Lawyer Challenges Ovitz Spending Testimony

 

Lawyers Friday challenged an account of allegedly excessive spending by former Walt Disney Co. president Michael Ovitz on dinners, magazines, a home screening room and a $2 million office renovation.

It was the third day of a trial in Delaware's Court of the Chancery on shareholder allegations that Disney's board didn't properly scrutinize Ovitz's contract when he joined the company in 1995 and was wrong to grant him a non-fault termination in 1996 that entitled him to a $140 million severance package.

In Thursday's testimony, John J. Donohue, a Yale University law professor and expert witness for the investors group suing the company, testified that auditors found that Ovitz incurred about $4.8 million in expenses at the company, including $2 million for renovations of an office for Ovitz.

Donohue said the auditors identified $370,535 in expenses that exceeded spending limits or violated Disney's policies. They also identified 92 occasions of expenses with no apparent business purpose, 112 occasions of gifts that exceeded a $100 limit and home entertainment expenses in excess of an agreed-upon $125 limit.

Mark Epstein, one of Ovitz's lawyers, said that Ovitz didn't violate Disney's spending policies. Rather the auditors were tasked after he left the company with examining expenses that exceeded a certain level. Esptein also said the $2 million renovation figure included renovations on offices of two floors at Disney's headquarters.

In cross-examination Friday, Donohue testified that he wasn't aware of the extent of the office renovation, but assumed from the auditor report that the $2 million figure referred specifically to Ovitz.

Stephen D. Alexander, a lawyer for former Disney directors Roy Disney and Stanley P. Gold, asked Donohue if his conclusion that Disney had the right to fire Ovitz for cause would change if his assumptions about the auditor report were wrong. Donohue wouldn't concede that point.

"A lot of them (the expenses) I would have questioned for business purposes," Donohue said. In particular, he pointed to subscriptions to variety of magazines, including Playboy and Martha Stewart Living, that were paid by Disney.

The trial is expected to last four weeks. Ovitz may testify as early as next week.

_________________________________________________________________________________________________

Disney CEO Called Ovitz 'Psychopath'

Michael Eisner, Walt Disney Co.'s chief executive, described the company's former president, Michael Ovitz, as a "psychopath" with a "character problem" in company memos revealed Thursday in a shareholder lawsuit.

The lawsuit, which has been in progress for more than seven years, claims Disney's board did not properly scrutinize Ovitz's employment contract when he joined the company in 1995 and then wrongly granted him a non-fault termination that entitled him to a $140 million severance package 14 months later.

"If I should be hit with a truck, the company can not leave him as CEO or figurehead CEO," Eisner said in a memo. "It would be catastrophic."

John J. Donohue, a Yale University law professor and witness for a group of Disney shareholders, testified about the memos during the trial's second day.

Donohue also said that under his review of California law, Ovitz's contract and depositions in the case revealed that the board had the right to fire Ovitz for cause.

In particular, Donohue cited "habitual lying" by Ovitz during his time as Disney's second-in-command.

Under the terms of Ovitz's contract, he could be fired for cause in case of gross negligence or malfeasance, Donohue said.

Neither term was fully defined in the contract, but applicable laws didn't require the company to prove that acts of criminal conduct, scandalous behavior or fraud had occurred for an executive to be fired for malfeasance, according to Donohue.

Bernie Roswig, a spokesman for Ovitz, countered that "The plaintiff's expert based his unfounded opinion on nothing more than second- and third-hand hearsay and gossip."

"When the actual facts are presented and fairly considered, they will clearly show that there was absolutely no cause to terminate Mr. Ovitz's employment, and that he was absolutely entitled to accept the contractual benefits he received from Disney," Roswig wrote in a statement.

Current and former Disney directors who are defendants are expected to contend that Ovitz's contract was given careful consideration, and that there were no grounds for denying his severance.

Citing a draft report by auditor PricewaterhouseCoopers, Donohue said Ovitz during his 14 months with the company charged Disney for $370,535 in expenses that exceeded spending limits or violated Disney's policies.

On 92 occasions, he charged the company for expenses that had no business purpose, including a dinner with Eisner and their families at New York's trendy Nobu restaurant, Donohue said. He also billed the company on several occasions for home entertainment expenses in excess of an agreed-upon $125 limit, Donohue said.

Mark H. Epstein, one of Ovitz's lawyers, said Ovitz didn't violate any Disney expense policies or exceed spending guidelines. After he left the company, PricewaterhouseCoopers examined expenses that exceeded a certain level. "This is not a Disney policy," Epstein said.

Donohue said Ovitz spent $2 million to renovate his office and $68,000 to build a home screening room at his residence. According to Epstein, the renovation included offices on two floors at Disney's corporate headquarters, not just Ovitz's.

Epstein also said Ovitz repaid the company for the "vast majority" of the cost of the screening room, which was included as a perk as part of his employment contract.

Ovitz, in a videotaped portion of his deposition played during Donohue's testimony, said he was "embarrassed" by the renovation, adding that he did not pay enough attention to it initially. Ovitz is expected to testify as early as next week.

Donohue said Ovitz failed to meet a number of key goals established for him when he was hired, including easing the work burden on Eisner and becoming a potential successor to Eisner.

"He was work," said Sanford M. Litvack, Disney's general counsel, in a portion of videotaped deposition played in court. "I walked behind him with a shovel."

The trial is being held in the Delaware Court of the Chancery, a specialized business court. It is expected to last four weeks.

_________________________________________________________________________________________________

Big names yet to show at Disney trial

The few spectators who showed up Wednesday for the opening of a world-class corporate trial involving the Walt Disney Co. in Delaware's Court of Chancery in Georgetown were hoping to see some of Tinseltown's brand names.

"Which one is Michael Eisner?" said Marcia DeWitt of Rehoboth Beach, referring to the company's fabled chief executive who is named as a defendant in the shareholders' lawsuit.

Eunice Carter of Georgetown, who sat with her mother on The Circle and gazed toward the courthouse, just wanted to know whether actor Sidney Poitier had arrived.

Eisner and Poitier, a former director of the Disney company, weren't in Georgetown and aren't expected to take the witness stand until later in the trial, which got off to a slow start with muted public interest and no big-name personalities.

But DeWitt, at least, didn't go away disappointed. She immediately spotted Dominick Dunne, the novelist and Vanity Fair writer sitting in the press section. Dunne has covered some of the country's most celebrated trials.

"I'm happy Dominick Dunne is here," said DeWitt, who was accompanied by Judy Catterton and Joyce Lussier, both of Rehoboth Beach. The three women were among four obvious spectators in the courtroom.

