Welcome to The Walt Disney Company Quarter Two Fiscal Year 2016 Earnings Conference Call. My name is Katie, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I'll now turn the call over to Lowell Singer, Senior Vice President of Investor Relations. Please go ahead, sir.

Good afternoon and welcome to The Walt Disney Company second quarter 2016 earnings call. Our press release was issued about 45 minutes ago and is available on our website at www.disney.com/investors. Today's call is also being webcast and the webcast and the transcript will also be available on our website. Joining me for today's call are Bob Iger, Disney's Chairman and Chief Executive Officer; and Christine McCarthy, Senior Executive Vice President and Chief Financial Officer. Christine is going to lead off, followed by Bob, and then, of course, we'll be happy to take your questions. So with that, let me turn the call over to Christine to get started. Christine M. McCarthy - Chief Financial Officer & Senior Executive Vice President: Thanks, Lowell, and good afternoon, everyone. Second quarter earnings per share, excluding items affecting comparability, were up 11% to $1.36, marking the 11th consecutive quarter in which we've delivered double-digit growth in adjusted earnings per share. Our financial results this quarter, which I will discuss in more detail in a moment, demonstrate once again how the strength of our brand and a relentless focus on creative excellence and execution can continue to drive growth across our businesses and create value for our shareholders. Our Studio delivered another great quarter, with operating income up 27% versus last year. The growth in operating income was primarily due to the worldwide theatrical success of Star Wars: The Force Awakens and Disney Animation's Zootopia. Fiscal 2015 was a record year for the Studio and the first half of fiscal 2016 is off to a record start with over $1.5 billion in operating income due to the phenomenal performance of our film slate. Fiscal year-to-date, Star Wars: The Force Awakens has generated almost $2.1 billion in global box office. Zootopia has generated $960 million,…

Bob, thanks a lot. Operator, we are ready for the first question.

Thank you. And our first question comes from Anthony DiClemente. Please go ahead.

Good afternoon, and thanks for taking my questions. I'll start with one for Bob. Bob, I hope you find this to be a fair question. I think investors would value any context that you could provide us with respect to Tom's resignation last month? And looking forward if you can give us any update on CEO succession plans? And specifically help us out with the probability that your contract could potentially be extended beyond June of 2018? And then, Christine, you said I think recurring Cable Networks affiliate fee growth at Cable was 4% in the quarter. I think that was 0.5 point ahead of the 3.5% that you realized last quarter. Could you just talk about the drivers of the 4% in terms of rate and volume? And any forward outlook that you'd be willing to provide us? Thanks a lot. Robert A. Iger - Chairman & Chief Executive Officer: Anthony, thank you, and I don't mind your question at all. Obviously, Tom was a valued colleague and a friend of mine and many others at the company. And so we're sorry what came to pass, but we don't really have much more to say about that. I will say that – or remind people that I have just over two years left on my contract as CEO of the company. And the board is very actively engaged in a succession process as it has been actually for some time. And it believes that it has ample time to identify a successor under timing circumstances that will be just fine for the company. I have nothing really to add in terms of the extension of my contract except that I don't currently have any plans to extend beyond the June expiration date that is June of 2018.

Okay. Thanks. Christine M. McCarthy - Chief Financial Officer & Senior Executive Vice President: Anthony, your question on the affiliate revenue growth. For Media Nets, we gave you a 4% adjusted affiliate growth at Cable. That was based on a solid rate of growth with some offset from foreign exchange and subs.

