to do to bring consumers in and are you planning to just gradually decrease the amount of discounting and then on retail, I think it just came across like a day or so that your buying your Japanese stores. Is this a country specific strategy or is it more of a global trend and then finally, Jay you mentioned the pacing's of the network and ESPN but you didn’t mention anything about the TV stations?

Let me start with your question theme parks. I don’t think that the discounting ever got off as high as what you mentioned, 45%. I think it never in my recollection got above the 30's. But in a way, you could already see this year it's both reflected in the numbers as well as in what is offered in the market. About half of the room inventory of Walt Disney World, we went from a four plus three, buy four and get three free to buy five and get two free and we also reduced the free dining option for value rooms. And at Disneyland we saw a similar decrease in gift cards and what not. So they are clearly starting to moderate discounts already but I will tell you that its not crystal clear looking forward what the best tactics will be to eventually make our way out of discounting which I think is not only probable, impossible but we will see in the coming quarters. So we look at every quarter as we can and gauge response from consumers and act accordingly. So yes it probably won't be flipping the switch off. It will be gradual build up out of it. I wanted to talk to the station pacing. I mentioned ESPN was plus 5% and the TV stations are nearly double that. So they are pacing well also in prime time and lastly the Disney stores….

On the Disney Stores front, we took back the stores in the United States a year ago from Children's Place. We own our stores in Europe. We had owned our stores in Japan and we sell them to Oriental Land Company which is the owner of Tokyo Disney Land, Tokyo Disney Sea and they decided that it wasn’t a core strategy of theirs to own those stores in Japan and we recently decided that we would take them back and that's just become official. And they're really in the trend because at this point we own now the global Disney store chain. And on that note we did speak about a new store model, a new physical store space and I’d also like say in that regard that we're looking at opportunities to upgrade our locations either within malls or in different malls around the world and we're going to roll the model out conservatively probably somewhere around 10 total globally within the next year and roughly half in the U.S. and half outside the United States but only in locations that we feel represent a real upgrade from the location that we might be in that environment.

We have a question from the line Jason Helfstein, Oppenheimer & Company. Please proceed. Jason Helfstein - Oppenheimer & Company: Bob can you comment on the state of the DVD business when you factor in this quarter's results and then also because of any comments on extra pieces for CapEx for this year.

Well, I can comment on DVD business. I don’t like to look at the DVD business on a quarter-to-quarter basis because it often is an apples-to-oranges comparison given the nature of the releases. What we're generally seeing in the DVD market is continued pressure and that’s due to a number of factors. Clearly the economy is one factor. Another factor is a more secular nature. There is more competition in the market place for people's time, particularly time spent on entertainment and I think that piracy at least in some markets, not necessarily just the United States but some markets internationally is also taking its toll. And so, we really feel that we need to be cautious in terms of the movie business overall because of the pressure on that very, very important window. And that’s why by the way we have been in discussions about windowing with the exhibitors because we feel that its really important for us to maintain a very healthy business on the exhibition side and 3-D is definitely contributing to that and a very healthy business on the home video side which we think is actually in the interest of the theater owners. A healthy movie business is good for them. They want us investing innovation, investing in higher quality content. And so mindful of what's going on the home video side, we feel that its time on a case-by-case basis, movie-by-movie to really take a look at how we're windowing the home video products into the marketplace. Relative to your question on CapEx, broadly across the company there are not huge swings in capital expenditures other than those projects which I think you're all aware in Parks and Resorts but to rephrase them just because I love them, both the crew ships are under construction and we are moving into spending real money on those obviously as the first one has its maiden voyage in 2011. The DCA project, the California venture that Bob has talked about in the past is in full swing and the Resort in Hawaii is beginning. Actually I think it gets topped off in April. So pretty much in full swing as well. So those projects will affect not only this year but next year as well. Next year happens to be 40% of the total spending on our two crew ships which will occur in 2011 and a significant piece of DCA. So those are projects that we feel have great rates to return and will build shareholder value and that’s where you see most of the swing in capital expenditures.

We have a question from the line of Anthony DiClemente, Barclays Capital. Please proceed.

One for Jay and then one for Bob. Jay just wondering what were the share buybacks in the current quarter, in the last five weeks. And then I caught the plus 5% on ESPN pacing's but I was wondering what ESPN advertising was year-over-year in the reported quarter. Then I have one for Bob.

On your first question, relative to share buybacks, the share buybacks were very minimal in Q1 mostly because we were brought out due to the then pending Marvel acquisition. So we did not make significant purchases but I will simply repeat what I said in the comments that we do intend by the end of the fiscal year to buy back the 58.5 million shares that we issued as part of the marble transaction.

I know, but what about in the last in the current quarter and not the first quarter, in the last 5 weeks can you help us about it?

I don’t think I will make that obvious but as I said we are going to be on phase 2 buy back by the end of the fiscal year.

