10-K

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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549
                                   FORM 10-K

        
   /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
           SECURITIES EXCHANGE ACT OF 1934

              FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

                                  OR

   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
           SECURITIES EXCHANGE ACT OF 1934

            FOR THE TRANSITION PERIOD FROM               TO



                         COMMISSION FILE NUMBER 0-20421

                           LIBERTY MEDIA CORPORATION
             (Exact name of Registrant as specified in its charter)

                                              
               STATE OF DELAWARE                                   84-1288730
 (State or other jurisdiction of incorporation        (I.R.S. Employer Identification No.)
               or organization)

            12300 LIBERTY BOULEVARD                                   80112
              ENGLEWOOD, COLORADO                                  (Zip Code)
   (Address of principal executive offices)



    Registrant's telephone number, including area code: (720) 875-5400

    Securities registered pursuant to Section 12(b) of the Act:



              TITLE OF EACH CLASS                     NAME OF EXCHANGE ON WHICH REGISTERED
- -----------------------------------------------  -----------------------------------------------
                                              
Series A Common Stock, par value $.01 per share              New York Stock Exchange
Series B Common Stock, par value $.01 per share              New York Stock Exchange


    Securities registered pursuant to Section 12(g) of the Act: None

    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

    Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes /X/  No / /

    The aggregate market value of the voting stock held by nonaffiliates of
Liberty Media Corporation computed by reference to the last sales price of such
stock, as of the closing of trading on February 28, 2005, was approximately
$27,076,000,000.

    The number of shares outstanding of Liberty Media Corporation's common stock
as of February 28, 2005 was:

                Series A Common Stock--2,678,923,910 shares; and
                   Series B Common Stock--121,062,825 shares.

                      Documents Incorporated by Reference
   The Registrant's definitive proxy statement for its 2005 Annual Meeting of
                             Shareholders is hereby
   incorporated by reference into Part III of this Annual Report on Form 10-K

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                           LIBERTY MEDIA CORPORATION
                        2004 ANNUAL REPORT ON FORM 10-K

                               TABLE OF CONTENTS



                                                                          PAGE
                                                                        --------
                                                                  
                                     PART I
Item 1.   Business....................................................  I-1
Item 2.   Properties..................................................  I-18
Item 3.   Legal Proceedings...........................................  I-19
Item 4.   Submission of Matters to a Vote of Security Holders.........  I-20

                                    PART II
Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.........................................  II-1
Item 6.   Selected Financial Data.....................................  II-2
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................  II-3
Item 7A.  Quantitative and Qualitative Disclosures About Market
          Risk........................................................  II-26
Item 8.   Financial Statements and Supplementary Data.................  II-30
Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure....................................  II-30
Item 9A.  Controls and Procedures.....................................  II-30
Item 9B.  Other Information...........................................  II-30

                                    PART III
Item 10.  Directors and Executive Officers of the Registrant..........  III-1
Item 11.  Executive Compensation......................................  III-1
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................  III-1
Item 13.  Certain Relationships and Related Transactions..............  III-1
Item 14.  Principal Accounting Fees and Services......................  III-1

                                    PART IV
Item 15.  Exhibits and Financial Statement Schedules..................  IV-1


                                    PART I.

ITEM 1. BUSINESS.

    (a) GENERAL DEVELOPMENT OF BUSINESS

    Liberty Media Corporation is a holding company which, through its ownership
of interests in subsidiaries and other companies, is primarily engaged in the
electronic retailing, media, communications and entertainment industries.
Through our subsidiaries, we operate in the United States, Europe and Asia. Our
principal assets include interests in QVC, Inc., Starz Entertainment Group LLC,
Ascent Media Group, Inc., Discovery Communications, Inc., Court Television
Network, GSN, IAC/InterActiveCorp and News Corporation.

    From March 9, 1999 through August 9, 2001 we were a wholly-owned subsidiary
of AT&T Corp. On March 9, 1999, AT&T acquired by merger our parent company at
that time, the former Tele-Communications, Inc. ("TCI"), which was converted to
a limited liability company and renamed AT&T Broadband, LLC. As part of that
merger, AT&T issued its Class A and Class B Liberty Media Group tracking stock,
which was designed to reflect the economic performance of the businesses and
assets of AT&T attributed to its "Liberty Media Group." Our businesses and
assets constituted all of the businesses and assets of Liberty Media Group.

    Effective August 10, 2001, AT&T effected our split-off pursuant to which our
common stock was recapitalized, and each share of AT&T Class A Liberty Media
Group tracking stock was redeemed for one share of our Series A common stock,
and each share of AT&T Class B Liberty Media Group tracking stock was redeemed
for one share of our Series B common stock. Following the split off, we are no
longer a subsidiary of AT&T and no shares of AT&T Liberty Media Group tracking
stock remain outstanding.