Okay. And I think just as a follow-up, last quarter you had talked about an uptick earlier in the year from lighter packages, I think in part driven by Sling TV subscribers. So do you care to kind of talk about that? Were the lighter bundles, were the Sling TV like services a driver of subs in any way? Can you kind of characterize the trajectory of those subs for ESPN? That'd be helpful. Thanks. Robert A. Iger - Chairman & Chief Executive Officer: Yes, Anthony, I'll take this one. We launched with Sling as you referenced. We also launched with Sony Vue. And the numbers on both of those platforms have been encouraging and they were a driver of sub. They did contribute incremental subs for ESPN this last quarter. But we're also in discussions with a number of entities, some current distributors that are coming forward with new packages and some completely new distributors, all have expressed an avid interest in having ESPN and our other channels included in their initial offerings, and we're very, very encouraged by the discussions/negotiations that we're having. But other than the Verizon settlement that was mentioned today, we don't really have any new news to give you on this at the moment, except to say again, that there are a number of new entrants in the marketplace. They all want ESPN. We like the status of our talks with them. And we actually like the trends as well. These products are very attractive, because they're offering consumers more choice. They typically are better at mobility and their user interface is really positive, is really strong. And those are all really important when it comes to today's environment. So we think long-term, given the discussions that we have and given the experience that we've had these last few months, we feel good about what we're seeing.

Okay. Thanks a lot.

Anthony, thanks for the question. Operator, next question, please.

Our next question comes from Alexia Quadrani from JPMorgan. Please go ahead.

Hi, thank you. I guess, just to start off if I can, maybe, Bob, follow up with your commentary just now about being in discussions with a number of potential over-the-top or streaming partners there. How expansive do you think that opportunity can be? I think if you look out for the next few years, do you think it can be a meaningful positive, or have a meaningful positive impact on either your subs or affiliate revenue outlook? Robert A. Iger - Chairman & Chief Executive Officer: I think it will have a meaningful effect on the marketplace for us. I can't really give guidance in terms of where I think it's going to end up, whether we would be ahead of what our projections were at one point. But there definitely are very, very encouraging signs in terms of what we've seen already. And we're not at liberty to give numbers for Sling or for Sony except we can say that we anecdotally were told that after ESPN was included in their package they saw some very, very encouraging signups or trend in terms of signups. So, I think, this is all very positive for us. And as I just mentioned as a response to the prior question, the conversations we're having have been quite productive. We just haven't concluded new deals to announce as of today.

And then a follow-up if I can, just looking at the Parks business. You've got a lot of moving pieces there; obviously, the big opening in Shanghai. You've got expansion plans domestically, dynamic pricing going on, all those technological innovations there. I guess what do you see as the biggest maybe opportunity for a profit contributor for profit growth going forward? Robert A. Iger - Chairman & Chief Executive Officer: I think you're going to see a number of contributors. It'll take some time for Shanghai to contribute because we've got start-up costs and we're walking before we run there as well. But eventually we have very, very optimistic outlook about the park that we're opening there and about the market in general. We like the steps that we've taken in terms of pricing. We've taken a number of steps or made a number of steps to essentially grow revenue, in some cases, actually at the expense of some attendance where we're changing our pricing approach. Sometimes in part to moderate attendance so that the park experiences a little bit better but all designed with the effect of essentially raising revenue. As you mentioned, we like some of the investments that we're making on the technology front. We also like what we've got in the works in terms of expansion and other locations; the Star Wars lands that we're building in Florida and in California; Avatar, in Florida, which opens before that. We announced two new cruise ships that's coming down the road, I think 2021 and 2023 as a for instance. We're looking at other expansion opportunities in Hong Kong and Tokyo. And generally, we think you're going to see a number of contributors to growth across that sector.

Thank you very much.

Thank you, Alexia, for the questions. Operator, next question.

Our next question comes from Michael Nathanson from MoffettNathanson. Please go ahead.

