Lowell Singer - The Walt Disney Co. Robert A. Iger - The Walt Disney Co. Christine M. McCarthy - The Walt Disney Co..

Michael Brian Nathanson - MoffettNathanson LLC Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC Jessica Jean Reif Cohen - Bank of America Merrill Lynch Alexia S. Quadrani - JPMorgan Securities LLC Douglas Mitchelson - Credit Suisse Securities (USA) LLC Todd Michael Juenger - Sanford C. Bernstein & Co.

LLC Steven Cahall - RBC Capital Markets LLC David W. Miller - Imperial Capital LLC Tim Nollen - Macquarie Capital (USA), Inc..

Welcome to the Q3 2018 Walt Disney Company Earnings Conference Call. We sincerely apologize for any difficulty you had joining the call today, and we thank you so much for your patience. My name is Vanessa, 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. And I will now turn the call over to your host, Lowell Singer, Senior Vice President of Investor Relations. Sir, you may begin..

Good afternoon, and welcome to The Walt Disney Company's third quarter 2018 earnings call. Our press release was issued about 25 minutes ago and is available on our website at www.disney.com/investors. Today's call is also being webcast, and the webcast and a 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 we will then be happy to take your questions. So with that, I'll turn the call over to Bob to get started..

Clone Wars animated series. Our robust content pipeline also includes theatrical movies such as the live-action version of Disney's Lady and the Tramp, as well as new series based on popular IP from across the company such as Disney Channel's High School Musical and Pixar's Monsters, Inc.

We're also moving forward with brand new Marvel content and, as I just noted, the Fox acquisition brings even more opportunity to create original programming for this platform. We'll share more details about our Disney DTC plans at an investor presentation in the near future.

I also want to note the encouraging initial performance of our ESPN+ service which launched to great reviews and enthusiasm earlier this year. It's still early days, but conversion rates from free trials to paid subscriptions are strong and subscription growth is exceeding our expectations.

ESPN+ will become even more compelling to fans across the sports spectrum as we continue to expand the content and enhance the user experience. ESPN has invested wisely in a number of sports events and packages, and the lineup for Plus is quite strong. The UFC and Top Rank Boxing packages made Plus extremely attractive for fans of combat sports.

Service will also offer over 200 college football games this year, 70 in the first three weeks of the season alone. And that's on top of thousands of other college sports events. Live events from Major League Baseball, the NHL and MLS will also be regular features on the service.

And our new Rights Agreement with Italy's Serie A, one of the world's top soccer leagues, will add more than 340 matches per season to ESPN+ starting this year.

It's safe to say, we are very pleased with our progress in the DTC space and having spent months working with Fox management team on integration planning, we've been more enthusiastic and excited by all the opportunities ahead. I'm now going to turn the call over to Christine to discuss the quarter, and then we'll take your questions.

Christine?.

a Disney Tunes Studio film and other animated project in early development. At Media Networks, operating income was comparable to the third quarter last year as higher results at Broadcasting were offset by a decline at Cable and lower equity income.

Total Media Networks affiliate revenue was up 5% in the quarter due to growth at both Cable and broadcasting. Higher affiliate revenue was driven by 7 points of growth due to higher rates, partially offset by about a 2 point decline due to a decrease in subscribers.

As Bob mentioned, this is the fourth consecutive quarter we've seen improvement in the rate of net subscriber declines.

While net subscriber counts are still lower than prior year, we're encouraged by the trends we're seeing, a slowdown in the rate of decline of traditional subscribers coupled with an impressive acceleration of growth in digital MVPD subscribers.

Our portfolio of networks, which includes ESPN, Disney Channel, Freeform and ABC, offers compelling programming for consumers and continues to be a driver of both traditional and digital MVPD subscriptions.

Broadcasting operating income was up 43% in the third quarter due to higher program sales and growth in network affiliate and advertising revenues, partially offset by higher programming costs.

Higher income from program sales reflect higher sales of a number of ABC shows, including Designated Survivor and How to Get Away with Murder, as well as higher revenue from the sale of Marvel's Luke Cage in Q3 this year, compared to The Defenders last year. Growth in affiliate revenue was driven by contractual rate increases.

Advertising revenue at the ABC Network was up 3% in the quarter as higher rates more than offset lower impressions. Quarter-to-date, primetime scatter pricing at the ABC Network is running 23% above upfront levels.

