Our consumer products division licenses our characters and properties for use in merchandising and home entertainment. They are used in a wide range of different ways, including toys, stationery, clothes and magazines.

Disney Consumer Products (DCP) represents our largest property, Power Rangers. Jetix Consumer Products (JCP), our in-house consumer products team, is responsible for all the other properties where we own or represent the consumer products rights.

Strategy

Our dual strategy in consumer products has served the business well and it will continue. Power Rangers is easily our most recognisable property and it benefits hugely from DCP’s market presence. JCP represents our other properties and these brands profit from the focus and attention of our in-house operation.

We will continue to secure consumer products rights to our flagship programmes so as to benefit from the audience exposure we generate. Our channel and programme sales activities bring clear advantages to brand building and consumer recognition for our key franchises; we will capitalise on these. We will aim to secure ownership of consumer products rights, rather than acting as an agent.

Highlights in 2007

Our consumer products division had another good year led by the continuing strong performance of the Power Rangers brand. During the first half of the year, we phased in a change in our contractual arrangements with DCP. Whereas previously DCP had acted as Jetix’s agent for Power Rangers, it now acts as Jetix’s licensee. The economics of our relationship are unaffected by this change. Its rationale is to increase DCP’s freedom of manoeuvre and open up wider opportunities for the brand.

The division improved on last year’s excellent performance. Reported revenue is down, but only because DCP’s licensee status has altered the way revenues are reported. With DCP as its agent, Jetix Europe booked gross revenues from Power Rangers sales and accounted for DCP’s fees as expenses. With DCP now a licensee, our revenue is booked net of DCP’s share of revenue. Without this change in accounting treatment this division’s reported revenue would be 10% ahead of last year’s levels.

Power Rangers, through DCP, has continued to grow underlying revenue³. The master toy licence with Bandai contributed materially to growth. The brand performed notably well in the apparel sector, particularly in the UK and Italy. The UK remains our most important market, but we also saw strong revenue growth in Italy and Germany. The number of licensees grew substantially. We are already beginning to benefit from the change in our contract with DCP.

JCP’s merchandising division had a good year. Pucca performed well, particularly in France. Stationery and fashion were key categories. Following this success licensees are looking to expand their representation to other territories.

JCP continued to expand its range of magazines with the launch of Jetix-branded titles in Italy and Poland. It secured another master toy licence with Hasbro, for the second series of A.T.O.M. Alpha Teens on Machines. However, as a third series is not planned this revenue will not be repeated. Following the decision in 2006 to bring representation in-house for most territories, our home entertainment division benefited from the continued success of Power Rangers. We have seen sales in over 20 markets.

JCP’s sales in Central and Eastern Europe were also a highlight, following our appointment of a dedicated sales executive to serve this region. We secured the consumer products rights, or entered into agency agreements, for all of the six new series we acquired or began producing this year.

Priorities for 2008

We will continue to work closely with DCP to build on the success of Power Rangers. The new contract should allow a continued expansion in the range of relationships in which DCP can include Power Rangers.

Within JCP we will continue to develop key franchises, such as Pucca. We will augment our range of Jetix magazines. We will focus on extending our Central and Eastern Europe presence and are dedicating additional resources to these markets. Where appropriate, we will negotiate to secure the consumer products rights on new series we acquire or produce.

3 Excluding the effect of the change in DCP’s contract.

New Jetix magazines in Italy and Poland

Jetix Europe now has five Jetix-branded magazines and two non-Jetix magazines. They complement our on-air and online advertising inventory and allow us to offer our commercial partners a multi-platform advertising solution.

Pucca continues to grow

With a notably strong performance in France, Pucca continues to grow her consumer products presence. She is particularly strong in apparel and stationery. Her success is generating interest in new markets.

Strong Power Rangers performance continues

Power Rangers had another good year. Disney Consumer Products, which represents merchandising rights, grew underlying revenue by over 15%⁴. Home Entertainment also did well, following our decision last year to bring representation of most of the rights in-house.

4 Excluding the effect of the change in DCP’s contract.