Thanks, hi. One for Christine, and then I'll ask one to Bob. Christine, can we focus a bit on Consumer Products, which surprised us? Can you walk through the impact to profit growth? If you look at the first quarter, you guys were up 23% of profits. This quarter you were down 8%. So what impacted that delta in growth? And how do you think about growth to products for the rest of the year? Christine M. McCarthy - Chief Financial Officer & Senior Executive Vice President: Sure. Thanks, Michael. You're absolutely right. The first quarter growth was 23% followed by the 8% decline this quarter and there's several factors that slowed the overall growth rate. The first I'd like to mention is that the earned revenue growth was strong again in Q2, at 18%. Now, that compares to an extremely strong growth in Q1 that was 23% in earned revenue growth. But again, second quarter was very strong at 18%. Star Wars, we all know, was a great contributor in Q2. But it didn't have quite the massive contribution it had in Q1. And also remember, in Q1, we had the Q4 deferral of the Episode VII merchandise revenue – the revenue associated with that merchandise. So that from Q4 was also moved into Q1, which had a bolstering effect on Q1. We also have a timing issue of guarantee shortfall payments that helped in Q1. And they were a drag in Q2, as I mentioned in my comments. And also, lastly, I'll mention that Battlefront was a much more significant driver in Q1 than it was in Q2. And I think if you look at those, those are good contributing factors to the quarter-to-quarter decline. Robert A. Iger - Chairman & Chief Executive Officer: And, Michael...

I know... Robert A. Iger - Chairman & Chief Executive Officer: ...before you ask me a question, I think it's really important with this business not to look at it as a quarterly business. Because we're not only continuing to support the $11 billion-plus franchises that we have as a company, but we continue to create intellectual property that is leverageable across our Consumer Products businesses. Now, not all is leverageable as Star Wars and Frozen, as a for instance, but when you look at Zootopia and you look at Jungle Book, somewhat small so far, but Captain America won't be and the impact of Captain America long-term on that business and the other Marvel properties, the reintroduction of Spider-Man. Spider-Man is the hottest or the number one Marvel character from a consumer merchandise perspective. And reintroducing Spider-Man successfully as we've done in Captain America through the release next year, 2017 of Spider-Man, is something that also has to be considered. So it's a kind of business that I think is very difficult to measure in terms of the bottom line success on a quarterly basis. We just don't run it that way.

Right. And it's hard for us to model it, too. Christine M. McCarthy - Chief Financial Officer & Senior Executive Vice President: And, Michael, I know you asked about sort of guidance going forward, and we don't provide guidance. But as Bob mentioned, we think we have the best portfolio of properties and we're very encouraged by what we see in this business.

Okay, thanks. And, Bob, can I just ask you one on Hulu? Last week... Robert A. Iger - Chairman & Chief Executive Officer: Sure.

...Hulu confirmed they're going to launch a virtual MSO sometime next year. And as a partner in Hulu and someone who's talked a lot about having the opportunity in the marketplace, I wonder what would you like to see as a design that maybe fits in between the large bundle of the MVPDs and what Sling and Sony Vue are doing? So if you could actually build something for the future, what are the elements that you think are missing from today's marketplace? Robert A. Iger - Chairman & Chief Executive Officer: Well, I'll answer. Before I do, Hulu's become an important investment for us, not just as a distributor of the programs that we make, but ultimately as a buyer of original product and ultimately as a distributor of our channels. And we think they have a great opportunity to become an OTT MVPD because they can leverage their current user base. And they also have a good user interface. I don't want to speak for them fully, but what they're looking at is a best-of-cable approach, which I guess the response specifically to your question, would put them between the big, expanded basic bundle category and some of the lightest packages that are available like some of what Sling has put out. We feel really good about the opportunity. We're also fully aligned with our partners at 21st Century Fox on the strategy. And I also know that there have been questions asked about what the impact of going into the distribution business is on our current distribution partners. And to that I would respond, even though you didn't ask the question, there are a number of our current distribution partners that are in the content ownership, content creation business, most notably Comcast and its purchase of NBCUniversal. So, we don't think that there's any negative impact whatsoever to us, going into the business of distributing our channels.

Thanks, Lowell.

Thank you, Michael. Operator, next question, please.

