Welcome to The Walt Disney Company's Fiscal Full Year and Q4 FY 2016 Earnings Conference Call. My name is Anna 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. Please note that this conference is being recorded. I will now turn the call over to Lowell Singer, Senior Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to The Walt Disney Company's fourth 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 a recording and 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. Bob will lead off followed by Christine and then, of course, we'll be happy to take your questions. So with that, let me turn it over to Bob and we can get started.

Thanks, Lowell, and good afternoon. We just finished a great year, our sixth consecutive year of record results. And since fiscal 2013, we've delivered EPS growth of almost 20%. Fiscal 2016 also included two of the most important achievements in the history of our company: the phenomenal return of Star Wars and the spectacular opening of Shanghai Disney Resort. We're extremely proud of these accomplishments which will drive long-term growth for our company. Star Wars: The Force Awakens exceeded $2 billion in global box office, making it the third highest grossing movie of all-time and we're only just beginning to reap the benefits of our Lucasfilm acquisition. Next up we have Rogue One, a fantastic original Star Wars story, opening in December. Star Wars: Episode VIII will be in theaters December of 2017, followed by a standalone movie about young Han Solo in 2018. And we'll release Episode IX the following year. Work on all those movies is already underway and we're thrilled with what we've seen so far. The magnitude of our Studio's success in fiscal 2016 is simply stunning. We released four films that broke $1 billion in worldwide box office, The Force Awakens, Captain America: Civil War, Finding Dory, and Zootopia. And Jungle Book came very close with $966 million. Our Studio slate topped a record-breaking $7.5 billion in total box office for the year. Disney, Pixar, Marvel, and Lucasfilm all contributed to this remarkable achievement, and their creative momentum continues. Doctor Strange just opened to great numbers, Marvel's 14th consecutive movie to open at number one at the U.S. box office. And it has already surpassed $377 million worldwide. Our next animated musical, Moana, is already generating great buzz ahead of its opening later this month. And we expect it will join the pantheon of recent…

Thanks, Bob, and good afternoon, everyone. I am pleased to report another solid quarter of financial results which, as Bob said, caps off another great year for our company. Excluding items affecting comparability, earnings per share were $1.10 for the fourth quarter and $5.72 for the full year. We've been able to deliver solid results year after year while maintaining a strong balance sheet which, combined with record operating cash flow of $13.2 billion in fiscal 2016, provides tremendous flexibility to make key investments to expand our existing businesses, capitalize on new growth opportunities, and return capital to our shareholders. Before I discuss our segments' fourth quarter results, I want to remind you that our Q4 results last year included the benefit of an additional week of operations compared to this year. This 53rd week in our fiscal 2015 calendar makes comparisons of our results a little challenging. While there is an element of imprecision in quantifying the impact, we are going to give you our best assessment of how the 53rd week affected key segments and drivers. As we've previously discussed, we estimate the benefit of the 53rd week to our Q4 fiscal 2015 results was approximately $350 million in operating income or about $0.13 in earnings per share, with the majority of the impact at Cable followed by Parks and Resorts and, to a lesser extent, Consumer Products. At Media Networks, we estimate the 53rd week had an adverse impact on the year-over-year change in operating income of about 12 percentage points. As a result, operating income was down 8% in the quarter as growth in Broadcasting was more than offset by a decline at Cable. The year-over-year change in Cable operating income was weighed down in Q4 by about 14 percentage points due to the 53rd week,…

Okay. Thanks, operator. We are ready to take the first question.

And our first question is from Michael Nathanson from MoffettNathanson. Please go ahead.

Thanks. I have one for Bob and one for Christine. Bob, on ESPN, you guys have been clear about 2017 step-up. You've been clear that ESPN will not grow at the rate it used to grow the previous decade. And you've been clear that you expect growth in the future. I think on those points, everyone agrees first and second. But on the third point, the question is, what can you share with us that gives you the confidence about the growth in the future? Is it an affiliate fee cycle? Is it new subscriber growth? Advertising costs? So anything to give us some sense of why you're so confident about the outlook.

