Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Jessica Reif-Cohen - BAS-ML.
Jessica Reif-Cohen - BAS-ML
Bob, you said you plan to spend less on films, do you mean you are spending less per film or overall in the film business?
And Tom, can you discuss the free cash flow outlook for the year?
Robert A. Iger
Our goal is to openly spend less in total on films but because we are making fewer films and there is a greater percentage of those films that are what we call [ten fold] the average price for a film isn’t necessarily going down significantly. We do believe, though, that the cost of both producing the DVDs, distributing and marketing the DVDs, needs to be addressed and that’s exactly what we’re doing with an eye toward not only reducing the cost and what I will call the investment in extras for the DVD, but also focused on improving the price to value in relationships.
For instance, we are finding that when we sell a blue-ray DVD with a standard DEP file and also a downloadable file, we can actually offer a price to the consumer that is viewed by the consumer as delivering greater value, which is enabling us to drive revenue at a level that is slightly better than we might have if we had not added those basically valuable extras to the DVD.
But definitely cost of basically the system needs to come down.
Thomas O. Staggs
On free cash flow I won’t guidance per se, the biggest determinate, of course, will be the operating results as we go through the year. I would say a couple of things about investment. There are a couple of places where we are making investments, first of all in the programming side. I expect to invest a little more in programming at ABC given the strike last year, on a year-over-year basis. We continue to invest in programming at the Disney channels around the world.
On the capital side we are investing in increased capacity up at Pixar and we’re putting some money into that this year. And on the park side, the major drivers, I would expect capital expenditures to be up somewhat, because we are investing in California venture, which we talked about last year. we continue to invest in the new ships that are due for the cruise business, in a couple of year. and we also continue to invest in vacation club facilities.
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