Despite the army of reporters, the trial got off to a tame start with the day taken up by expert testimony from Deborah A. DeMott, a professor of law at Duke University School of Law. DeMott was called by the plaintiffs to testify about corporate governance practices at Disney.

At issue in the case is the $140 million severance package former company president Michael S. Ovitz received when he left Disney at the end of 1996 after a little more than a year on the job. Shareholders of the Burbank, Calif.-company sued Eisner, Ovitz and certain directors for wasting Disney's money in bestowing such a lavish package on Ovitz after what was agreed was a failed tenure.

The lawsuit alleges the directors, including former director Poitier, were asleep on their watch and did not uphold their duty in the hiring of Ovitz and the payment of the severance benefits.

DeMott testified that Disney's board did not conform to "customs and practices" of good corporate governance in some decision-making processes regarding Ovitz.

People in Georgetown, however, were less interested in the details than in the rumor that, unrelated to the case, talk show celebrity Oprah Winfrey had been spotted somewhere near Seaford or Laurel.

"She's at the hotel across from the Wal-Mart," said Stephanie Harper of Georgetown Antiques Market as her mother, Mildred Bowie, made phone calls to gather more news about the Winfrey sighting.

"We hope she comes in here," Bowie said. "We even vacuumed."

Back at the courthouse, it was quiet. Aside from the media presence and the cordoned off area in front, business went on as usual.

In fact, Debbie Marker, at Smith's Family Restaurant, thought the buildup might have kept regular customers away.

"Normally on Wednesdays people are standing here waiting for a table," she said.

Activity could pick up next week when Ovitz is expected to testify. The trial is scheduled to last at least four weeks.

"It'll be something to see," said Koskey, of Chardon Ltd. fine jewelry, located next to the courthouse.

_________________________________________________________________________________________________

Singh back in Disney swing as $10 million mark awaits

No Tiger, no problem.

Well, not much of one anyway.

Vijay Singh could turn Tiger Woods' absence at the Funai Classic at Disney into a footnote if he wins -- or even remains in contention through Sunday -- one of the final PGA Tour events of the season.

The four-day tournament, which starts today and concludes Sunday, will be played on the Palm and Magnolia courses at Walt Disney World in Lake Buena Vista.

Singh, who has all but wrapped up Player of the Year honors, tries to defend his title and push his earnings over $10 million for the season. True, the latter may only be a couple of commercial shoots for Woods, but no player has ever cracked the $10 million mark.

After a season in which he has won eight tournaments, added a third major championship to his Hall of Fame credentials and wrested the world's No. 1 ranking from Woods, it would be a surprise if Singh didn't eclipse $10 million in earnings.

He has three tournaments, including the Funai Classic, to collect $544,434. He can do it one fell swoop by winning the Funai Classic, and if the Singh needed any more motivation he could make history in Woods' backyard.

The two are not exactly friendly rivals.

"It's been pretty impressive to see what he's accomplished," Billy Andrade said of Singh. "He's got something we ain't got."

His eight wins in one season give him something Nicklaus never got during a career that is widely considered the best of all time.

"I never thought I was going to win this many events," said Singh, who tees off at 12:20 p.m. today on the Magnolia Golf Course's first hole and will play with John Daly. "It is happening and I'm enjoying it. My focus is on this event and I try not to get complacent. That's the way I look at it."

Singh won the Funai Classic last year by shooting a 23-under-par 265. Woods, who finished tied for second in 2003, is on his honeymoon and is missing the event for the first time since turning professional. Other notable names taking the week off include Ernie Els, Phil Mickelson, Davis Love III and Mike Weir.

There are a number of players who may be fighting for their livelihood this week. The top 125 money winners this season retain full playing privileges for 2005.

Since there are only two PGA events after this weekend, the Funai Classic looms large in who will make the top 125. That explains why only two players who are anywhere between 114 and 143 on the money list will skip the event and that is because of injuries.

Of course, the big story will be Singh and how much bigger his season can get.

"These last three tournament," he said, "I want to end on a high note."

_________________________________________________________________________________________________

Sky High

Sky High, a different upcoming Disney film about superheroes, is currently filming. This live-action production (starring Kurt Russell and Kelly Preston) has transformed parts of the campus of California State University Northridge into the location for the titular academy for budding superheroes.

A staple of Disney comedies of the '60s and '70s, screen star Kurt Russell returns again, to make a second film for the studio in two years. In Sky High, Russell and Kelly Preston (Jerry Maguire) play Commander Stronghold and Josie Jetstream, parents to a boy named Jeremy (Michael Angarano), who is struggling to fit in as a freshman at an academy for budding superheroes.

Tackling roles as the academy's staff are Bruce Campbell (Evil Dead) as gym teacher Coach Boomer, Dave Foley ("NewsRadio") as teacher of sidekicks Mr. Boy, and Lynda Carter (TV's "Wonder Woman") as the principal of Sky High. Mike Mitchell (Deuce Bigalow) is directing the film.

_________________________________________________________________________________________________

Cheese for the Mouse House's Investors?

After shareholder unrest and takeover fights, good news is finally outweighing bad at Disney, and many analysts are high on its stock

It was probably a slip of the tongue. Speaking to an investor conference on Sept. 30, Walt Disney President Robert Iger noted that it was the end of Disney's fiscal year -- adding: "And what a year it has been. I'm not talking about takeover battles or shareholder issues," the Disney No. 2 quickly clarifies. "I'm talking about performance."

Indeed, the last year has had more dips and turns for Disney investors than Thunder Mountain. During that time, Disney withstood a hostile takeover offer from cable giant Comcast and weathered shareholder unrest that forced the board to strip CEO Michael Eisner of his chairmanship. The board has just launched a search for a successor to Eisner, who in his 20 years as Disney's chief remade the once sad-sack company into a world-class entertainment giant.

But Iger, the front-runner for Eisner's job, was there to talk good news, not turmoil, projecting that the outfit would report "better than 50% growth in earnings per share" when it announces end-of-year results on Nov. 18.

PITFALLS REMAIN.  It's a point that hasn't been lost on investors. For the first time in years, Wall Street analysts believe Disney may be on the rebound: Its long-suffering ABC network is coming up with hits, theme-park attendance is up, and even Disney merchandise is starting to sell once more. All of this while ESPN and its other cable channels are starting to mint money.