Equity income was lower in the quarter due to higher losses at Hulu and lower income from our investment in A+E, partially offset by the absence of equity losses at BAMTech, which, as you know, we now report as part of our Cable results.

The higher losses at Hulu were primarily driven by higher programming and labor costs, partially offset by higher subscription and advertising revenue. At Cable, operating income was lower in the quarter as higher results at ESPN were more than offset by a loss at BAMTech.

BAMTech's results this quarter reflect higher content and marketing costs and ongoing investment in its technology platform, including costs associated with ESPN+.

At ESPN, operating income was higher in the quarter, as growth in affiliate revenue and a favorable comparison to severance costs incurred in Q3 last year more than offset higher programming costs and a decline in advertising revenue. The increase in programming expense was driven by contractual rate increases for NBA programming.

Ad revenue at ESPN was down 3% in the quarter as higher rates were more than offset by lower impressions. So far this quarter, ESPN's cash ad sales are pacing down 3% compared to prior year.

At Consumer Products and Interactive Media, operating income was down in the quarter as a result of lower licensing income and a decline in comp store sales, partially offset by lower costs at our games business.

The decline in licensing was driven by lower revenue from the sale of Spider Man and Cars merchandise as both properties benefited from theatrical film releases in the prior year, partially offset by higher revenue from Avengers merchandise.

We expect some of the headwinds that impacted our Consumer Products business in Q3 will also impact the business in the fourth quarter. In the third quarter, corporate expenses were about $100 million higher than the prior year. The single biggest driver of the growth was expenses related to our Fox acquisition.

In Q4, we expect corporate expenses to be higher by about $35 million, driven almost entirely by Fox acquisition-related costs. During the third quarter, we repurchased 9.6 million shares for $970 million. Year-to-date, we've repurchased 34.6 million shares for approximately $3.6 billion.

Given our pending acquisition of Fox and the expected increase in leverage in order to fund the $35.7 billion cash component, we will not be an active buyer of our stock until our total leverage ratios return to levels consistent with a A credit rating.

At the time we announced our revised offer for Fox, we said this could happen by the end of fiscal 2021 or by the end of fiscal 2022 depending on the outcome of the Fox-Sky transaction. The ultimate timetable will depend on whether Fox acquires full ownership of Sky, as well as the amount of proceeds from the RSN disposition.

And with that, I'll now turn the call over to Lowell, and we'd be happy to take your questions..

All right. Thanks, Christine. Operator, we are ready for the first question..

And thank you. Our first question comes from Michael Nathanson with MoffettNathanson..

Thanks. Bob, I have two here. One is on Netflix and your strategy. If we think about what Netflix was able to accomplish, it was just an amazing amount of choice and personalization.

So when I think about your own OTT strategy, you have a great content library, you're acquiring a content library, but you're thinking about maybe different apps to different consumers, constituents of different brands.

So can you walk through kind of the pluses and minuses you have within Disney on the strategy of maybe building one aggregated app versus going in segments? And how do you think about that? And the second question is just about China, and any update on timing on the regulatory front on the China side?.

Thanks, Michael. I'll answer the second question first. We have no updates regarding the regulatory filings. In June, our S-4 stated that we anticipated getting the necessary regulatory filings in the various markets around the world between 6 and 12 months from then, and we don't intend to update that at all.

Regarding Netflix and our strategy regarding the apps, first of all, because we will be launching the Disney app into the market probably in about, well, a year, sometime the end of calendar 2019, we're going to walk before we run as it relates to volume of content because it takes time to build the kind of content library that ultimately we intend to build.

That said, because the Disney app will feature Pixar, Marvel, Disney, ultimately National Geographic will be a contributor, Lucasfilm, Star Wars, we feel that it does not have to have anything close to the volume of what Netflix has because of the value of the brands and the specific value of the programs that will be included on it.

And the price, by the way, will also reflect a lower volume of product as will, by the way, the cost of producing and owning all that content. Obviously, after the deal closes for 21st Century Fox, we'll own 60% of Hulu. So that will fit in very significantly to our app strategy.

And then I talked about in my earlier comments and we've spoken a fair amount about this in the past, we have the ESPN app.

As we look at all three, it is our feeling – and as we look at the environment today, I guess one thing you could even point to would be the great growth in the new digital OTT offerings where you're looking at essentially fewer channels, slightly less choice for less cost.

