Financial Review

Business Segment Performance

Media Networks

Media Networks was our most profitable segment in 2006, led by the strong performance of our cable networks. Here too, success comes from providing our consumers with high quality programming associated with our well known and trusted brands. This success is enhanced by our ability to leverage programming across many distribution platforms, rather than just one. ESPN’s multi-media delivery of top quality sports programming like Monday Night Football, Major League Baseball, NBA and (starting in 2007) NASCAR across TV, internet, broadband, wireless, print and radio outlets is a great example of our efforts in this regard.

In 2006 Disney Channel further demonstrated its importance as a creative engine and brand building vehicle with successful shows like Hannah Montana, The Suite Life of Zack and Cody and the teen phenomenon High School Musical, to name a few. In addition to traditional cable television, Disney Channel’s popular programming can now be accessed at outlets like DisneyChannel.com and the iTunes music store.

Our commitment to quality branded programming and a multi-platform approach drove ESPN and Disney Channel to again deliver increased viewership and ratings. Overall, the group delivered solid growth in revenue and operating profit, more than making up for ongoing investment in new digital and programming initiatives designed to drive future performance.

In our broadcasting businesses, ABC’s programming line-up continued to resonate with viewers across the country, bolstering the network’s ratings and helping deliver substantially improved profitability in 2006. As with ESPN and Disney Channel, ABC is also taking important steps to distribute its most popular shows on new digital platforms including ABC.com, the iTunes music store and, starting in fall 2007, via video on demand in some markets.

During the past year, we also entered into an agreement to merge our ABC Radio assets into Citadel Broadcasting. The terms of this proposed transaction were recently amended to facilitate the closing of the deal, which is now scheduled for late in the second calendar quarter of 2007. Upon closing, we will distribute the ABC Radio assets to our shareholders. As such, our shareholders, rather than Disney itself, will own a stake in the combined radio company. We continue to believe that this transaction and strategic combination allows us to maximize the value of these assets to our shareholders.