The result: In the last two months Disney's stock has increased by 11%, to $24.88, outperforming the S&P 500 over that time, as well as competitors such as News Corp. and Viacom. Since spring, four analysts who follow Disney have upgraded its stock, according to the Thomson Financial Network. Of 28 analysts following the shares, 15 now have a buy or strong buy on the stock.

The company isn't out of the woods yet. Its stock is trading significantly below where it was five years back, when it was in the 40s. It faces the possibility of losing key supplier Pixar Animation, which has created such animated megahits as Toy Story and Finding Nemo. And some of its board members are being dragged through a trial in Delaware, reliving the 10-year-old embarrassment of the $140 million that Michael Ovitz received for a rocky 15 months as Eisner's No. 2.

ABC IN THE BLACK.  But enough positives exist to cheer many investors. The key turnaround is at ABC, which has had hits with shows such as Desperate Housewives and Lost and has reversed its ratings free fall. Today the network's ratings are up 5% among the 18-to-49-year-old viewers advertisers most covet, according to Nielsen, moving ABC into second, behind CBS, for total viewers and into a tie for second, with NBC, for the younger demographic groups.

That ratings bump means a $300 million turnaround for the network, figures Merrill Lynch analyst Jessica Reif Cohen, who says ABC will swing from a loss to a small profit in the quarter. For the year, she predicts Disney's broadcasting unit (which includes the ABC TV stations) will show operating earnings of $270 million, up from just $37 million in 2003. Overall, Cohen has increased her fourth-quarter estimates for Disney to match the Street consensus of $0.17 a share -- up from her estimate of $0.14 a share.

Cohen isn't raising her neutral rating on Disney, which she believes is fairly valued compared to its peer group. But other analysts say the Mouse House is poised to see its shares climb. A.G. Edwards analyst Michael A. Kupinksi, who rates Disney an aggressive buy, targets the stock at $28 a share, a 12.5% increase over its Oct. 21 price. "We believe that the favorable operating momentum should continue through the fourth quarter and into next year," Kupinksi wrote in an Oct. 6 report.

NOT ALL CHEERY.  Kupinksi stresses that Disney's balance sheet is in good shape, now that debt levels have been cut, and that it has $3 billion in cash that could be used for share repurchase or dividend payouts. Indeed, Disney CFO Tom Staggs says the outfit has bought back more than $300 million shares already and is recommending a dividend hike to its board.

Disney is poised to boost revenues from its theme-park unit, which provides about 30% of the group's operating income, many analysts believe. Though the parks are susceptible to terrorism or an economic downturn, Prudential Equity Group analyst Katherine Styponias projects that the theme-park unit will see attendance grow by 5% at its California locations and 9.9% in Orlando. She sees the parks' earnings increasing to nearly $1.4 billion next year, from $1.1 billion this year. Overall, Styponias, who rates Disney "overweight," with a $28 price target, projects that the outfit will announce fourth-quarter revenue of $7.58 billion, up 3% from last year, with earnings higher by 4%, to $907 million.

Not every analyst is quite as cheery. CIBC World Markets' Michael E. Gallant cut Disney's fourth-quarter earnings-per-share estimates by 9%, to $0.18, due to a lackluster string of movies including Mr. 3,000 and Ladder 49 that hasn't matched last year's hits like Pirates of the Caribbean. He also thinks Florida's hurricanes will knock $45 million to $50 million off Walt Disney World's revenue.

CABLE POWERHOUSE  But Gallant notes that Disney's cable unit will hike operating earnings in the quarter by 25%, improving its operating margins by increased advertising at its powerhouse ESPN and at once-struggling ABC Family, where he sees advertising sales climbing by 32%. And he sees earnings rising by 23% at Disney's consumer-products unit, in part because of selling its money-losing Disney Store chain and an uptick in its characters' licensing.

Still, Gallant recently removed his $25 price target for Disney stock, figuring a lot of the good news is already priced into Disney's stock. That may not be a ringing vote of endorsement. But after years of lackluster earnings, some on Wall Street still have a show-me attitude toward Disney -- even if, as Bob Iger says, it's having quite a year.

_________________________________________________________________________________________________

Sith Trailer: November 5th?

There are few films whose trailers can draw crowds to theaters all by themselves. The Star Wars prequels have proven to be among those few, and next month will they will exert their influence once again as fans converge on local theaters for a glimpse of Revenge of the Sith.

So which movie is the lucky one? That was a guarded secret until this week, but now Cinescape is reporting that the trailer will be shipped with The Incredibles, Pixar's new animated film which opens November 5th. We suggested this as one possibility in last week's Star Wars trailer update.

Cinescape's source also mentions that theater managers in some cases might choose to put the trailer on another movie instead. If you're set on seeing the Sith preview on the weekend of November 5th, it would be smart to check with the manager at your local cinema for confirmation.

If you can't wait for the big screen, the teaser will also most likely be aired on the November 4th broadcast of Access Hollywood, which is syndicated by NBC in the US. An online version will probably appear the same evening, and Hyperspace subscribers might get an early peek (there's no official word yet).

Posters and banners will also probably begin appearing in theater venues once the first trailer is out. Stay tuned for more!

_________________________________________________________________________________________________

A Ghoul and His Money ($37,400!) Will Soon Part

Cary Sharp is not a Disney zealot. Truth be told, he's been to Disneyland only once.

But he acknowledged Thursday afternoon — minutes after winning a $37,400 EBay charity auction to have his name and epitaph carved on a tombstone in the Anaheim park's Haunted Mansion attraction — that reasonable minds might disagree.

"I enjoy Disney; I'm not a Disney fanatic," said Sharp, a 37-year-old doctor and health care attorney from Baton Rouge, La. "Of course, this would raise questions now."

He placed his first bid Monday for a whopping $35,500 "as a joke" to give his friends one more thing to tease him about.

"To be honest, I seriously thought I would be outbid," he said. "I guess I'm a little bit stunned right now…. But I definitely have no regrets. It's a once-in-a-lifetime opportunity."

Disneyland has never given fans a chance to be a part of any attraction. Only longtime employees are immortalized in the park — in Haunted Mansion gravestones and in the store names along Main Street.

"It's been phenomenal," said Duncan Wardle, vice president of press and publicity for the Disneyland Resort. "I think it just completely caught people's imagination. We've never done anything like that."

When the tombstone offer first hit EBay, horror author Clive Barker started the bidding at $750. By the end of the first night, it had far surpassed Disney's expectations, climbing to $16,000.

But there are people like Patrick Hurd, 29, of Oklahoma City, a huge Haunted Mansion fan who went so far as to give his son the middle name of Gracey, after the ghost host in the attraction.