Well, I think you have to start with what ESPN offers and its popularity. I mentioned in my comments the popularity and there is certainly recent examples, like the World Series, of live sports, so I feel really good about their programming. I feel good about their continued ability to drive solid advertising. We have a good sense of what their rate structure is in terms of existing deals with distributors, but we have some opportunities and some new deals to improve the rate structure even more. We have taken a more bullish position on the future of ESPN's sub base. We think that while we were candid a year ago on sub losses, we believe that, to some extent, the causes of those losses have abated, notably the migration to smaller packages. But we also believe that new entrance in the marketplace, particularly DMVDs – digital MVPDs, I should say, are going to offer ESPN opportunities that they haven't had before to reach more people, and in particular we think those offerings because of their pricing, the user interface, their mobile-friendly nature, are likely to cause more Millennials to either stay in the multi-channel ecosystem as subscribers or to enter it when they might not have in the past. So we just generally feel bullish about ESPN's future. We are, I'd say, realistic about what we've seen with recent sub trends and again have been, I think, fairly candid about that and we think the long-term prospects for the reason I cited for ESPN are good. The other thing that ESPN has, which we've talked about a lot, is the ability to take product out direct to consumer and that's why we invested in BAM. And we think that gives us a really interesting opportunity to create a new product, it gives us an interesting opportunity to create product that is more user-friendly and, therefore, is likely to gain more consumption, and it gives us an ability to mine data from that user consumption that can approve our advertising prospects and give us the ability to tailor the product in a more customized way for those consumers.

Okay. Thanks, Bob. And then for Christine, I think most folks who have covered the company for a long time expected Shanghai to look like other parks that open with big losses. So what's different about Shanghai? Why is it going to get close to breakeven a year into operation than maybe some of the other international parks?

I'll take the first part of that. Christine may want to address a little bit from a financial perspective. But this has opened very successfully, very successfully. And I mentioned two things in my earlier comments; one, just the sheer number of people that have come in, but we also have a fair amount of data already about guest satisfaction. We know that consumers are staying longer, obviously that's the result of them liking it. And the other thing that's really interesting to us is what a national product this has become. We expected that attendance would be primarily from the Shanghai area, at least in the early months and maybe couple of years as word-of-mouth spread across the country, but the fact that 50% of attendance already is from outside of Shanghai tells us that this is a product that's resonating across China. And obviously, given the population base that China represents, that bodes very well for us. So the product is working, people are coming, they're staying longer. We like the trends that we're seeing generally about spending. Our hotel occupancy is extremely high. We didn't get into details there, but I can tell you that it's very, very high off the bat. We've already made a decision about expansion and that's already begun. And so, our outlook for this – and what we even see happening in 2017, is quite positive.

Yeah, Michael, I'd add to that that the first quarter of full operations, which we just concluded, exceeded our expectations. We've got a very established team over there, established in the sense that they've worked in the theme park for a while. They're very nimble and they can adjust to findings that they are encountering along the way, and we're very optimistic that what we gave you for the fiscal 2017 expectation of around a break-even result is certainly something that we're looking forward to.

Okay. Thanks.

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

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

Just staying on the parks for a minute, we've seen such impressive growth over the last several years both in terms of revenue and margins, really all metrics. I know there's been benefit from the expansions, the MyMagic+ as well as, obviously, the usual organic drivers. I guess looking forward, when we look for the incremental growth over the next several years, is it a higher contribution from Shanghai given what you've just said or is there something else that's going to be incremental? I guess, any color you can give us to better frame how this impressive growth can continue.