Our next question comes from Jessica Reif Cohen from Bank of America Merrill Lynch. Please go ahead. Jessica Jean Reif Cohen - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Thanks. I guess to follow up on the Hulu question, could you say anything about the timing of the launch? And you said best of, kind of, in between the bigger bundle, but what it will look like and anything – if you could say anything on pricing. And does it change the way you will sell, or you plan to sell to SVOD and OTT? And moving away from that, on the advertising market, it's been incredibly buoyant. How are you thinking about approaching the upfront market? Are there any changes in your sales approach into the upfront or generally speaking? Do you look more to targeted, et cetera, et cetera? Robert A. Iger - Chairman & Chief Executive Officer: I'll answer the second part of the question first. We're not going to get into details in terms of our strategy going to the upfront except that we would agree with what you said. We see a very robust marketplace and a very strong upfront ahead, both for our broadcast network for ABC, and for ESPN. We're very encouraged with what we see, but we're not going to disclose what our strategy is going in. Your question about Hulu, I don't think they've been specific about when they're going to launch or what their pricing is going to be. But I'll reiterate what I said earlier, and that is we're fully aligned with our partners at 21st Century Fox on plans to launch, on what their user interface is, on what their approach is in terms of the overall package. We'll have individual negotiations with them for our channels, of…

Thanks, Jessica. Operator, next question, please.

Our next question comes from Omar Sheikh from Credit Suisse. Please go ahead. Omar Sheikh - Credit Suisse Securities (USA) LLC (Broker): Thanks. Just a couple of questions. First, for Christine, going back to Consumer Products if I could, could you maybe let us know what the Infinity as it annualized revenue and operating income contributed by Infinity was, so we know what to strip out going forward? And also maybe what the FX headwind was in the quarter for Consumer Products? That would be helpful. And then a question for Bob, and I know there's been some press reports about your potential interest in MLB's BAM unit. I wonder whether you could, well, A, perhaps comment on that if you care to? But just maybe more broadly, could you maybe update us on your thinking on potentially taking some of the contracts or content that you have control over, and taking it direct-to-consumer? Thanks. Christine M. McCarthy - Chief Financial Officer & Senior Executive Vice President: Thanks, Omar. On Infinity, we don't disclose those numbers by product. But I will answer your question on foreign exchange headwinds for the segment. In this quarter, the FX impact on Consumer Products was $18 million. But I also want to reiterate that our forecast for the year-over-year change, which we gave you previously of 500 (36:32) for the year, is still the same outlook and we're not making any change to that. And that's for the entire company. Omar Sheikh - Credit Suisse Securities (USA) LLC (Broker): Okay. Thanks. Robert A. Iger - Chairman & Chief Executive Officer: Omar, I'm not really going to make a specific comment about our interest in acquiring a stake in BAM. I will say that we've been very impressed with their product. It's obviously quite evident…

Omar, thanks for the questions. Operator, next question, please.

Our next question comes from Doug Mitchelson from UBS. Please go ahead.

Thanks so much. I had one for Bob and one for Christine. I'll just ask them both upfront I think. Bob, you've got a lot of discussion already on the call about I guess we're calling them OTT MVPDs for now. We need a better acronym for sure, I think. But I'm interested in the advertising side for IP streaming world. Has Disney been rethinking advertising models, including ad loads as your vision for the future of TV advertising informed your strategy for the Media Networks division? And for Christine, the 5% hotel bookings pacing for the June quarter, that's despite the tough Easter comparison, so the core trend would actually be better than that, am I thinking about that right? Thanks. Robert A. Iger - Chairman & Chief Executive Officer: I mentioned earlier, Doug, what a dynamic marketplace it is, and I was referring to distribution opportunities, but the same thing would apply on the advertising front. And Ben Sherwood and I had a discussion yesterday about this as it related to the non-ESPN Media Networks. And just about everything is on the table right now including ad load and pricing and advertising integration into programming as a for instance. And I think you're going to see just a lot of shifting in terms of not only what we're selling but how advertisers are buying into all different kinds of television product. I don't know that right now it's a time to declare anything specific in terms of a strategy because again it's such a changing marketplace, except to say that there's strong demand right now for television product and it's obviously evident in how everybody's feeling about the upfront. Christine M. McCarthy - Chief Financial Officer & Senior Executive Vice President: And, Doug, to answer your question on the resort bookings to-date for the third quarter being up 5%, that is incorporating our fiscal year impact of Easter the way it fell this year. So the short answer to your question is, yes, it does incorporate that.