We don't really want to go to market with an aggregation play that replicates the multi-channel environment that exists today because we feel consumers are more interested in essentially making decisions on their own in terms of what kind of packages that they want.

So rather than one, let's call it, gigantic aggregated play, we're going to bring to the market what we've already brought to market, sports play. I'll call it Disney Play, which is more family-oriented. And then, of course, there's Hulu. And they will basically be designed to attract different tastes and different segment or audience demographics.

If a consumer wants all three, ultimately, we see an opportunity to package them from a pricing perspective.

But it could be that a consumer just wants sports or just wants family or just wants the Hulu offering, and we want to be able to offer that kind of flexibility to consumers because that's how we feel the consumer behavior, what consumer behavior demands in today's environment..

Okay. Thanks, Bob..

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

Yes. Our next question comes from Ben Swinburne with Morgan Stanley..

Thank you. I want to stay on the OTT topic. Bob, a couple of years ago when you guys had the first Star Wars film come out, you talked about sort of leveraging the entire company's assets to really make that movie successful or as successful as it could be, made it a priority for the company.

Is there a similar opportunity with this OTT launch? And I don't know if there's anything you'd be willing to share with us today.

I know it's a year away, but how you might be thinking about leveraging the Parks or your Media Networks or other parts of the business to really make sure that thing gets off the ground with as much momentum as possible? And then, Christine, for you, honestly a bit of an accounting question, but I think important.

Have you guys figured out how you're going to account for the content production on the OTT? So I think you're already spending money on developing and I don't know if you're close to shooting anything at this point, but will that stuff go in the balance sheet and then be amortized over some useful life estimate? Anything you can give us there, since this will start to build in dollar terms, would be helpful.

Thank you, both..

Ben, the launch of the Disney DTC products at the end of 2019 is probably the biggest priority – is the biggest priority of the company during calendar 2019. And there will be a significant amount of support given across all of our assets to see to it that that product launches successfully.

We, obviously, from a Disney perspective, have connection with and we are in touch with Disney consumers, Disney aficionados, all over the world, not just people who've gone to our parks or the people who've been to our movies and bought a variety of consumer products and have joined the various Disney affinity organizations, like D23.

And so, we actually think that the first priority is going to be reaching the core Disney fan, and we certainly have a number of different company touch points to do that. And then on the second part, I'll let Christine talk about the cost and how we're going to ultimately manage it from a financial perspective..

Ben, so the way we're going to treat the content is we will be capitalizing the cost of the new content. And as you know, we will be starting to do that now and going forward until the launch. That will be put on the balance sheet, and we will amortize it once it's finished and airing..

Thank you, both..

Thanks, Ben. Operator, next question, please..

Yes. Our next question is from Jessica Reif with Bank of America Merrill Lynch..

All right. Thank you. I have a couple of questions on the Fox acquisition. You gave a number when you announced of $2 billion of synergy, which I think was all cost. And then on this call you've talked about investing at some of the brands like Nat Geo, FX, et cetera.

Can you talk a little bit about the investment that you see over the next couple of years? Anything you can say on incremental revenue? And what's the timing of the transition, of the management team transition? Will it only be closer to the closing? And then a different topic, just a quick question.

But theme parks, your margins are getting closer to prior peak, so what you've outlined.

Can you just talk about where you see that going? Do you have plans to build hotels given all the attractions that you're planning over the next, let's say, three years?.

You're right, Jessica. We have spoken about $2 billion in cost synergies and we're confident that we're going to be able to deliver those. There will be revenue synergies as well, but we have not been specific about what they are and we don't intend to get specific about that at least for the foreseeable future.

Maybe eventually we will, but right now we don't intend to. We are looking at incremental investment from a content perspective from both the Disney side of the company. So we have a variety of different, as you know, original productions in development and production right now essentially to feed the app.

We also intend to turn to the Fox side of the business. I mentioned National Geographic, FX, Searchlight. We look at the Fox Television Studios.

They are not only great franchises and brands that come out of those organizations, but there's a lot of talent both on the executive front and there are talent relationships that we can turn to, to help essentially fuel the direct-to-consumer businesses that we have.

We've not been specific about what kind of incremental production cost is associated, but certainly there will be some. We believe that as we get closer to launch, we'll have the ability to just be a little bit more specific with all of you about what our plans are from a cost perspective..