Well, first of all, we believe we still have pricing leverage and that's not just from raising prices on your standard ticket, it's from creating new packages, and we certainly have seen that in the last year, which was designed to do a few things. One, obviously when we put in more demand-oriented pricing, we're able to move some of the attendance away from the peak period and improve the guest satisfaction. But we believe that there are a number of tools we have available to us on the revenue yield management side, to create more revenue out of the attendance that we're getting. We also have other kinds of expansion opportunities, like hotels, for instance, where not only do we have the property but we've seen such high occupancy rates in Orlando and in California that we believe that it would be smart for us to build more hotels out – we have no announcements to make per se, but build more hotels out at both sites and take advantage of what we're seeing there. That clearly is very beneficial to us. And then we've only just begun to mine some of the critical IP that we have created in the last few years, Star Wars being the biggest one. We're building two of the biggest lands we've ever built in Orlando and in California. And we think that – I know you talked about what we've done already, but there's so much more that we can do, and so much more we are doing. And I think usually when we talk about the Studio, we talk about the Studio results as it relates to box office and the bottom-line for that business, but you also have to think about it in terms of how we mine these assets not just in the United States, but globally at our Parks and in Consumer Products. I was in Shanghai last week and it was just thrilling to see the reaction people are having to those franchises. We had 11 franchises of Consumer Products last year that did $1 billion or more in global retail sales. But you really see that resonating when you go to the theme parks. And not just Mickey Mouse and core characters and Pirates and things you'd expect, but the line for characters from Zootopia in Shanghai was significant. So I think there – and we're at a time in that product cycle that the ability to increase profitability from it is really just kicking in.

And then if I can just sneak in another one quickly. On the sports side, I'd love to hear your comments, the ratings have been very mixed lately, some franchises showing record viewership – you cited the World Series. Others, like the NFL, being in a bit of a slump. I would love to hear your view on how much of this volatility you think is cyclical? Or do you see any sort of permanent changes in viewership that may give you a different view of these franchises at this point?

Well, we've seen some of the numbers from the NFL as well. I actually think that there's kind of a lot of premature speculation there. I'm not – I don't want to make light of it, except I do want to say this is a season, and it happens to be a season that's occurred when postseason baseball was very strong, and clearly the election had some impact, certainly the debates did. So I think it's a little too soon to jump to conclusions. We're being patient about it. We're going to look at the trend lines and see and continue to watch it, but I think it would be – it's far too early for us to suggest that we're concerned. It's still the highest rated sports programming that's out there, and we think we're lucky that we've got it licensed on a long-term basis. Look, it's clear also, the most important thing the NFL can do is to maintain quality. And it just could be that what we're seeing among the contributors is that the match-ups or the strength of certain teams, particularly some of the teams that have done extremely well in the past, is not what it was, and that could just be aberrational. So we'd love to see the ratings higher, but we're not expressing long-term concern about it on a long-term basis.

Thank you.

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

Our next question is from Jessica Reif Cohen from Bank of America Merrill Lynch. Please go ahead.

Hi. I hope you can hear me; I'm trying to take out the slack (30:06).

We can hear you.

Okay. Thank you. There's been tons of speculation on potential acquisitions, notably potentially Netflix, Twitter. Can you talk about, like, just generally, what you think is missing at Walt Disney? What acquisitions would fill a hole for you? And then I have a follow-up.

Well, obviously we're not going to get specific about that. But we think there's some really interesting opportunities, given what's going on from a technological perspective, to both improve our businesses and also improve the consumer experience by selling directly to consumers. I mentioned that earlier. And we're considering and exploring various ways to accomplish this. We think it's something that's important for us to do. I'll go back to BAM. The purchase of BAM was designed just to do just that. Whether there will be more or not, I can't really say. Except to say that we're obviously interested in the opportunity that exist today to have more direct relationship with the consumer for the reasons that I cited.

And then, Bob, could you – again it's kind of an awkward question, but you've stated the time that you plan to leave. Can you talk a little bit about your succession planning and how you're thinking about that?

Yeah, it's not awkward at all. The board has discussed succession at every meeting that the board has had in the last few years, and I don't think there's necessarily a need for the board to provide any more details publicly about the process, except to say the process is ongoing, it's robust, and we're all confident that it's going to result in the board choosing not only the right candidate, but the right candidate on a timely basis.

Okay. Thank you.

All right, Jessica. Thanks for the questions. Operator, next question, please.