And, Bob, if I could follow up. I mean maybe I'm fishing here a little bit, but you have a much greater exposure to affiliate revenue in your Media Networks business than advertising revenue. Is that a position that you prefer? Do you think affiliate revenue is you've got a lot more visibility over the next five years than advertising revenue? Or do you think perhaps it will end up being the reverse? Robert A. Iger - Chairman & Chief Executive Officer: Well, we're at a very high level when it comes to affiliate revenue. And you're right, in terms of the total number, we do have more exposure as well. We have in the past preferred that to advertising, although there's nothing wrong with advertising. We certainly drive a lot of it because of the certainty. Obviously, with the discussion that's been in the marketplace about the shifting dynamics of distribution and to some extent some of the sub erosion, that would perhaps call some of that into question. But, we would still take our hand in terms of being more subscription-centric than advertising-centric because of – that we still believe there's much more certainty in that than advertising which as you know, has tended to be somewhat cyclical in nature, at times could be fickle in nature based on a variety of other conditions. And as we look at distribution, we still think that there's huge demand for these channels, particularly in the United States but worldwide as well. And while consumers are clearly shifting their habits in terms of television, we still think that the subscription channel model is going to dominate the marketplace for certainly the next five years, if not many years thereafter.

Thanks so much.

Hey, Doug, thanks for those questions. Operator, next question, please.

Our next question comes from Ben Swinburne from Morgan Stanley. Please go ahead. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Thank you. One for Bob and a follow-up for Christine. Bob, can you talk a little bit about how you're looking at the Sling product map, roadmap? DISH talked on their call about wanting to bring Disney's channels into their multi-stream service. And you've been quite complementary of the single-stream product lately. I'm just wondering how you feel about, A, them offering two different products in the marketplace shortly; and B, what are the puts and takes to including your networks in the multi-stream product, whether the Hulu plans sort of impact your thought process there? And then I have a quick follow-up for Christine. Robert A. Iger - Chairman & Chief Executive Officer: When we initially launched on Sling, we liked the single-stream. It was a new product and we wanted to be careful about the impact of that on our bigger business. When Sling decided to launch the multi-stream product, we were unable to conclude an agreement with them right away, meaning to launch with them when they launched the product. But they've subsequently come back and engaged with us. In fact, I talked to Charlie Ergen – I met with Charlie Ergen personally a couple of weeks ago and we're engaged in discussions with him about possibly being included in the new product in the future. But I don't want to comment more on those discussions. And I don't think Hulu, at least from our perspective, didn't have an impact on it at all. We're looking for multiple opportunities to distribute our product, new platforms because as I said earlier, we like what the new platforms offer to consumers. And we'll continue to look pretty…

Thanks, Ben. Operator, next question, please.

Our next question comes from Jason Bazinet from Citi. Please go ahead.

Just a question for Mr. Iger. I think even before the decision to shutter Infinity, we were at least getting questions from institutional investors about Disney acquiring a console or a video game company I should say. I'm not going to ask you to comment on that, but can you just refresh us in terms of what caused you to start as a licenser of your content, pivot into consoles, and now move back into licensing and what the lessons learned were? Robert A. Iger - Chairman & Chief Executive Officer: Well, we thought we had a really good opportunity to launch our own product in that space. I realize it was console space, but it was also essentially – a large component of it was the toys – they call it toys-to-life space, the toys-to-life business. And, in fact, we did quite well with the first iteration of it. And we did okay with the second iteration, but that business is a changing business, and we did not have enough confidence in the business in terms of it being stable enough to stay in it from a self-publishing perspective. You know that you take on substantially more risk, particularly when it comes to manufacturing and managing the inventory, the toy inventory of that business. And in fact, as Christine noted, a good part of the write-off that we just announced comes from having to write-off that inventory that we took responsibility for when we went into the publishing business. And we just feel that it's a changing space and that we're just better off at managing the risk that that business delivers by licensing instead of publishing. It's just that simple. We did fine with the product initially. We actually made a good product. I give the developers a lot of credit for the product that they made. It was extremely well received. But we knew going in that there would be a lot of risk with this product, and the fact that we did so well initially, gave us the confidence to continue with it. The truth of the matter is that the risk that we cited at the beginning when we went into this caught up with us.