The only thing I would add to that, Jessica, is on the cost that $2 billion we had given that it would be achieved after the second year post-closing and that would be roughly 50% in the first year, 50% by the end of the second year. And you can anticipate more domestic at the front end just because of regulatory issues outside of the U.S.

On the parks margins, you did indicate that you saw that increase. Year-over-year, the park margin expanded by 190 basis points this quarter and that included the negative drag from the holiday shift. So that included the 60 basis point drag.

The opportunities that we see of continuing to expand parks margin will be yield management, which we have talked to you about before. And we still believe that there is opportunity for that especially in the domestic market..

And particularly given the fact that we've launched some very, very attractive new properties, including Toy Story Land and the Star Wars Land is going to open sometime in calendar 2019, so that's going to give us some pricing or revenue yield opportunities as well..

Thank you..

Okay. Thanks, Jessica.

Operator, next question, please?.

Our next question is from Alexia Quadrani with JPMorgan..

Thank you. Just two questions. The first one is on ESPN+. Can you give us any more data maybe on subscriber growth? I think you said it's exceeding expectation.

I don't know if it's soon to give us a number and if there are any lessons you may have learned as you plan for the Disney direct-to-consumer launch from that launch? And my second question is really, I think you're going through a pretty notable renewable cycle between your major affiliate deals up in 2019.

The question is really how you're balancing those negotiations with the distributors given your high profile direct-to-consumer priorities?.

Well, I'll answer the second question. We'll be going to market with some very attractive product. Obviously, I don't know if we could cover all of what they are because you certainly know what they are, Alexia.

And we also know that the traditional distributors are very, very interested in distributing our DTC products as they do right now, by the way, for Netflix. And so, we actually believe that they can in a sense live side-by-side as part of the negotiation and not necessarily create issues.

I think there is a reality that is set-in in the distribution side of the business that the business is changing, that consumer habits have changed, and that the over-the-top SVOD product is here to stay and is real, and is probably going to continue to either compete with the more traditional platforms or complement the more traditional platforms.

So we don't really see it complicating our negotiations with the primary distributors. The first on, ESPN+, I realized when I said that the subscriber numbers were exceeding our expectations, it was probably going to beg the question, well, then what are they and we haven't been specific.

They don't tell you if (33:19) we're telling the truth, so that doesn't do much good. We had relatively modest expectations. I'm not going to be specific on numbers. We're just not ready to get into that.

But as it related to what kind of subscribers we would ultimately achieve from the beginning in part because of the nature of the product offering, but actually we've added nicely to that product offering. Boxing is the probably the primary example, but there has been some other good programming as well.

And we've been heartened by the fact that the conversion rates from free to pay have been quite strong and the trends that we're seeing in terms of churn are modest in nature in the sense that they're manageable.

As we add more product, I mentioned in my comments, we've got a huge lineup of college football, 200 games coming up this coming season, 70 in the first three weeks. UFC kicks in. Today, we announced the inclusion of the very attraction Italian soccer league Serie A.

So Cristiano Ronaldo's first match with his new team will be on ESPN+, which is exciting. And then, of course, as the season unfolds the next baseball season and the NHL season, MLS, there'll be regular games from all three of those leagues and more and more programming.

So we feel really good about how we are positioned and we'll continue to look opportunistically in terms of what rights will be available.

A lot of the rights in sports are already spoken for, but we still have some opportunities including some opportunities to take some of the rights that we already own for the ESPN primary channels and move them along. Give you an example is, we have a lot of inventory for Little League World Series.

And we've noted that as we've gotten more specific with consumers about what Little League games will be available, our subscription sign-ups have ballooned in the last few days as a for instance we believe as a result of interest in just that. So we actually feel good about it. It's a marathon; it's not a sprint.

The product seems to be working well technologically. It's quite stable from a streaming perspective, and we feel great about it..

All right. Thank you very much..

Thanks, Alexia. Operator, next question, please..

Our next question is from Doug Mitchelson with Credit Suisse..

Thanks so much. One for Bob, one for Christine.

Bob, are there any overarching principles that is driving how much you think is the right investment level in streaming? For example, is there a need to move quickly because otherwise the market would be passing by? Or should you move slowly to manage the impact on earnings? Any framing of the factors that determine how aggressively the company is turning to digital would be helpful? And then, for Christine, similar to Ben, an accounting question related to streaming service.