And we have a question from Todd Juenger from Sanford Bernstein. Please go ahead. Todd Juenger - Sanford C. Bernstein & Co. LLC: Hi. Todd Juenger here. A quick one for Christine and then maybe a little follow-on for Bob. Christine, just on the Asian park attendance – or, doesn't have to be you, but probably you, Christine – especially with Bob's comments about the strength of the start, just wondering across all of China, can you talk about whether there's any impact at all that you see between the attendance at Hong Kong and the attendance in Shanghai, whether there's any interrelation there or even cannibalization? And at Shanghai, now that schools are open, I assume, in China, is there any difference in the attendance profile during times of school period? And then the broader question – this is really a pickup, right, from what Jessica said, so sorry if it's – I hope it's not redundant. It's not to me. Bob, I just picked up a line that you said in your opening comments in the press release around further strengthening your technological capabilities. You've talked about that a little bit, but I haven't seen that statement before in the opening line of the press release. I'm just wondering what types of technological capabilities you are thinking about that needs strengthening and what are some different ways to strengthen them. Is that mostly about the BAMTech type of stuff or is there other stuff going on? Thanks. Sorry for the windy question.

First of all, by using the term strengthening, I'm not in any way implying that we are weak. It just means that there are opportunities for us to get stronger. Let's use the parks as an example on what we're doing at Imagineering, where there's significant investment in new technology to improve the guest experience. And that, by the way, includes how guests buy access to our parks, the whole online sale or e-commerce experience. As a for instance, we're redoing disneystore.com using basically better technological tools. Another example, BAM clearly was what I was mostly referring to because that is an investment in a technology platform aimed at strengthening our technology capabilities so that we can strengthen our business. On the parks question that you asked, we haven't seen a negative impact at Hong Kong due to Shanghai at all. In fact, there was some uptick initially on Hong Kong attendance when Shanghai opened. And there seems to be an interesting growth in pride locally in Hong Kong in that park. I guess their competitive spirits have somehow or another been stimulated. In terms of what we're seeing in Shanghai attendance-wise and the makeup of the visitor weekday or post-summer, it's really kind of too early to tell. I will say, having been there last week on two weekdays, I was surprised at how many kids were in the park. They were younger kids, but there were many more of them of what we expected. And we are seeing some interesting patterns already with visitation. I cited one just in terms of where we're sourcing visitors geographically. I don't want to get into too many of the others yet because we're only four months in, but the strength of certain days of the week that we didn't expect and some days of the week are slightly less strong than we thought initially. But so far, I can say so good, meaning we really are happy with how this product has launched. Another thing that I haven't really addressed here, but one of the things that we wanted to be incredibly sensitive about and be really good at was the whole notion of entering a new market with this product under, what I'll call, culturally sensitive or culturally correct circumstances, opening something that the people of China actually that resonated with them in terms of their experience, and that has been letter-perfect. Todd Juenger - Sanford C. Bernstein & Co. LLC: Thank you.

Todd, thank you for those questions. Operator, next question, please.

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

Oh, thanks so much. One for Bob, one for Christine. So, Bob, I guess it's not an easy one but do you just see the change in the power structure in Washington having an impact on The Walt Disney Company at all, positively or negatively? And I'll just ask the question for Christine. You outlined another aggressive year of share repurchases and I was hoping you could offer your latest thoughts on optimizing buybacks versus dividends and debt leverage? Thanks.

I think it's really too early to speculate about what the changes in Washington are going to mean for our business or for businesses. We have, though, been exhorting Washington both the executive and the legislative branches to take a look at the current tax policy of the United States, particularly the corporate tax rate, and to close more loopholes but lower the corporate tax rate. We are no longer competitive with the rest of the world in that regard and that must be addressed. It's possible that, given what's gone on this week, that that's likely to be addressed sooner rather than later. That's obviously a good thing. It's also a good thing I think for the market and for most businesses that the transition is already off to what appears to be a fairly smooth start, meaning it looks like there's cordiality, which we've not seen in a long time, and there's an attempt by both sides, the incumbent and the President-elect, to approach this in a rational, cordial – I guess, the best way to – effective and polite way. That can only be good for business and for the country. And I think smooth transitions are good. I will say on the smooth transition front, we're going through a smooth transition as well. We've already prepared a bust of President-elect Trump to go into our Hall of the Presidents at Disney World.

Okay. Thank you for that.