His final bid was $35,666.

"We honestly couldn't have gone any higher than we did," Hurd said. "We were going to max out the credit cards."

Sharp, meanwhile, logged back on to the auction with five minutes to spare, figuring he'd be willing to go a little past his $37,400 bid, which held steady Tuesday night and through Wednesday afternoon. But he didn't have to.

Within minutes of winning, he was on the phone with Disneyland officials, confirming that he had the money to pay (he does) and making sure he would sign all the necessary waivers (he will).

The money will be split between the Boys and Girls Club in Anaheim and one in Sharp's hometown. And it's a tax-deductible contribution.

"At least that'll be a plus," he said. "That'll take the bite out of the $37,400."

_________________________________________________________________________________________________

Hong Kong Disneyland appoints first ambassador to spread magic

Hong Kong Disneyland, set to open in late 2005 or early 2006, announced here Thursday its very first ambassador Angela To, who will act as the official representative for the theme park.

Initiated in 1964 by Walt Disney, the Disney Ambassador programcame to life during the celebrations for Disneyland's 10th anniversary. The ambassador is selected from among Disneyland employees and acts as the park's official representative and host as well as an emissary of goodwill in the community.

Angela To, who has been a cast member with the Walt Disney Company (Asia Pacific) Limited since 2001, will begin her new roleas Hong Kong Disneyland Ambassador in January 2005 for a duration of 12 months. Next month, Angela will visit Disneyland in Anaheim,California and Walt Disney World in Orlando, Florida, to participate in the Disney Ambassador training program.

The selection process for the Hong Kong Disneyland Ambassador took several months with applicants required to submit essays and participate in a series of interviews.

_________________________________________________________________________________________________

Visa's Holiday Promotion Ties to Disney's Blockbuster 'National Treasure'

Visa USA is teaming up with the Walt Disney Pictures to market National Treasure, one of the year's most anticipated films. The movie is the focus of Visa's upcoming promotional campaign to drive usage among millions of cardholders this holiday season.

integrated marketing program will include a multi-million dollar advertising campaign, online interactive elements and special events tied to the movie's "treasure" theme. The campaign launches Nov. 1, building up to the film's national release on Nov. 19. As part of Visa's long-term Disney alliance, Visa Members and select merchants have the ability to use the campaign as part of their own marketing efforts.

"We designed this campaign to provide a compelling way to connect with consumers during the busiest time of year," said Susanne D. Lyons, Visa's chief marketing officer. "This partnership gives us the opportunity to create a memorable tie-in for cardholders that will help add to the bottom line for Visa's Members and merchants."

Campaign Elements

The Visa campaign contains several key elements, including the Year of Treasure sweepstakes. This promotion automatically enters cardholders who use their Visa card in November and December for a chance to win the total amount of their Visa purchases made on their winning Visa card from Jan. 1 to Dec. 31, 2004. Twenty-five winners will be randomly selected at the end of the promotion period.

Visa also plans a supporting promotion entitled Reveal the Treasure, which is an online instant win game that uses eDecoder game pieces to instantly reveal prizes at www.Visa.com/treasure. Prizes include AAA vacations valued at $4,000 each and Visa AAA prepaid gift cards ranging from $100 to $500. Nine million eDecoder game pieces will be distributed via Visa's Member financial institutions as well as AAA branches nationwide, select college campuses, movie theatres and grass roots events. No purchase or obligation is necessary to enter or win either sweepstakes. Visit Visa.com/treasure for more details and Official Rules for each promotion.

In addition to the above promotional programs, Visa has planned the following:

• A Visa card will be integrated into a key scene in National Treasure
• The official National Treasure website links to Visa.com/treasure
• Thousands of National Treasure-themed Visa prepaid gift cards will be distributed during select Buena Vista Pictures Marketing and Visa events and also at the movie premiere.
• Member financial institutions will promote the Year of Treasure campaign to cardholders through statement inserts, direct mail, signage, and web marketing materials.

_________________________________________________________________________________________________

Disney To Make New Offer To Top Unions

Disney negotiators are set to make a new offer Thursday in the seven-month standoff with its largest unions, Local 6 News has learned.

The offer is expected to be delivered to the Services Trades Council off Disney property Thursday at a hotel on Highway 192.

The Services Trade Council is a group of six unions representing more than 20,000 Disney employees.

Health care costs have been a stumbling block in reaching a deal this year, according to the report.

Union members have rejected the first two offers from Disney.

Sources said Disney executives spent Wednesday working out the latest counter-proposal.

Disney spokesperson told Local 6 News, "Both sides want an agreement and we are focused on getting there." 

Witness: Disney Had Right to Fire Ovitz

 

Disney Board Had the Right to Terminate Michael Ovitz for Cause, Expert Witness Testifies.

 

Walt Disney Co.'s board had the right to fire Michael Ovitz, the company's former president, for cause under California law, an expert witness testified Thursday as a high-profile shareholder lawsuit continued for a second day.

The lawsuit, which has been in progress for more than seven years, claims Disney's board did not properly scrutinize Ovitz's employment contract when he joined the company in 1995 and then wrongly granted him a non-fault termination that entitled him to a $140 million severance package 14 months later.

John J. Donohue, a Yale University law professor and witness for a group of Disney shareholders, testified that under his review of California law, Ovitz's contract and depositions in the case revealed that the board had the right to fire Ovitz for cause.

In particular, Donohue cited "habitual lying" by Ovitz during his time as Disney's second-in-command.

Under the terms of Ovitz's contract, he could be fired for cause in case of gross negligence or malfeasance, Donohue said.

Neither term was fully defined in the contract, but California employment, Social Security and tort law didn't require a company to prove that acts of criminal conduct, scandalous behavior or fraud had occurred for an executive to be fired for malfeasance, according to Donohue.

Donohue said deposition testimony showed that Sanford M. Litvack, Disney's general counsel, failed to research this point at the time Ovitz was terminated.

The trial is being held in the Delaware Court of the Chancery, a specialized business court. It is expected to last four weeks.

Current and former Disney directors who are defendants are expected to contend that Ovitz's contract was given careful consideration, and that there were no grounds for denying his severance.

_________________________________________________________________________________________________

_________________________________________________________________________________________________

Viacom, Disney Agree to Pay $1.5M

Viacom, Disney to Pay $1.5M to Settle Charges They Violated Ad Limits on Children's Programs.

Viacom and Disney agreed Thursday to pay a total of $1.5 million to settle government charges the companies violated advertising limits for children's television programming.