How do you manage the Pay 1 rights for calendar 2019 films from an accounting perspective? Does this will apply to other factors as well.

Does the film division still include Pay 1 revenue in its ultimates for calendar 2019 releases when determining film amortization by window? Or is that something actually you have to wait for the streaming service to launch and the streaming service to buy that content? Thanks..

So, Doug, to answer the first question, we don't see the need to rush because the market will pass us by, simply because the only place people are going to be able to get Disney, Pixar, Marvel, Star Wars original product is going to be on this app. And so, we believe whenever we launch, it will be attractive.

What we want to do is we want to make sure when we launch it is viewed as a quality product that we're serving the fans, particularly of Marvel, Pixar, Disney and Star Wars well, and that the price that we're charging reflects the value that we're delivering.

We've mentioned a number of times that we have the luxury of programming this product with programs from those brands or derived from those brands, which obviously creates a demand and gives us the ability to not necessarily be in the volume game, but to be in the quality game.

And that's not in any way suggesting that Netflix isn't in the quality game. There's a lot of quality there, but they're also in the high volume game. And we don't really need to do that. We will fill in, in terms of creating volume with a significant amount of library content, both movie and television content.

And so, it's not as though the cupboard's going to be bare, but we want to produce the programming that we're putting on under the right circumstances which means with the right budgets and the right timing. It takes time to produce these, particularly to produce them well. There are a number that already in production.

And so, we feel good about ultimately what we're going to lunch with. But I think the way to look at it is to look at it as a service that is focused on those brands. We'll also infuse it with National Geographic product as well when the time is right to do that.

We will continue to spend incrementally on this service; we talked about that a fair amount. But we will always do so, again, with the knowledge that because of the specificity of these brands and the uniqueness of them, that we don't have to be in the absolute volume game.

We have to put enough on to make sense from a price to value relationship perspective..

Okay, Doug. For the question of the pay-TV one window. For the time being, you should assume status quo. But as the service launches, we will be reevaluating the way we're treating that window, and we'll be getting more information once we finalize how we're going to account for it..

All right. Thank you both..

Okay. Thanks, Doug. Operator, next question, please..

Our next question is from Todd Juenger with Sanford Bernstein..

Hi. Thanks. Bob, I know you talked about an investor event coming up soon talking about the DTC stuff. And yet, I'm going to ask you, just like everybody else if you don't mind, a question on that topic. So you've listed now a couple times all of these great brands that will exist and live on the Disney direct-to-consumer entertainment service.

I guess my question is pretty much every brand you listed, I believe, has historical content obligations to other licensing partners. So, for instance, I'm thinking about Star Wars, the movies are either on Netflix or even on Turner cable syndication in the states. Marvel movies are on Stars or Netflix, that sort of thing.

So I guess my question is, can you just confirm that when you launch a whole bunch of those historical products associated with those brands, I guess, will not be on your service, it doesn't sound like. In fact, there's some scenario where there's no Star Wars old movies at all maybe. I'd love a comment on that.

I might be wrong because I don't know the exact carve-outs. So that's the main question. And if that's true, how big a deal is it and how are you going to message that – are you thinking with your consumers? Thanks..

Well, we knew when we made the decision to do this that a number of the products that have been made and it will be made in the rest of 2018 are encumbered by licensing arrangements that we have with a number of different entities.

In notably, Netflix and Stars you mentioned, there are some windows down the road that enable us to put those films on our service. I don't think we've been specific about that, but you'll see when we launch. But starting in 2019, the movies – the Studio movie slate is clean and unencumbered.

And so, one of the reasons why we've talked about – I don't want to say walk before we run because it's not quite that. There's going to be a fair amount of running going on. But we want to make sure we're managing expectations. The price of the service will reflect that. The volume of the product it's on.

But it's also one of the reasons why we're creating a fair amount of original content for it as well, original Star Wars series, original Pixar series, original Marvel series and so on.

And some original films as well because it's clear that from a library perspective while there is certainly a lot of volume, the recent Studio slate will not fully be available at any one-time because of the existing deals and it wouldn't take time for those rights ultimately to revert back to us.

But what we have been doing is making sure that since the time that we made the decision to bring the service out, we've not done anything that further encumbers any of our product..

Todd?.

Okay. Thanks.