Okay. Doug, on buybacks, as you know, in fiscal 2016 we bought back $7.5 billion of our stock this year. We gave you $7 billion to $8 billion for 2017. And I think you know we have a very balanced approach to addressing return of capital to shareholders. We also considered dividends but that's after we invest in our businesses and look at other growth opportunities. I think you'll also noted in my comments that I called out a record year for cash flow from operations at $13.2 billion. So we have a lot to work with. And once again, we invest in our existing businesses, look for other opportunities, and of course always keep shareholders in mind.

And by the way just to add to what Christine said, we had record years in fiscal 2014 and 2015, really strong years, and 2016 had great growth but a little bit more modest than the two years prior, to deliver from operations $13 billion-plus of cash is quite an extraordinary performance.

Thank you.

Doug, thank you for those questions. Operator, next question, please.

Our next question is from Omar Sheikh from Credit Suisse. Please go ahead. Omar Sheikh - Credit Suisse Securities (USA) LLC (Broker): Thank you. I have a couple of questions. First of all, Bob, on BAMTech, going back to that. I wondered if you could just maybe just give us a sense of how big of an investment you think you need to put into that effort in fiscal 2017 so you obviously talked about needing to get close to the consumer and that seems to be the only projects you have that we know about. So maybe if you could maybe give us a sense of how much you need to put behind that. That's the first question. And then second one maybe for Christine is on Consumer Products, if I could switch to that. You give us some guidance I think you said for Q1 OI. I wondered maybe if you could give us a little bit of sense of how you expect 2017 overall to pan out. I'm particularly thinking about the licensing revenues and the trends you might see there. Thank you.

Omar, on the BAMTech side, the investment that we're thinking about in terms of launching new product is very, very modest. The primary investment is in buying the 33% stake in BAMTech that we're buying initially. We do plan, as I mentioned in my comments, to launch an ESPN branded service in 2017, but we've already licensed enough sports to put onto that service so that the incremental cost from a programming perspective would be de minimis. And the technologies we've talked about already exist to do what we want to do and so you're not looking really at a significant investment to accomplish near-term what we need to accomplish there.

Hi, Omar. On Consumer Products, as I mentioned in my prepared comments, we do expect growth for the year in the segment. While I did note a challenging first quarter operating income performance, once again that is going to be primarily due to the difficult comp we have last year to Star Wars and, as you remember, last year we also had the fourth quarter revenue recognized in our first quarter, so it made it even a little more challenging than just a straight quarter. But, year-over-year, we expect there to be growth in that segment. We also – last quarter, I got a question on Frozen comparisons, and I just want to mention it because it still is trickling through in our results. But we did see difficult comps for the phenomenal performance that we had in Frozen, and we saw those in fiscal 2016 in the second, third, and fourth quarter, and we still expect to have difficult comps for Frozen merchandise throughout 2017. Omar Sheikh - Credit Suisse Securities (USA) LLC (Broker): Okay. Great. And then it's just the Cars launch in the middle of next year that you expect to see some sort of reacceleration on the top-line there. Would you say that's correct?

Absolutely. Cars is one of those evergreen franchises that has been very successful in Consumer Products, also throughout our – it's also represented in our Parks, as you know, through Cars Land in Anaheim. And also this year we have the movie Spiderman. It's not our movie to release, but our Consumer Products will represent the strength in that franchise as well.

And Marvel is producing that movie. Omar Sheikh - Credit Suisse Securities (USA) LLC (Broker): Great. Thank you very much.

Thanks, Omar. Operator, next question, please.

And we have a question from Ben Swinburne from Morgan Stanley. Please go ahead. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Bob, I just want to go back to your comments about the pay-TV universe and your enthusiasm for the new emerging bundles. Any comments you could share with us on Hulu, given your position as an owner of that company, what the product may look like? And sort of any color on why you think that may expand the pie? And any role BAMTech may fill for you, in also addressing that broadband-only universe with ESPN? And then, Christine, I just wanted to go back to your prepared remarks on Cable. I think if I adjust out the 53rd week, I'm looking at, like, 3% Cable affiliate revenue growth. I think you said down 8% – an 8% hit from 53rd week down 5% reported. I just wanted to make sure I got all that right. I was jotting it down quickly. So, thanks.