The combined settlement with the Federal Communications Commission is the largest negotiated with the agency for such violations.

Viacom will pay $1 million for ad programming that aired on Nickelodeon, and Disney will pay $500,000 for ad programming that aired over the ABC Family Channel.

FCC rules limit the commercials that can be aired in certain children's TV shows to 10 1/2 minutes per hour on weekends and 12 minutes per hour during weekdays. The time limits apply to over-the-air broadcasters and cable operators for programming originally produced and aired for an audience of 12 years and younger.

The rules also bar broadcasters from airing commercials that refer to or offer products that are related to the children's program. For example, a cartoon program cannot air a commercial for the dolls of its characters during the program broadcast. In that case, the entire program would be considered a commercial and thus a violation of the federal rules.

_________________________________________________________________________________________________

Mickey's Smart Move: Selling Stores

Disney and Children's Place have consummated a deal, and it's a good one for Mickey's investing club. Children's Place will take over North American Disney Stores' 313-location retail operation. The exact value of the arrangement isn't clear yet, but Disney will receive a working capital adjustment when the deal actually closes.

I  wrote about talks and negotiations between the two companies not long ago. Now the deal has come to pass, and it hasn't come soon enough for me. I used to be bullish on the Disney Stores. I even thought sometimes that fighting for them was worthwhile. But reality eventually tempered my enthusiasm. I came to accept the inevitable conclusion: Disney just wasn't extracting any value from them. For any number of reasons -- overexposure, improper merchandising techniques, inventory selection issues -- take your pick, the boutiques no longer possessed their previous pizzazz.

The proposed licensing scheme is the way to go: Children's Place will actually manage the real estate and operate the business, and Disney will collect royalties. Children's Place seems confident it can make a go of this, pledging $100 million toward transforming the stores into unique, must-visit destinations once again. It won't be dependent on just magic and pixie dust, though; the action plan indicates pricing will be important to attract value-oriented consumers. As a Disney shareholder, I'd like to think that brand equity alone is enough to warrant premiums on merchandise, but such is life. Kids still love Mickey and Goofy, but their parents want those iconic characters at the right price.

Disney is now free to concentrate on managing its portfolio of licenses. Children's Place can hopefully be the catalyst that this business needs. If it can get things going, the consumer products segment of Disney should have some favorable reports down the line. As for Children's Place, its stock rose 18% as investors approved of the acquisition, believing that it will be a good fit for the company, one that is intrinsically and significantly incremental.

Time will tell, as they say, but I'm glad I'm on the Disney side of things. I'd rather be the licensor than the licensee, since I've already seen what those stores can do to shareholder value.

Recent Disney Takes:

• Disney and eBay summon a grave auction.
• ABC is in hot competition with Viacom's CBS and Fox.
• Is Disney giving Mattel's Barbie a run for her money?

_________________________________________________________________________________________________

Forbes.com Names Disney Home to Three of Top Five Most Valuable Character Franchises in the World

The Walt Disney Compan, owns three of the top ten character franchises according to Forbes.com's annual "Top Earning Fictional Characters List." Forbes.com estimates the top-ten fictional characters grossed more than $25 billion in 2003. Mickey Mouse and Winnie the Pooh -- number one and two, respectively -- topped all character franchises, with Disney/Pixar's $860 million box office blockbuster, Finding Nemo, rounding out the top five. Collectively, all three character franchises amount to nearly half the combined retail sales of the entire "Fictional Billionaires" list. Disney's Power Rangers and Disney/Pixar's Buzz Lightyear were included in Forbes.com's "Near Misses" list. Forbes.com's complete list can currently be viewed at: http://www.forbes.com/.

"At Disney, we strive to develop characters that engage a child's imagination, tell stories that connect with families and find ways for our characters to live on in the hearts and minds of children everywhere," said Matt Ryan, senior vice president of brand management at The Walt Disney Company. "The consistent top ranking of Mickey Mouse and Winnie the Pooh on Forbes.com's list tells us that these characters live on with new generations. And we will continue to introduce classic characters, like Nemo, which children can enjoy for years to come."

Mickey and his friends, Donald, Goofy and Pluto accounted for $5.8 billion in retail sales, up from $4.7 billion in 2003, to claim the top spot from Disney's other multi-billion dollar character franchise, Winnie the Pooh.

"It's not just kids who love Mickey and his entourage either: Disney says Mickey's impressive boost in earnings has been driven in part by a surge in popularity of vintage adult apparel," according to Forbes.com.

Pooh, Eeyore, Tigger and the rest of the 100 Acre Wood gang recorded $5.3 billion in retail sales. The Walt Disney Company's third billion dollar franchise include Disney Princess -- featuring Ariel from The Little Mermaid, Sleeping Beauty, Belle from Beauty and the Beast, Cinderella, Jasmine from Aladdin and Snow White -- a franchise that recorded an excess of $2.4 billion in global retail sales. Disney Princess was not included on Forbes.com's list due to the fact the characters originated from multiple stories.

"The resurgence of Mickey to this year's top ranking can be attributed to the successful programs we implemented, including the Mickey 75th Anniversary, Mickey postage stamp program, vintage Mickey fashion line, as well as new DVD and television releases surrounding the character," said Andy Mooney, chairman of Disney Consumer Products Worldwide. "Although Disney Princess was not eligible for this list, the power of the Disney Princess brand is truly making its mark among young girls -- with 300 percent growth in the past three years alone."

To qualify to be on the Forbes.com list, a character must be both "fictional" -- not based on a real person -- and a "character" in the sense of having made its debut in a narrative story -- book, a film or videogame. To calculate the earnings of the world's top fictional characters, Forbes.com added together worldwide toy/merchandise sales, videogame sales, publishing and box-office revenue, as well as DVD/VHS sales and rental revenue.

For further information, please contact Clint Hayashi, Disney Consumer Products, +1-818-567-5947.

_________________________________________________________________________________________________

Ovitz ‘did not grasp executive position’

Michael Ovitz, the former Walt Disney president, “seemed to have no understanding at all” of the basic responsibilities of an executive in his top-rank position, a leading employment law professor said on Thursday. 

There were also good and sufficient grounds for him to be fired “for cause” under the terms of his contract, John Donohue of Yale Law School told a hearing in Delaware chancery court.

He did not achieve or advance any of the goals set when he was hired, failed to take any of the burden off Michael Eisner, chairman and chief executive, and failed to establish himself as a worthy successor, Mr Donohue said.

Mr Donohue, called by share holder plaintiffs seeking the return of Mr Ovitz's $140m pay-off, made in 1996, directly contradicted one of the entertainment group's core assertions.