How was ESPN advertising in the first quarter?

ESPN advertising in the second quarter was as I mentioned up single digits.

In the first quarter was up single digit and its pacing up 5?

Yeah first quarter.

And then Bob I was just wondering which one of your partners one of your partners in A&E television network your equity cable network with one of your partners being acquired just wondering what your strategy is for that group of cable networks how core are those to immediate network strategy?

Well a number of months ago with our partners NBC Universal and Hearst we consolidated operations to A&E history and lifetime because we felt that it was better position those assets in the market place. Those have been great investments for us and we look forward to many years of solid returns from those business returns that should be improved by the fact that we put the units together in terms of core assets they are core in the sense that we really believe in cable television programming and they certainly have been leaders in that space for a long time and we hope that we will continue.

We have a question from the line Michael Morris, UBS please proceed.

Thank you good afternoon couple of items first on the part Jay you mentioned the room reservations are running about 10% behind last year at this point can you help just give little bit more context on that’s sounds like a weak number it sound like its trending worse sequentially and but at the same time it also sounds like you said their promotions are rolling back at least modestly so can you kind of reconcile those two things what is room reservations running 10% behind last year main and is it apples to apples and then over the networks on a couple of occasions you mention that international strength of the Disney channel and I am looking for just anymore color you can give there on why is it getting sequentially stronger in terms of what you are seeing demand for the Disney channel and how much of is it really core and why now thanks.

Well let me take the Disney channel side and then Jay can answer the first question about reservations on the book or trends in reservations. The Disney channel strengthened international is coming for a few directions one rolling out in new markets to continue to do two increasing our subscriber base some markets we actually is only move fairly reasonably from more of a premium service to a basic service and then we also are overall because of a number factors increasing the rates that we are getting from our Disney channels internationally also the ratings of the Disney channel domestically have been up nicely and the strength of its programming is essentially felt on a world wide basis the other thing that we have been doing quite successfully is converting our former Fox family and JetX and Toon Disney channels to Disney XD and the ratings there where we have converted have also been up nicely and those channels are largely advertiser supporter. So stronger ratings should result overtime and stronger revenue and now we are improving revenue prospects but also strengthening the brand.

Relative to rooms on the books, I don’t have and I am not going to give you sort of a crystal clear picture here but I will say that when Tom talked about our last quarter at this time, our rooms on the books for the first quarter they were down 5%, we finished the quarter down 2%, its just another indication that there is late bookings and the 10% that we are down today for me is not fully indicative of where the quarter is going to wind up, but the number speaks for itself, we are down as to what's on the book has it right now.

Okay, right. may be if I look to year-over-year do you know, its really tough I am just trying to figure out sequentially whether we are actually still in the downward part of the cycle and whether you might have to be more promotional, anything else clarify we can get there?

The only thing that I can add to what I said was that we do the holiday week flip flop in the quarter. And that might help you think about it.

We have a question from the line of Richard Greenfield, Pali Capital. Please proceed.

May be just a follow-up on that last question because the issue a year ago you all seemed very focused and Jay obviously were running parts, very focused on making sure that you maintain the tenants at the utmost level and if we use discounting as a leverage to make sure that the tenant stayed as flat as possible. I am just curious essentially why are you not being more promotional this year? I mean you clearly got that back so obviously weren’t or probably were expecting without a significant rebound in the economy we are expecting some attendance to drop I am just curious you know what’s changed year-over-year is it just simply that you can’t discount for that long or how is just that dynamic between price and volume and your approach to it different this year than a year ago today, thanks.

Not different as strategically not different, obviously when you run promotions in the market place you switch them, you change them out, we’ve been pretty demonstrative about our desire to start to pull out of the level of discounting we were at and we are doing that. I think that Q1 I would call our volume our total volume domestically was up I would call our volume at world flat and so I don’t think there’s either any change in the strategy and tactics that we are using frankly there isn’t any change in the results either other than the fact that Disneyland attendance was much higher for the quarter.

So I think that we should notice what we do is we test the market place. So you maintain pricing meaning higher pricing to a point and if the market place doesn’t respond to that and that’s when you judiciously roll out your promotional strategy and some of that by the way is just a matter of timing, I am pretty confident then we are going to be able to deliver as Jay said the volume that we need over the course of this year the question is how much will we have to discount to get in and with visibility being relatively limited its difficult for us to predict exactly what that would be, our goal of course is to slowly rein our guests of discounting and because we don’t believe that we are dealing with an economy right now that enables us to shut off the discounting immediately.