Hulu is, at some point, going to go public with far more details about its product, the user interface, the pricing, and I guess ultimately the programming that it's licensed, although some of it has already come out. So I can't really add much except to say that between what Hulu is doing, what Sling has done, what AT&T Direct is doing, what others are doing that we're already in negotiation with, we believe that you're going to see a number of different packages brought out, meaning different prices, different bundles. In all cases, we believe the user interface and the technology is going to be very contemporary and will be very mobile-friendly. And we think, given the pricing and the nature of the product that is coming out, that the opportunity to either keep Millennials in as subscribers, or to attract them, meaning cause them to subscribe earlier than they may have, is actually very encouraging. And that's one of the reasons why we're more bullish about the future of multi-channel TV than perhaps either the marketplace or others are. It doesn't mean there isn't going to be a shift either away from the giant expanded basic bundle, or away from some of the traditional distributors. But we believe that there will be plenty of other opportunities. The other thing that we have to note, which we've said before is these new entrants in the marketplace are very, very interested in distributing our product. They know the popularity of sports, and in particular ESPN, and they know that it is in their best interest to license that product to launch their service more effectively. We've seen that time after time after time, negotiation after negotiation, and the pricing to us is also good. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Just as a follow up, where's your head on a direct-to-consumer ESPN, either leveraging BAMTech or on your own? Is that still being deliberated, or have you moved to the point of thinking more seriously about that?

We're taking it seriously. It's not something I think we need to deliberate about. I think if the opportunity exists, or if the need exists, or both, we will take advantage of it, meaning we have the technology now through BAMTech to accomplish exactly what we would need to accomplish, and we're probably more likely to be aggressive about it than non-aggressive, but the need doesn't exist at the moment. And we're going to give a lot of these new products that are launching a chance to prove what we believe is the case, and that is they're going to be considered attractive to the marketplace and, therefore, deliver value to us on a timely basis. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Makes sense.

Hi, Ben. It's Christine. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Hey, Christine.

So thanks for asking the question on affiliate revenue, and I know my comments were a little laden in some 53rd week information, so thanks for the opportunity to hopefully clarify. So on Cable affiliate revenue, the actual was down 5%, the 53rd week was 8%, for a net of 3%, as you noted. For Media Networks affiliate revenue – and the reason I'm saying this is, the numbers are close but they're flipped. It's down 3%, with the same 8% adjustment, for a 5% growth. Now, as you know, we'll be filing our 10-K in a couple of weeks which will provide the affiliate revenue growth drivers for the full year, but let me give you some context now on Q4 affiliate growth. So the 53rd week was a 7 point drag on the Q4 affiliate revenue growth. Rates were a 6 point benefit to that Q4 affiliate growth. Subs were a 2 point drag in the quarter, which is consistent with what we saw last quarter and consistent with what you'll see in the 10-K as the full year impact of subscriber declines. And also, lastly, foreign exchange was a 1 point drag on that quarterly growth. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Was that Cable, Christine, or Media Net? Sorry to...

That was Media Networks. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Got it. Thanks so much for all the help.

Thanks.

Okay. Ben. Thank you. Operator, next question, please.

And we have a question from Kannan Venkateshwar from Barclays. Please go ahead.

Thank you. So, just a couple of follow-ups on that. Recently there was this dispute between Nielsen and Disney, it looked like, on the numbers itself. If you could just help us understand what the differences were in terms of the way those numbers were being arrived at? And secondly, from a balance sheet perspective, how sacrosanct is the kind of leverage levels you look at in case something interesting in size does come along from an M&A perspective? How do you guys view your balance sheet flexibility from that perspective? Thanks.

Thank you, Kannan. We thought the Nielsen numbers when they were released – we continue to think this, by the way – are an anomaly in terms of what the industry overall is seeing. And further they contradicted what other respected third-party observers and experts had been saying and telling us. So we've exhorted Nielsen to take a very careful look at basically their methodology. They're obviously an important business to us because of the service they provide, particularly on the advertising side, but given the fact that what they provided was an anomaly and given the fact that it contradicted what other observers were seeing, we think it's important that more scrutiny is given to it. In addition to that, Nielsen is currently not measuring digital subs. We've talked to them about the need to do that and they've talked about doing it but we believe given the growth in these digital platforms that needs to happen on a much more timely faster basis than it has been happening. That's basically I think is it in a nutshell.