Based on advice from Sanford Litvack, the company's general counsel at the time, Disney has claimed it had no alternative to paying the full severance package because Mr Ovitz had not been guilty of gross negligence or malfeasance. The definition of these terms, used in his contract as the only justification for firing, was central to Mr Donohue's testimony.

While the defendants have proposed they referred only to fraudulent or criminal behaviour, Mr Donohue offered several less dramatic definitions.

In his opinion, documented instances of Mr Ovitz's violation of company rules on expenses, gift-taking and his disregarding orders from Michael Eisner, group chairman and chief executive, could justify his dismissal for cause.

According to a review after he left the company, Mr Ovitz's expenses during his employment were about $5m and included more than $9,000 for flowers for lunch and breakfast meetings at his home.

Mr Donohue also referred to Mr Ovitz's “habitual lying”, quoting a deposition from Sid Bass, a former major shareholder in Disney and close associate of Mr Eisner, who “repeatedly alluded to Ovitz's veracity problem”.

According to Mr Bass's deposition, Mr Eisner was aware of this issue even before he hired his friend but was to conclude Mr Ovitz “was incapable of changing his ways”.

The former president, who co-founded Creative Artists Agency, had no previous experience of working in a public company. He “seemed to have no understanding at all of his duty of care”, Mr Donohue said, referring to a statement by Mr Ovitz during his deposition that he “thought it was about what went on in a hospital”.

_________________________________________________________________________________________________

Walt Disney Records Releases Disney Channel Hits: Take 1, the First-Ever Collection of Hit Songs and Music Videos from Favorite Disney Channel TV Shows

Available October 26, 2004 on Walt Disney Records, Disney Channel Hits: Take 1 is the first complete collection of hit songs and music videos from favorite Disney Channel TV shows such as Lizzie McGuire, The Proud Family, That's So Raven and Kim Possible. The CD features never-before released songs from Even Stevens, Lilo & Stitch: The Series, Phil of the Future and Dave the Barbarian. A special bonus DVD contains five music videos, including Hilary Duff's "I Can't Wait" and for the first time, Raven's "Supernatural."

Disney Channel Hits: Take 1 track listing:

DISC ONE

1. "Lizzie McGuire Theme Song (Extended Supa Mix)" - Lizzie McGuire

2. "I Can't Wait" by Hilary Duff - Lizzie McGuire

3. "That's So Raven Theme Song" by Raven - That's So Raven

4. "Supernatural (Crystal Ball Mix)" by Raven - That's So Raven

5. "Shine" by Raven - That's So Raven

6. "Say The Word" by Christy Carlson Romano - Disney's Kim Possible

7. "It's Just You" by LMNT - Disney's Kim Possible

8. "The Naked Mole Rap" by Ron Stoppable (Will Friedle) and Rufus (Nancy Cartwright) - Disney's Kim Possible

9. "The Proud Family Theme Song" by Solange featuring Destiny's Child - The Proud Family

10. "Enjoy Yourself" by L.P.D.Z. - The Proud Family

11. "It's All About Me" by Penny Proud - The Proud Family

12. "Even Stevens Theme Song" - Even Stevens

13. "Aloha, E Komo Mai (Theme Song from Lilo & Stitch: The Series, Extended Version)" by Jump5 - Lilo & Stitch: The Series

14. "Phil of the Future Theme Song" - Phil of the Future

15. "Dave the Barbarian Theme Song" - Dave the Barbarian

DISC TWO: Music Video DVD

"I Can't Wait" by Hilary Duff

"Enjoy Yourself" by L.P.D.Z.

"That's So Raven Theme Song" by Raven

"Supernatural" by Raven

"The Naked Mole Rap" by Ron Stoppable and Rufus

A must-have collection for Disney Channel fans, Disney Channel Hits: Take 1 will be available on October 26, 2004 for a suggested CD retail price of $18.98. All Walt Disney Records audio products also can be ordered by visiting DisneyRecords.com.

_________________________________________________________________________________________________

Passport Prices STABLE

Disneyland Paris -  - As of November 1st, so in not even two weeks time the new passport prices take effect at the Disneyland Resort Paris which are mostly the old!

Departing from the recent traditions single and multi-day passports will not increase in price, in fact the "top-of-the-line" three day park hopper passport for adults will be offered for one Euro less at 108,- Euro. The childrens' version's new price of 80,- Euro is full four Euro below last seasons identical passport. No changed pricing of the Annual Passports has been communicated so far. Important note for all guests planning to buy their tickets in advance: according to the official website the one day park hopper passport is on sale exclusively at the ticket counters of the theme parks

_________________________________________________________________________________________________

Choose Your Color

Disneyland Paris - The rehab related closure of Space Mountain is still several months away and the rehab of the facade seemed finished (with the exception of the change of the attraction's logo) already, but in its drive to transform the Space Mountain into an attraction as good as new for its tenth anniversary nothing is forgotten - so now the concrete base of the mountain / dome is going to receive a new paint job too. As with many major repaintings this year Imagineering is trying to figure out on-site, which would be the color best fitting into the overall atmosphere of Discoveryland. For this small parts of the mountain's base have been painted in the different colors up for "election". The small test patches are located right at the FastPass entrance as the photo shows.

                                          

Speaking of the major rehab: strange happenings are also reported from the attraction's station, where all but the windows of the control booth have been covered temporarily including the ride's logo. Not even rumors have surfaced so far about the purpose of that.

_________________________________________________________________________________________________

Disney Releases January-April Discounts

Disney has announced Room-only discounts for travelers vacationing at Walt Disney World Resort between 1/2 - 4/16/05. Rates range from $55+ per night for Value Resorts, $85+ per night for Moderate Resorts and $164+ per night for Deluxe Resorts. Ask for code BDP. Reservations must be made by 12/01/04. Package discounts for these dates are also available. For more information visit their web site and fill out a quote form.

_________________________________________________________________________________________________

Kimmel keeps talking

"Jimmy Kimmel Live" lives on.

ABC has renewed the latenight gabber for another year, keeping the show on the air through early 2006. Skein bowed in January 2003, following "Nightline" in most markets.

"I'm delighted that ABC has exhausted all other options and picked up mine for another year," Kimmel said of the net's decision to renew the show. Host also took a comic swipe at remarks Jay Leno made during the recent announcement of his intent to retire.

"In 2006, I'll be 38 years old, and I promised Mavis I would take her out for dinner before I turned 40," Kimmel quipped.