We have a question from the line David Miller, Caris & Company. David Miller - Caris & Company: Just a question on Miramax, assuming you're willing to talk about it. I know you haven’t made any sort of formal announcement about the sale of the library and the brand name but assuming the reports in the financial press are true why put this library up from sale now? Why not wait until the MGM library is sold? So your sort of affecting supply-demand dynamics here by putting the library up for sale at the same time as MGM. Why not wait say a year or so for both the market to improve and to create better supply-demand dynamics just by having a constriction situation on library sales? Appreciate your comments.

Well you're presuming that MGM is going to be sold. I don’t know what the timing of that is going to be. You probably know a lot more than we do. We’ve determined that continuing to invest in new Miramax movies wasn’t necessarily a poor strategy of ours and the investment and production and distribution, the only investment that remains is to cover the movies that are being made or have been made and have yet been distributed or released. And with that we believe that it would be prudent for us to explore all of our options. We're always intent on driving as much value as we possibly can from an asset and to some extent that will affect the timing of what we do next with Miramax and I don’t think that getting any more details would necessarily be either wise or consistent with our approach. But the goal here for the company is to continue to focus on our core strategies and to drive as much value from all of our assets as we possible can.

You have a question from the line of John Janedis, Wells Fargo. Please proceed.

You referenced lower rates to both cable and broadcast. I'm just wondering, where do you think we are in the recovery in terms of demand? What needs to happen from here to see rates move higher on a year-over-year basis understanding the upfront pricing was soft and how far is sellout from historical levels?

Well what needs to happen is you obviously need an economy that is stronger than the economy that we're in. We're seeing some really robust sales in certain sectors. Jay mentioned that scatter is running at ABC almost 30% above up front this quarter. That’s obviously a result of some sectors strain. We're seeing for instance a lot of activity among Telco's and technology companies. On the local side we're seeing some renewed activity among autos, both domestic and foreign autos. But in general there is still a marketplace that is not as strong as certainly the market place that we saw back before the market fell apart in the later part of 2008. Was there a second part to that question?

On the sell out, are you…

Yes, you asked about sell out. We at the up front sold considerably less than we had sold in the years prior. That was due to, not that much pricing pressure back then and we didn’t want to sell into our inventory deeper than the prices that we were getting at the time. Interestingly enough we still have units to sell in the April, May, June period. Actually I think we still have units to sell this quarter as well, less so this quarter. We have a relatively decent mix of inventory to go. There is not that much inventory left in the prime time market place though, our information suggest that our competitors are extremely well sold. I am not going to compare how much is left to go and scatter in terms of amount of inventory but there is a still a fair amount to sell and as I said we got a good mix and with scatter pricing the way it is we feel pretty good about it. I should also add that’s scatter have been strong, earlier in the quarter they were currently in and then it slowed slightly and then we have just seen a fairly new and robust wave of spending again which is actually a good indication. But I think in general you are looking at a market place that is not as strong as it was 18 months ago.

Thanks and one quick follow-up I appreciate the color there. Is the Toyota issue having an impacted at all in terms of demand broadly?

No I called our own stations and I spoke with our network and I spoke with ESPN over the last 24 hours and they have not seen any impact whatsoever due to the Toyota issues.

Okay, we have a question from the line of Tony Wible, Janney Montgomery Scott. Please proceed.

Thank you. I was hoping you can provide a little more clarity on the premium scheme you have within the DVD market I think with Up you guys were selling digital copy as well as Blu-Ray and DVD all in one skew. Just curious to see what kind of uptick you are seeing with that? Or is that something you are going to look to do for more titles going forward?

Yeah, we definitely are seeing some decent premium pricing from Blu-Ray and then from a three pack which is the three Blu-Ray and the standard DOS and then another file that enables you to download the file on to a computer hard drive which is a nice product. I am not going to give percentages of sales but they are relatively decent. On the Blu-ray side and that’s just another anecdote we went out in the marketplace with Snow white with the Blu-Ray and a Blu-Ray plus standard debt exclusive window for six weeks and sales of Snow White were 68% Blu-Ray which is just a huge number. And actually Snow White we are told was the number one Blu-Ray title in calendar 2009. So clearly there’s been some continued growth of Blu-Ray in the marketplace is definitely a product that consumer seem to like and we are getting the pricing premium that we hope to get and have not seen signs of that falling even in a difficult economy so we remain believers and we are going to continue to experiment with different packaging and different window and timing the market primarily because of the success of the exclusive window for Snow White. Thanks Tony. Thanks again everyone for joining us today. Note that a reconciliation of non GAAP measures that were referred to on this call to equivalent GAAP measures can be found on our investor relations website. Let me also remind you that certain statements on this call may constitute forward-looking statements under the Securities laws. We make these statements on the basis of our views and assumptions regarding future events and business performance at the time we make them and we do not undertake any obligation to update these statements. Forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from the results expressed or implied in light of a variety of factors, including factors contained in our annual report on Form 10-K and in our other filings with the Securities and Exchange Commission. This concludes today’s first quarter call. Have a great day everybody.