Description of the Business and Segment Information

The Walt Disney Company, together with the subsidiaries through which businesses are conducted (the Company), is a diversified worldwide entertainment company with operations in the following business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive.

DESCRIPTION OF THE BUSINESS

Media Networks

The Company operates cable programming services including the ESPN, Disney Channels, ABC Family and UTV/Bindass networks, broadcast businesses, which include the ABC TV Network and eight owned television stations, radio businesses consisting of the ESPN Radio Network, including 4 owned ESPN radio stations, and the Radio Disney Network, which operates from an owned radio station in Los Angeles. The ABC TV and ESPN Radio Networks have affiliated stations providing coverage to consumers throughout the U.S. The Company also produces original live-action and animated television programming, which may be sold in network, first-run syndication and other television markets worldwide, through online services and on DVD and Blu-ray formats. The Company has interests in media businesses that are accounted for under the equity method including A&E Television Networks LLC (A&E), Seven TV, CTV Specialty Television, Inc., Hulu LLC and Fusion Media Networks LLC. Our Media Networks business also operates branded internet sites.

Parks and Resorts

The Company owns and operates the Walt Disney World Resort in Florida and the Disneyland Resort in California. The Walt Disney World Resort includes four theme parks (the Magic Kingdom, Epcot, Disney’s Hollywood Studios and Disney’s Animal Kingdom); 18 resort hotels; a retail, dining and entertainment complex; a sports complex; conference centers; campgrounds; water parks; and other recreational facilities. The Disneyland Resort includes two theme parks (Disneyland and Disney California Adventure), three resort hotels and a retail, dining and entertainment complex. Internationally, the Company manages and has an 81% (85% as of October 3, 2015) effective ownership interest in Disneyland Paris (see Disneyland Paris recapitalization in Note 6), which includes two theme parks (Disneyland Park and Walt Disney Studios Park); seven themed hotels; two convention centers; a shopping, dining and entertainment complex; and a 27-hole golf facility. The Company manages and has a 47% ownership interest in Hong Kong Disneyland Resort (HKDL), which includes one theme park and two resort hotels. The Company has a 43% ownership interest in Shanghai Disney Resort, which is currently under construction, and a 70% ownership interest in the management company of Shanghai Disney Resort. The Company also earns royalties on revenues generated by the Tokyo Disneyland Resort, which includes two theme parks (Tokyo Disneyland and Tokyo DisneySea) and three Disney-branded hotels, and is owned and operated by an unrelated Japanese corporation. The Company manages and markets vacation club ownership interests through the Disney Vacation Club; operates the Disney Cruise Line; the Adventures by Disney guided group vacations business; and Aulani, a hotel and vacation club resort in Hawaii. The Company’s Walt Disney Imagineering unit designs and develops theme park concepts and attractions as well as resort properties.

Studio Entertainment

The Company produces and acquires live-action and animated motion pictures for worldwide distribution to the theatrical, home entertainment and television markets. The Company distributes these products through its own distribution and marketing companies in the U.S. and both directly and through independent companies and joint ventures in foreign markets primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm, Touchstone and UTV banners. We distribute certain motion pictures for DreamWorks Studios under our Touchstone Pictures banner. The Company also produces stage plays and musical recordings, licenses and produces live entertainment events and provides visual and audio effects and other post-production services.

Consumer Products

The Company licenses its trade names, characters and visual and literary properties to various retailers and publishers throughout the world. The Company also engages in retail, online and wholesale distribution of products through The Disney Store, DisneyStore.com and MarvelStore.com. We operate The Disney Store in North America, Europe and Japan. The Company publishes entertainment and educational books and magazines and comic books for children and families and operates English language learning centers in China.

Interactive

The Company creates and distributes branded entertainment and lifestyle content for interactive media platforms. The primary operations include the production and distribution of multi-platform games, the licensing of our properties for games and mobile devices, and the development of branded online services.

In June 2015, the Company announced the combination of its Consumer Products and Interactive segments into a single segment. The Company will begin reporting the financial results of the combined segment in fiscal 2016.

SEGMENT INFORMATION

The operating segments reported below are the segments of the Company for which separate financial information is available and for which segment results are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and in assessing performance.

Segment operating results reflect earnings before corporate and unallocated shared expenses, restructuring and impairment charges, other expense, interest income/(expense), income taxes and noncontrolling interests. Segment operating income includes equity in the income of investees. Corporate and unallocated shared expenses principally consist of corporate functions, executive management and certain unallocated administrative support functions.

Equity in the income of investees included in segment operating results is as follows:



	2015			2014			2013
Media Networks
Cable Networks	$	896		$	895		$	788
Broadcasting	(82		)	(39		)	(46		)
Parks and Resorts	—			(2		)	—
Equity in the income of investees included in segment operating income	$	814		$	854		$	742

In fiscal 2013, the Company recorded a $55 million charge for our share of expense related to an equity redemption at Hulu LLC (Hulu Equity Redemption). This charge is recorded in Equity in the income of investees in the Consolidated Statement of Income but has been excluded from segment operating income. See Note 3 for further discussion of the transaction.