Renewal is particularly important since earlier this year Kimmel lost one of his biggest backers when ABC chairman Lloyd Braun exited the Alphabet. That led to speculation that ABC's new leadership might try to make a latenight switch, but the renewal -- along with the decision to go with Kimmel as host of next month's American Music Awards -- indicates he's on solid ground with the new regime, at least for now.

Move also comes in the wake of NBC's signing Conan O'Brien to host "The Tonight Show" starting in 2009 and Craig Kilborn's exit as host of "The Late Late Show."

ABC exec VP of alternative programming/latenight Andrea Wong called Kimmel "a great talent who has brought us an innovative show that we know he will only make stronger and stronger."

Despite its title, Hollywood-based "Jimmy Kimmel Live" earlier this year switched to a taped format, though with an 8 p.m. tape time, skein is produced closer to live than any other latenight gabber. Kimmel also tweaked his opening monologue.

Kimmel exec produces his show, with Jason Schrift as co-exec producer. Duncan Gray is the ABC exec in charge of production.

_________________________________________________________________________________________________

Gray to pen Blume's 'Deenie' for Disney

Screenwriter Pamela Gray has been hired to adapt Judy Blume's novel "Deenie" for Disney.

Blume's bestseller concerns a young woman's struggle to define herself independently from the dreams and expectations her parents have for her.

Jane Startz, Blume and Tashmoo Prods. prexy Lawrence Blume, the author's son, are producing. Gillian MacKenzie is co-producing. Buena Vista Motion Pictures Group senior VP production Karen Glass is overseeing the project.

Gray's credits include "A Walk on the Moon" and "Music of the Heart" as well as uncredited work on "Dirty Dancing: Havana Nights."

She most recently contributed to Working Title's "Betty Anne Waters," helmed by Tony Goldwyn. Other pics including Universal's "The Seamstress," with Peter Kominsky directing; Imagine/Universal's "Untitled Female Dating Project" for Rita Wilson; and HBO's "Ruthie and Connie," with Betty Thomas directing.

Next month Blume receives the National Book Foundation Medal for Distinguished Contribution to American Letters -- the first time the distinction will go to a children's author. Last year it went to Stephen King.

_________________________________________________________________________________________________

Arielholics Invited to the 2004 ArielCon Pacifica at Disneyland This Weekend

You are invited to join a group of self-described "Arielholics" for their annual celebration of The Little Mermaid. This delightful group travels throughout the Disneyland Resort sharing their love of Ariel and visiting various Ariel-related attractions, restaurants, etc.

This year they will be join on Saturday by animator Philo Barnhart. Philo not only helped bring Ariel to life in the animated feature but he is also the writer of the How to Draw the Little Mermaid book.

There is a $50.00 registration fee for this which can be paid by pay pal, my I.D. is floundering. The goodie bags alone are worth $80.00 each and that is before we get to the cameras and the film developing and all the prizes.  I will constantly be handing out goodies all weekend long!  I cleaned out the Ariel closet!

Even if you don't officially register, stop by one of their events for some fun and a chance to make new friends. This is not affiliated with Disneyland or the Disney Company in any way. It is just a bunch of fun Little Mermaid fans that want to get together and have a great time.

Friday, October 22th  Disneyland

10 a.m. Everyone meet in front of city hall.  Receive T-shirts and name badges.

10:30 a.m.  Parade ourselves down Main Street to let everyone know that we  are here and head to Ariel's Grotto.

10:45  Pictures with Ariel!  What a great way to start the day....

11:30  Head over to Innoventions and ride a Segway and play Disney Dance Dance Revolution

12:30  Meet in front of the globe of water in the center of Tomorrowland and I will pass out your picture hunt and cameras

3 p.m. For those brave souls who wish to dance in the 4 o'clock parade meet  me in front of the castle

4 p.m.  Dance in the parade or take pictures of crazy Arielholics in the parade.

5:30 P.M. Head over to go see the last Snow White show of the day at 6:15 I know it isn't Ariel but it is something not to be missed!

8 p.m. meet in the lobby of the Grand Californian in front of the fireplace and have an "Ariel" gift exchange.  Everyone who wants to participate bring a mermaid gift of around $10.00 to exchange.  We will also play to sea who is the pretty pretty princess.

By 9 p.m. all cameras from the teams must be turned into me here in the  lobby.

There is fireworks at 9:25 p.m. and the park is open until 11 p.m. and seeing the Haunted Mansion at night is quite fun.  This time of the year is the Nightmare Before Christmas there and this is totally worthwhile.

Saturday, October 23rd  Disney's California Adventure

Meet at 10:00 a.m. in front of the big sun in the center as you walk in to  California Adventure.

10:30  head off to the Animation area and watch Ariel come up on the big screens inside.  We will then go into the Beast's library to find out what character we are most like and then we go to Ursula's Grotto and she steals our voice!

11:30 take the official Arielholic ride on Tower of Terror...hey there is no Ariel on this ride is there Tim?

12:30 we will all meet up in front of Tritons Carousel and I will give your team a task of very special importance to complete.

5:00 p.m. Meet  up in front of Ariel's Grotto for dinner with Ariel!  Fun, fun, fun!

After we have gorged ourselves we will head over to the Grand Californian Lobby to watch Mermaid together.

After mermaid for those who are not faint of heart there will be a Dance Dance Revolution Contest in the game room.

Sunday morning, October 24th:  Picnic Grove Area to the left of the Disneyland Entrance

All meet up at 10 a.m.  so I can hand out all the prizes and everyone gets a copy of all the pictures that you took to go home with you in a little photo book.

And then I will sadly adjourn Arielcon Pacifica 2004.  But many new friends will be made!

As usual, the schedule may change, because I have more things that are up in the air.  I have left plenty of room for people to have fun time on their own.  The  Haunted Mansion Holiday is up and is fabulous and I will be there.

As always things might and will change but I will keep to the posted times as best as I can so people can meet up with us whenever they wish. This is not affiliated with Disneyland or the Disney Company in any way. It is just a bunch of fun Little Mermaid fans that want to get together and have a great time. You do not need to worry about a park hopper pass.  We will be in Disneyland on Friday and California Adventure all day Saturday.  Sunday will be in Downtown Disney.....it's free!

I can hardly wait to sea all of you!  This is going to be an awesome Arielcon

_________________________________________________________________________________________________

_________________________________________________________________________________________________

 

New French Collector's Edition DVDs

Why does the European market sometimes get better DVD covers than the U.S.?