And, Kannan, on the balance sheet and your comments on leverage, so we ended the year with total leverage about 1.1 times. So, we view – and I said it in my comments, and we said it consistently, we view our balance sheet as a source of strength and great financial flexibility. So that's the way we treat it. There's nothing sacrosanct about it. But we do treat it as a valuable financial flexible tool and we will deal with things as they come along.

Thank you.

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

And we have a question from Anthony DiClemente from Nomura. Please go ahead.

Thanks very much. I have two questions. One for Bob and one for Christine. So, Bob, on the subject of direct to consumer and getting closer to the consumer, I want to ask about Disney content as a direct to consumer service sort of outside of ESPN. So you have in the U.K. I believe DisneyLife, which you've talked about in the past. When do we see something like that Disney as a service, so to speak, back in U.S., so direct-to-consumer Disney branded apps here stateside? And then Christine, just you mentioned Cable programming costs up 8% in fiscal 2017. I was curious, does that include the expectation for a step-up in the Big Ten costs for renewal there? I think that's up for renewal during the year. Correct me if I'm wrong. Thank you.

I think there's an inevitability to us bringing a Disney-branded product out in the United States, but I'm not prepared to discuss timing yet. One of the reasons is that we're still learning about the product in the U.K. We're still considering its pricing, the nature of the product, the user interface, the manner in which it's distributed. And we want to learn as much as we possibly can, which is what that was designed to do before we bring it out in any other market. But we do know that, to those that have used it, it's quite popular. And we think there's an opportunity here, but we're not prepared to say when.

Okay.

And on programming expenses, Anthony. Yes, the Cable programming expenses are estimated to be up 8% for the year. We talked about the NBA contract driving $600 million of that increase. The Big Ten, we don't have a deal with currently. So we'd love to be in business with the Big Ten long-term, but we don't have a deal currently to announce.

So if you were to have a deal, it would be a greater step-up in programming costs, just to clarify?

We're not going to comment on specifics, but the 8% is what we've given publicly.

Okay. Thank you very much.

Thanks, Anthony. Operator, next question, please.

And we have a question from Michael Morris from Guggenheim Securities. Please go ahead.

Thank you. Good evening. Two questions. Bob, you talked a little bit about the regulatory environment previously, but I'm curious specifically about your position on net neutrality. How important is the current policy to your business both the existing business, also strategy? How do you think about things going forward? And how could that impact you if it were removed as policy? And then second on the BAMTech partnership with Discovery in Europe. I'm curious since ESPN seemed to move away from European exposure, why do you think Eurosport and Discovery can succeed were ESPN kind of pulled back? Thanks.

Interesting, we used to own as a company a good piece of Eurosport, and we divested a long time ago. I think to me answer that part of the question first, we think it's better because they were already in the market successfully, and we would be a new entrant with ESPN. And so, this made sense for us. On the first part, we really haven't been vocal about net neutrality. I think it would be safe to say right now, not even sure we have a strong, a big oar in the water, so to speak. And so, we don't really have a public position to take on it. Frankly, it's not something that has even been discussed with me in the very recent past. So I'm caught mildly by surprise by it. But I think one of the reasons it hasn't been discussed is it hasn't been of issue to us.

Great.

All right, Mike, thanks. Operator, we have time for one more question.

And we have a question from Jason Bazinet from Citi. Please go ahead.

A question for Ms. McCarthy. You talked about the $175 million FX hit for fiscal 2017. Is that independent of any currency moves intra-year because of your hedges?

So that $175 million, Jason, is both the year-over-year impact of foreign exchange as well as pension expense.

Okay.

The way you should look at our foreign exchange for fiscal 2017 is that we are fully hedged, so the number that we've given which is a combined number, but if you want to disaggregate it a little bit, and I'm happy to do that. It's a little over $100 million for foreign exchange with the balance being in pension expense.

Okay.

In the recent moves, by the way, in currencies have not impacted us because we are fully hedged.

Okay. Thank you very much.

All right, Jason, thank you, and thanks, everyone, for joining us today. 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 call. Have a nice evening, everyone.

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