If there is any quick comment on how you have thought about messaging this to a consumer who might buy your service expecting to see, whatever a Star Wars movie and not find it there? And any concerns you have about (42:33)?.

Captain Marvel, Dumbo, Avengers, Aladdin, Toy Story 4, Lion King, Artemis Fowl, Jungle Cruise, Frozen 2 and Star Wars. That's a pretty strong slate..

Happily, no argument with that. Thank you, Bob..

Thanks, Todd. Operator, next question, please..

Our next question comes from Steven Cahall with Royal Bank..

Thank you. Maybe just first you mentioned the content that you'll be getting from Fox from Nat Geo and FX and Searchlight..

Pardon me, Steven, you're breaking up.

Is there any way you can clear your connection, sir?.

I heard it. Go ahead, go ahead..

That's better..

Okay. [Technical Difficulty] (44:49-45:07)..

Steven, it's Lowell. Yeah, it's very hard. You're breaking up. We're hearing every other word..

Sounds like a good question..

Okay. Let me get back in the queue. I'll turn it back..

Okay. Sorry about that. Let's go to the next question, operator..

Yes. Our next question is from David Miller with Imperial Capital..

Yeah. Hi. Just a quick financial question for Christine. Christine, it looks like you have a couple of upcoming maturing securities. The September 2018, $500 million that's the corporate MTN; and then the January 2019, I think that's $400 million senior unsecured. Just curious what you plan to do about those.

I assume you could take them out, but just curious as to your thoughts. Thanks so much..

Yeah. Thanks, David. We have plenty of capacity to satisfy those maturities. It's absolutely no issue for us from a liquidity perspective..

Okay. Thank you..

Thank you, David. Operator, let's take one more question, please..

Yes, sir. Our next question is from Tim Nollen with Macquarie..

Thanks very much. Couple of things, please. You mentioned a decline in ad revenue at ESPN in the quarter and it looks like another similar type of decline in the quarter we're in now. Wonder if you could just talk a little bit about what's driving that. And then I wonder, Bob, you mentioned Sky as part of your comments around Fox.

I wonder if there's anything more you could give us a hint on as to what happens with the remainder of the Sky stake that Comcast is bidding for. I don't know if there's anything you can say. And likewise on the RSNs, I thought the original understanding was that Fox would take those back if that were a regulatory issue.

It now seems more like this is something you would take on and then be forced to sell. I don't know if there's anything you could mention on that as well, please..

On the RSNs, no. We took on initially in the December deal that we announced, we assumed the responsibility of divestiture if the regulatory process demanded that we do that. It wasn't Fox that would either buy them under those circumstances or would take them back.

The RSNs though in the agreement that was reached with the Justice Department will be sold and the process of selling them is actually already beginning, in that conversations are starting, interest is being expressed.

And it's likely that we'll negotiate a deal to sell them, but the deal will not be fully executed, or won't close until after the overall deal for 21st Century Fox closes. There's nothing more really to add on that. On Sky, there's really nothing further to add. I think just to clarify because there were some erroneous reports about this.

But there was a filing in the UK today. It was a formal filing as per UK Law, and that's what Fox had to do to basically formalize its £14 offer for the remaining 61%. But as per our July 8-K filing, our consent is required for an increase in that bid.

And since this is a fluid situation, an open matter, we really are not going to comment any further about it. I think that would be the most appropriate..

Understood..

And on ESPN ad sales, as you noted, ad revenue was down in the third quarter and it's still kind of early in the fourth quarter. As Bob mentioned, college football, we are getting into that season and the match-ups are all getting out in the marketplace and we expect the ad revenue to reflect that.

Just looking back at third quarter, I do want to make the note that the difference in the number of NBA Playoffs and final games when you adjust for that, we had one fewer final, we had two fewer semi-finals, but we had the benefit of three additional conference finals.

When you net all that out, ESPN's ad sales in 3Q would have been roughly similar to the prior year..

Thank you..

Okay. Tim. Thanks. And thanks again, everyone, for joining us today. Note that a reconciliation of non-GAAP measures that were referred to on this call to equivalent GAAP measures can be found on our IR website.

Let me also remind you that certain statements on this call, including financial statements and statements as to the expected timing, completion and effects of the proposed transactions, 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 good afternoon, everyone..

Thank you. Ladies and gentlemen, this does conclude our conference for the day. We thank you for participating. You may now disconnect..