Every once in a while, Disney creates some great DVD covers for its movies, but releases these covers only in other markets. Beauty and the Beast and Who Framed Roger Rabbit were both incredible looking covers for the European market. Now we have our first look at 3 collector's editions coming to Region 2 in the next few months. While these titles are also planned on being released here in the U.S., chances are, their covers will be drastically altered. We know that the new 3 disc set of Pirates of the Caribbean in the U.S. is just the same 2 disc set already offered with the third disc sitting in its own case to the side.

                  

The Children's Place and the Walt Disney Company Enter into Definitive Agreement Regarding the Sale of the Disney Store North America Retail Chain to the Children's Place

 

The Children's Place Retail Stores, Inc. (Nasdaq: PLCE) and The Walt Disney Company (NYSE: DIS) today announced that the parties have entered into a definitive agreement for The Children's Place to acquire and operate under a long-term licensing arrangement the Disney Store retail chain in North America, which currently includes 313 stores.

"This exciting and unique opportunity gives us instant access to one of the most magical brands in the world, and is consistent with our goal of being the leading retail player in the newborn to age 10 category," said Ezra Dabah, chairman and chief executive officer of The Children's Place. "The Disney Store North America profile is strikingly similar to that of The Children's Place: the chain is a mall-based, vertically integrated specialty retailer, with a comparable customer demographic. Disney Store North America generates high sales productivity, driven by significant customer traffic. We believe that by utilizing our merchandising and sourcing expertise and leveraging our infrastructure we can further increase the level of profitability and build on the chain's positive momentum."

"The Children's Place management team has a proven track record of growing a unique and compelling retail concept," said Peter E. Murphy, senior executive vice president and chief strategic officer of The Walt Disney Company. "We believe their commitment to quality, the Disney brand, and entertainment retailing will maximize the Disney Store opportunity. We look forward to a long and rewarding relationship with The Children's Place."

"The sale of the Disney Store North America marks another step in the ongoing refocusing of Disney Consumer Products' resources and expertise toward growing our core character franchises such as Mickey and developing new and exciting character franchises such as Disney Princess and W.I.T.C.H." said Andy Mooney, chairman of Disney Consumer Products. "We will continue working with all our retail partners and licensees, including the Disney Store, to optimally showcase Disney's character franchises to consumers of all ages across all channels of distribution. The current management team's success in improving the performance of the Disney Stores over the last year should serve as a platform for The Children's Place to continue growing and improving the Disney Store business."

Mr. Dabah continued, "By combining the Disney brand with our retail expertise, we believe we can increase sales, produce significant margin expansion and leverage operating expenses - resulting in increased earnings power for our shareholders. Assuming a November closing, we anticipate that the transaction will be accretive to earnings in fiscal 2004 and on an annualized basis in fiscal 2005."

TRANSACTION OVERVIEW

The Children's Place will acquire the equity of the Disney Store North America from Disney Enterprises, Inc. in exchange for a working capital adjustment payment to Disney at the close of the transaction. The Disney Store North America will retain responsibility for the store lease obligations. The Disney Store North America will be held in a wholly owned subsidiary of The Children's Place and will have the exclusive right to operate the Disney Stores in the United States and Canada under a long-term license agreement. The Disney Store North America will continue to manufacture, source, offer, and sell merchandise featuring "Disney-branded" characters, past, present and future, and will begin to pay royalties to Disney on its physical retail store sales on the second anniversary of the closing of the transaction. Furthermore, beginning in October 2005, the Disney Store North America will operate an Internet store featuring a select assortment of merchandise offered in the physical retail locations. The Walt Disney Company will continue to operate the Disney Catalog and will maintain a Disney online retail presence.

The Children's Place has committed to invest up to $100 million into the remodeling and operations of the Disney Store North America. Of this amount, an initial $50 million will be funded at closing. The Children's Place will fund the transaction with cash on hand and short term borrowings and at this time, does not anticipate taking on any long-term debt or issuing any stock as a result of this transaction. In connection with the acquisition, The Children's Place is in the process of expanding its credit facility and establishing a working capital facility for its new subsidiary with its working capital lender, Wells Fargo Retail Finance.

The Hart-Scott-Rodino waiting period has expired, and subject to various closing conditions, the closing is expected to occur during the fourth quarter of the 2004 calendar year.

OPERATING PRIORITIES

Mario Ciampi, Senior Vice President of Store Development and Logistics for The Children's Place, will be appointed President of the Disney Store North America and will report directly to Ezra Dabah, Chairman and Chief Executive Officer.

Mr. Dabah commented, "Mario Ciampi is a proven leader and we fully expect his leadership and experience to translate into long term success for the Disney Store business. Over the past 13 years Mario has played a pivotal role in building and growing The Children's Place, including spearheading our successful expansion into new markets like Canada and Puerto Rico."

The Company's operational action plan will encompass the following key areas:

-- Enhance the store concept and in-store entertainment experience through store remodels;

-- Strengthen the value proposition by offering quality merchandise at affordable prices;

-- Utilize the Company's direct sourcing expertise and infrastructure;

-- Implement a character driven merchandise strategy that will include more frequent product flows; and

-- Leverage existing back office functions and systems infrastructure.

"The Disney Store provides us with the ability to capitalize on the popular licensed character apparel market and gives us a new growth vehicle. We believe we can significantly grow the chain through selective expansion into quality malls, and lifestyle and outlet centers," Mr. Dabah concluded.

CONFERENCE CALL

Management of The Children's Place will host a conference call this morning at 9:00 am Eastern Time with investors to discuss the transaction. Interested parties can access the call by dialing 785-832-1508, ID # "PLCE." The call can also be accessed through the Investor Relations section at The Children's Place website www.childrensplace.com. A replay of the call will be available approximately one hour after the conclusion of the call, until midnight on Wednesday, October 27, 2004. To access the replay, please dial 402-220-0857, or you may listen to the audio archive on the Company's website, www.childrensplace.com.

ABOUT THE CHILDREN'S PLACE

The Children's Place Retail Stores, Inc. is a leading specialty retailer of high quality, value-priced apparel and accessories for children, newborn to age ten. The Company designs, contracts to manufacture and sells its products under the "The Children's Place" brand name. As of October 2, 2004, the Company operated 725 stores, including 674 stores in the United States, 49 stores in Canada, and two stores in Puerto Rico. The Company also sells its merchandise through its virtual store located at www.childrensplace.com.

This press release and above referenced call may contain certain forward-looking statements regarding future circumstances. These forward-looking statements are based upon current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements including, in particular, the risks and uncertainties described in the filings of The