TV, Parks, Consumer Products Drive Disney Gains

BURBANK, August 2: The Walt Disney Company, which yesterday
announced its acquisition of the kids’ virtual world Club Penguin, has reported
an improved third quarter profit of $1.2 billion, a 4.7-percent gain, on
revenues of $9 billion, a 6.7-percent rise on the year-ago period.

"We've again achieved strong results by focusing on
doing what we do best: building high-quality creative franchises across
multiple platforms and multiple markets," said Robert A. Iger, Disney’s
president and CEO.

At the Media Networks segment, revenues were up 6 percent to
$3.8 billion, with an operating income that was up 23 percent to $1.4 billion.
Revenues just from cable networks rose 4 percent to $2.3 billion, led by ESPN
and the U.S. Disney/ABC cable networks. Broadcasting revenues posted a
9-percent increase, to $1.5 billion, with operating income more than doubling
to $295 million. The gains were led by strong sales of ABC Studios productions,
lower programming and production costs, including a decrease in the number of
pilot productions, and higher advertising revenue at ABC. These increases were
partially offset by increased costs associated with the Disney-branded
mobile-phone service.

Studio Entertainment revenues rose 4 percent to $1.8
billion, while segment operating income fell 20 percent to $192 million, due to
a decrease in worldwide home entertainment, partially offset by an increase in
international theatrical distribution, driven by Pirates of the Caribbean:
At World's End.

In Consumer Products, revenues were up 23 percent to $549
million, delivering an operating income of $118 million, a 12-percent rise.
Parks and Resorts revenues gained 6 percent to $2.9 billion, with operating
income up 13 percent to $621 million.

In other Disney news, the company has reached a deal to
acquire the Kelowna, British Columbia-based Club Penguin, one of the
fastest-growing online virtual worlds for kids. Since its launch in October
2005, Club Penguin has grown to more than 700,000 current paid subscribers. The
site has more than 12 million active users, primarily in the U.S. and Canada,
and is one of the fastest growing online destinations for kids aged 6-14. The
site features animated penguin avatars that inhabit a snow-covered virtual
world, converse with other users, participate in group activities and create
and furnish a virtual home with currency earned inside the game.

"This acquisition is consistent with our strategy of
leveraging technology to create and deliver high-quality entertainment around
the world and our commitment to investing our capital to generate growth and
value for our shareholders," said Iger. "Club Penguin embodies
principles that are of the utmost importance to Disney—providing
high-quality family entertainment and fostering parental trust. The founders
have woven together new technologies and creativity to build an incredibly
compelling, immersive entertainment experience for kids and families. Just as
with our own Disney.com, kids love Club Penguin and parents trust it; and we
are proud to welcome the creative team of Club Penguin into Disney. Combining
the creativity and knowledge of the Club Penguin team with our existing Disney
Online assets will help us further achieve our objective of establishing clear
leadership in the kids and families online virtual worlds space around the
globe."

Club Penguin, which will be called Disney's Club Penguin,
will retain its URL (www.clubpenguin.com)
and will remain based in Kelowna, British Columbia, Canada. The company's three
founders, Lane Merrifield, Dave Krysko and Lance Priebe, will join Disney and
remain the senior management team of the unit. Merrifield, Club Penguin's chief
executive officer, will become an executive VP of The Walt Disney Internet
Group (WDIG), reporting to WDIG president Steve Wadsworth. Disney plans no
immediate changes to the operation or business model of Club Penguin. It aims
to create international versions in Europe and Asia, as well as in the Americas.