Okay, all right, very good. Thank you.

Jason, thanks for the question. Operator, next question, please.

Our next question comes from Todd Juenger from Sanford Bernstein. Please go ahead. Todd Juenger - Sanford C. Bernstein & Co. LLC: Hi. Thanks for taking the question. Like most people, one for Christine, and hopefully one for Bob. Christine, on the A&E equity income, I just wonder – I know there is a lot of puts and takes there, and a new one with VICE. So, I just hoped you might be able to – willing to comment on whether sort of this quarter was emblematic of how it's going to look for a while with the start-up move there, with your partner at VICE, or anything else we should be thinking about in terms of advertising affiliate that would affect that equity income for the next many quarters? And then, Bob, if you don't mind, I'd love to hear your thoughts on ABC. You mentioned a conversation with Ben Sherwood before. You've got new leadership at ABC. When you think about what you're hoping Ben will accomplish there, and what sort of his marching orders are, given all the changes in attracting primetime audiences and advertising, and the backend value of content, what are we hoping to see there? What should we be looking for to see if it's on track and delivering what you're hoping? Thanks for your thoughts. Christine M. McCarthy - Chief Financial Officer & Senior Executive Vice President: Okay, I'll take the first one, Todd, on A&E. As you noted, A&E was down year-over-year. The biggest driver of that was a decrease in ad revenue coupled with an increase in programming expense. And as you mentioned, with VICE being in there as well, there was a negative impact of the conversion of the H2 channel to VICELAND that factored through A&E's numbers. And VICELAND…

Thanks, Todd. Operator, we have time for one more question.

Okay. And our final question comes from David Miller from Topeka Capital Markets. Please go ahead.

Yes, thanks. Just one for Christine, looking at the Park margins here of 15.9%, truly outstanding for a fiscal Q2, just given that fiscal Q2 is usually your weakest quarter. Christine, in your opinion, how much of this is due to MyMagic+? How much of a contributor is that, just given that the design of MyMagic+ was to just get people moving around more, get people to have a more efficient experience, if you will, around the Parks? Just curious what the contribution was, if there's any way you can quantify it? Thank you. Christine M. McCarthy - Chief Financial Officer & Senior Executive Vice President: Thanks, David. MyMagic+ has been around for several quarters and a few years, so it's really been incorporated into the base business in the way the Parks manages their business. So I think another way of looking at Parks' margins is to look at the strength of the domestic operations this quarter. And as you noted, the 15.9% was a total segment, including our international operations but that the domestic business was up 20% in OI and their margins were up 300 basis points. So it's part of the way we do our business, but the business domestically has done extremely well.

Okay, wonderful. Thank you very much. Robert A. Iger - Chairman & Chief Executive Officer: I want to add one thing. I'm actually kind of surprised that after almost 45 minutes of questioning, we didn't get one question about our Studio. But I just want to reiterate that the Studio's results were up tremendously in the quarter and up over 60% for the first two quarters of the year. They've had three movies in the marketplace, just recently, Zootopia, which is well over $900 million worldwide; Jungle Book, which is well over $700 million worldwide and climbing; and then Captain America, which had one of the best openings any movie has had in the history of the business. And their slate going forward is just fantastic whether you're looking at Disney Live Action, Disney Animation and Pixar or Marvel and Lucas. And I just feel that we've done a lot of work as a company to grow that business. In fact, Studio OI for the first half of the year is over $1.5 billion. And I just want to make sure that we give credit where credit is due to a studio that has done a fantastic job and it is firing on more than all cylinders. Thank you.

Bob, thanks. That really does conclude today's call. A reconciliation of non-GAAP measures that were referred to on this call to equivalent GAAP measures can be found on our IR website. Let me also remind you 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 SEC. This concludes today's call. Thanks, everyone, for joining us.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating, and you may now disconnect.