At the end of 1998, we added the Walt Disney International organization to coordinate and optimize our international operations. Our international expansion is occurring on three fronts. First, there is the creation and acquisition of new businesses. Second, there is the growth and increased penetration of existing businesses. Third, there is that culture of efficiency, which we have also exported overseas, with Walt Disney International consolidating numerous Disney office functions in countries around the world.

For our company, the primary driver for international success is the strength of our brands. This is most dramatically demonstrated by the strength of our mouse. It is virtually impossible to travel anywhere in the world and not see someone wearing a piece of clothing adorned with Mickey's beaming face. The world loves Mickey and Disney, but the fact is that, relative to what we have achieved in the United States, we still have enormous opportunities to increase per capita penetrations in most overseas markets.

The pervasiveness and potential of the Disney brand is demonstrated by a recent brand equity study. It concluded that, in the 14 primary world markets, 1.2 billion (that's not a typo and is indeed a "b" at the beginning of that word) consumers had used at least one Disney product over the preceding 12 months. This doesn't even include developing markets such as Russia and China. People around the world know and love what we offer. But outside of the U.S. and Canada, our penetration levels are much lower. In other words, if you're a shareholder standing somewhere in North America and are wondering where to find Disney's greatest growth prospects, just look to the east, west or south.

Consider what has been achieved in the past year with wireless phone technology in Asia. In 2000, we established a company called Disney Mobile in Japan, which entered into an agreement with NTT DoCoMo Wireless, allowing subscribers to pay roughly $1 to $3 a month for a range of Disney offerings on their cell phones. Cell phones in Japan are dazzling mini-computers, featuring a wealth of services that are not yet available here. The Disney Mobile deal took off at the light speed of cellular transmission, and we already have more than two million subscribers, who are able to play Disney games, send Disney greeting cards, hear Disney ring tones and download special Disney promotions. Early in 2002, Disney Mobile will expand to Taiwan, Hong Kong, Korea, England, Austria and Germany (with European subscribers getting to choose from 100 Disney ringtones!). And, presumably, this is just the beginning. There is every reason to expect that, as cell phone technology in other parts of the world becomes more sophisticated, we will see these and further enhanced opportunities emerge elsewhere, including the United States. Packs of kids will be walking down the streets of Chicago, not talking to each other, but talking to kids in another part of town as they play computer games, check movie times, sports scores and maybe even their Disney stock price.

Japan was the scene of another tremendous success story in 2001 - the opening of the Tokyo DisneySea theme park, adjacent to Tokyo Disneyland. DisneySea is certainly a crown jewel in the sparkling creative bundle of projects your company has built. As my wife and I stood at the entrance to that park at the opening on September 4, we had the feeling we were seeing something of such significance that we literally could not speak ... something that usually isn't a problem for me. Since the park opened, both Tokyo parks have achieved attendance levels that have greatly exceeded our projections, with Tokyo Disneyland setting a new record for the year. We expect our royalties from Oriental Land Company to increase by 80 percent thanks to Tokyo DisneySea and our two Disney-themed hotels. Beyond the direct economic benefit for our company, these spectacular theme parks play a major role in defining the Disney brand in this important market.

Also in Asia, work is progressing on Hong Kong Disneyland. What a site! I think this will be the most spectacular park location we have anywhere in the world. Maybe I'm too enthusiastic, but looking back across the bay to central Hong Kong is awesome. During a recent trip, we all got on a bus for a one-day excursion among the 90 million people who live in Guangdong province just north of Hong Kong. I was impressed with the warmth of the people, the height of the skyscrapers, and the live seafood and frogs for sale in the grocery section at the local Wal-Mart. You can expect me to be writing about this project for a good four more years, as I will keep trying to think of new ways to describe its enormous significance as a beachhead for the Disney brand in the most populous nation on earth.

On the immediate horizon is an all-new theme park adjacent to Disneyland Paris, called Walt Disney Studios Paris. This park is modeled after the Disney-MGM Studios at Walt Disney World and will give guests a behind-the-scenes look at film, television, music and animation production. In the process, we will offer them the thrills of Catastrophe Canyon, a stunt show spectacular and the inverted loops of the Rock 'n' Roller Coaster Starring Aerosmith. Disneyland Resort Paris is already the most visited tourist destination in Europe. With the creation of this park, our Paris property will become a true multi-day resort, offering a tremendous range of entertainment experiences just outside one of the greatest cities in the world.