The following segment results include allocations of certain costs, including information technology, pension, legal and other shared services costs, which are allocated based on metrics designed to correlate with consumption. These allocations are agreed-upon amounts between the businesses and may differ from amounts that would be negotiated in arm’s length transactions. In addition, all significant intersegment transactions have been eliminated except that Studio Entertainment revenues and operating income include an allocation of Consumer Products and Interactive revenues, which is meant to reflect royalties on revenue generated by Consumer Products and Interactive on merchandise based on intellectual property from certain Studio Entertainment films.



	2015			2014			2013
Revenues
Media Networks	$	23,264		$	21,152		$	20,356
Parks and Resorts	16,162			15,099			14,087
Studio Entertainment
Third parties	6,838			6,988			5,721
Intersegment	528			290			258
	7,366			7,278			5,979
Consumer Products
Third parties	5,027			4,274			3,811
Intersegment	(528		)	(289		)	(256		)
	4,499			3,985			3,555
Interactive
Third parties	1,174			1,300			1,066
Intersegment	—			(1		)	(2		)
	1,174			1,299			1,064
Total consolidated revenues	$	52,465		$	48,813		$	45,041
Segment operating income (loss)
Media Networks	$	7,793		$	7,321		$	6,818
Parks and Resorts	3,031			2,663			2,220
Studio Entertainment	1,973			1,549			661
Consumer Products	1,752			1,356			1,112
Interactive	132			116			(87		)
Total segment operating income	$	14,681		$	13,005		$	10,724
Reconciliation of segment operating income to income before income taxes
Segment operating income	$	14,681		$	13,005		$	10,724
Corporate and unallocated shared expenses	(643		)	(611		)	(531		)
Restructuring and impairment charges	(53		)	(140		)	(214		)
Other expense, net	—			(31		)	(69		)
Interest income/(expense), net	(117		)	23			(235		)
Hulu Equity Redemption charge	—			—			(55		)
Income before income taxes	$	13,868		$	12,246		$	9,620
Capital expenditures
Media Networks
Cable Networks	$	127		$	172		$	176
Broadcasting	71			88			87
Parks and Resorts
Domestic	1,457			1,184			1,140
International	2,147			1,504			970
Studio Entertainment	107			63			78
Consumer Products	76			43			45
Interactive	11			5			13
Corporate	269			252			287
Total capital expenditures	$	4,265		$	3,311		$	2,796



	2015		2014		2013
Depreciation expense
Media Networks	$	245	$	238	$	238
Parks and Resorts
Domestic	1,169		1,117		1,041
International	345		353		327
Studio Entertainment	55		48		54
Consumer Products	57		59		57
Interactive	12		10		20
Corporate	249		239		220
Total depreciation expense	$	2,132	$	2,064	$	1,957
Amortization of intangible assets
Media Networks	$	21	$	12	$	13
Parks and Resorts	3		2		2
Studio Entertainment	84		88		107
Consumer Products	102		109		89
Interactive	12		13		24
Corporate	—		—		—
Total amortization of intangible assets	$	222	$	224	$	235
Identifiable assets⁽¹⁾
Media Networks	$	30,638	$	29,566
Parks and Resorts	25,510		23,297
Studio Entertainment	15,334		15,162
Consumer Products	7,591		7,526
Interactive	2,087		2,199
Corporate⁽²⁾	7,022		6,391
Total consolidated assets	$	88,182	$	84,141
Supplemental revenue data
Affiliate Fees	$	12,029	$	10,632	$	10,018
Advertising	8,499		8,094		8,006
Retail merchandise, food and beverage	5,986		5,598		5,185
Theme park admissions	5,483		5,114		4,704
Revenues
United States and Canada	$	40,320	$	36,769	$	34,021
Europe	6,507		6,505		6,181
Asia Pacific	3,958		3,930		3,333
Latin America and Other	1,680		1,609		1,506
	$	52,465	$	48,813	$	45,041
Segment operating income
United States and Canada	$	10,820	$	9,594	$	7,871
Europe	1,964		1,581		1,361
Asia Pacific	1,365		1,342		1,016
Latin America and Other	532		488		476
	$	14,681	$	13,005	$	10,724



	2015		2014
Long-lived assets ⁽³⁾
United States and Canada	$	53,976	$	52,909
Europe	8,254		8,733
Asia Pacific	6,817		5,084
Latin America and Other	182		217
	$	69,229	$	66,943


⁽¹⁾	Identifiable assets include amounts associated with equity method investments, goodwill and intangible assets. Equity method investments by segment are as follows:



	2015		2014
Media Networks	$	2,454	$	2,321
Parks and Resorts	9		28
Studio Entertainment	2		2
Consumer Products	1		1
Interactive	—		—
Corporate	17		124
	$	2,483	$	2,476

Goodwill and intangible assets by segment are as follows:



	2015		2014
Media Networks	$	18,186	$	18,270
Parks and Resorts	376		379
Studio Entertainment	8,538		8,679
Consumer Products	6,118		6,187
Interactive	1,650		1,670
Corporate	130		130
	$	34,998	$	35,315


⁽²⁾	Primarily fixed assets, cash and cash equivalents, deferred tax assets and investments


⁽³⁾	Long-lived assets are total assets less the following: current assets, long-term receivables, deferred taxes, financial investments and derivatives