I must take a moment, at the risk of writing too long a letter, to comment on our parks in general. We have just completed one of the most ambitious building periods in any company's history. Through the efforts of Walt Disney Imagineers and architects around the world, we have created the highest level of construction quality and innovation for people's enjoyment ever. I'm sure I will have to fight the editor of this annual report to leave in this somewhat over-the-top enthusiasm, but if it is here, you'll know I won the argument. I can say this because around the world we have established four Disney destinations, not just theme parks. From Florida with its four theme parks, two water parks, 25 hotels, entertainment venues and an actual town, to Anaheim with its new second theme park, Disney's California Adventure, hotels and entertainment complex, to France and its (soon-to-be) two theme parks and entertainment complex and hotels, to Tokyo with the same, we have established spectacular three-dimensional environments where one generation can pass the Disney baton to another. We have invested the intellectual and financial capital. Now we can spend the next decades enjoying the returns.

Disney Consumer Products has also been adversely affected by the economic downturn and the international markets are a key to the turnaround of this business. In 2001, new direct-to-retail licensing agreements were made with some of the leading retailers in Europe, including H&M, Tesco and C&A. There are now 211 international Disney Stores, including a new flagship store that was recently opened in Milan. In Japan, we concluded an agreement to sell the Japanese Disney Stores to our colleagues at Oriental Land Company, who will continue to operate the business under a licensing arrangement with us.

And, among the products that we will be offering at retail overseas and domestically will be the Baby Einstein line of merchandise.
In November, we acquired this great company from its founders. Baby Einstein's innovative and educational videos, books and toys for infants and young children are an ideal fit for our company and should benefit substantially from our worldwide distribution and marketing resources.

One of Consumer Products' businesses - Publishing - is perhaps our longest-running international success story, having begun in the early 1930s, and encapsulates why Disney's potential is so enormous overseas. We are now the world's largest publisher of children's books and magazines, putting out publications that are read by 100 million people in 55 languages in 74 countries. To kids everywhere, Mickey Mouse is not an American character. He is whatever they are - Belgian, Brazilian or Bengali. And, this goes for Donald Duck, Goofy, Winnie the Pooh - also known as Donarudo Dakku, Gao Fei and Kubus Puchatek - and all the rest. They provide us a connection with consumers everywhere that gives us an incredible advantage in the marketplace ... wherever that marketplace happens to be.

Walt Disney Studios has been number one at the international box office five of the last seven years, grossing more than $1 billion for seven years in a row - a completely unmatched record. We also continue to be the number-one video distributor internationally. One Studio business that illustrates the eternal Disney truth that great content leads to new opportunities is Walt Disney Theatrical, which currently produces two live stage musicals in England, two in Germany, one in Spain, one in Canada and one in the Netherlands. Of course, all these shows are great, but arguably the most unusual one is the stage play in Berlin, because it is a production of Hunchback of Notre Dame. Unlike our other shows, all of which had their initial runs on Broadway, this is the premiere production of Hunchback. By the way, we now have plans to produce an English language version for ABC's Wonderful World of Disney, so this is one Disney stage show that is going to be "exported" to America.

Television represents one of our greatest growth opportunities overseas and has major significance in developing and growing the Disney brand. We have aggressively built up the Disney Channel Worldwide business so that it now comprises 12 channels, with Brazil and Portugal having been added in 2001. These channels reach more than 15 million subscribers in 56 territories. The first international channels we started are already profitable and the overall business will be in the black by 2003. Complementing our Disney Channel holdings will be our recent acquisition of a majority interest in Fox Kids International, which will be appropriately renamed. This cable- and satellite-delivered family program service already reaches more than 24 million additional homes in Europe and 10 million in Latin America. Since Disney Channel is a premium cable service and Fox Kids is an advertiser-supported service, together they comprise a perfect fit, providing us with an enormous reach among our prime Disney audience around the world.

To demonstrate the progress we are making in China, we just returned to the most-watched national television network in China - CCTV1 - with a regularly scheduled Mickey Mouse animation program at 6:00 p.m. In addition, Disney.com became available on the Chinese Internet, bringing Disney entertainment and news to more than 20 million Internet users in that nation.

Then there is my favorite radio station, Radio Disney, which has proved tremendously successful in the U.S. and is now starting to go abroad, beginning with an Argentina station that launched in 2001. And, don't forget that Disney is not our only brand that is embraced by media consumers overseas, since ESPN is also a major success story, with its programming now reaching more than 125 countries. And the launch of ESPN Classic in Europe will expand its presence even further.