    RECENT DEVELOPMENTS

    On June 7, 2004, we completed the spin off of Liberty Media
International, Inc., one of our wholly-owned subsidiaries, which we refer to as
LMI. In connection with this spin off transaction, holders of our common stock
on June 1, 2004 received 0.05 of a share of LMI Series A common stock for each
share of our Series A common stock owned on June 1, 2004 and 0.05 of a share of
LMI Series B common stock for each share of our Series B common stock owned on
June 1, 2004. At the time of the spin off, LMI owned substantially all of our
international broadband distribution and international video programming assets
and businesses. In addition, we also contributed certain monetary assets to LMI
in connection with the spin off. See note 5 to the accompanying consolidated
financial statements for more information on the LMI spin off.

    During 2004, we continued executing a debt reduction program that we
announced and initiated in the fourth quarter of 2003. During 2004 and pursuant
to this program, we retired $1.0 billion of our parent company debt for
aggregate cash payments of $994 million. Since the inception of the program, we
have retired $3.51 billion of parent and subsidiary debt. We currently expect to
complete our debt reduction program by retiring $1.0 billion of additional debt
in 2005.

    On July 28, 2004, we completed a transaction with Comcast Corporation
pursuant to which we repurchased 120.3 million shares of our Series A common
stock held by Comcast in exchange for 100% of the equity of Encore ICCP, Inc.,
one of our subsidiaries. At the time of the exchange, Encore ICCP held our 10%
ownership interest in E! Entertainment Television, our 100% ownership interest
in International Channel Networks, all of our rights, benefits and obligations
under a TCI Music contribution agreement and $547 million in cash. The
transaction also resolved all litigation pending between Comcast and us
regarding the TCI Music contribution agreement, to which Comcast had succeeded
as part of its acquisition of AT&T Broadband in November of 2002.

                                      I-1

    In December 2004, we exchanged 86.9 million shares of News Corporation
non-voting stock with a fair market value of $1,608 million for 92 million
shares of News Corp. voting stock with a fair market value of $1,749 million
through a total return equity swap. We currently have an approximate 17%
economic interest and an approximate 18% voting interest in News Corp.

                                   * * * * *

    Certain statements in this Annual Report on Form 10-K constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. To the extent that statements in this Annual
Report are not recitations of historical fact, such statements constitute
forward-looking statements which, by definition, involve risks and
uncertainties. In particular, statements under Item 1. "Business," Item 2.
"Properties," Item 3. "Legal Proceedings," Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Item 7A.
"Quantitative and Qualitative Disclosures About Market Risk" contain
forward-looking statements. Where, in any forward-looking statement, we express
an expectation or belief as to future results or events, such expectation or
belief is expressed in good faith and believed to have a reasonable basis, but
there can be no assurance that the expectation or belief will result or be
achieved or accomplished. The following include some but not all of the factors
that could cause actual results or events to differ materially from those
anticipated:

    - general economic and business conditions and industry trends;

    - consumer spending levels, including the availability and amount of
      individual consumer debt;

    - spending on domestic and foreign television advertising;

    - the regulatory and competitive environment of the industries in which we,
      and the entities in which we have interests, operate;

    - continued consolidation of the broadband distribution and movie studio
      industries;

    - uncertainties inherent in the development and integration of new business
      lines and business strategies;

    - changes in distribution and viewing of television programming, including
      the expanded deployment of personal video recorders, and their impact on
      television advertising revenue and home shopping networks;

    - increased digital TV penetration and the impact on channel positioning of
      our networks;

    - rapid technological changes;

    - capital spending for the acquisition and/or development of
      telecommunications networks and services;

    - uncertainties associated with product and service development and market
      acceptance, including the development and provision of programming for new
      television and telecommunications technologies;

    - future financial performance, including availability, terms and deployment
      of capital;

    - fluctuations in foreign currency exchange rates and political unrest in
      international markets;

    - the ability of suppliers and vendors to deliver products, equipment,
      software and services;

    - the outcome of any pending or threatened litigation;

    - availability of qualified personnel;

                                      I-2

    - changes in, or failure or inability to comply with, government
      regulations, including, without limitation, regulations of the Federal
      Communications Commission, and adverse outcomes from regulatory
      proceedings;

    - changes in the nature of key strategic relationships with partners and
      joint venturers;

    - competitor responses to our products and services, and the products and
      services of the entities in which we have interests; and

    - threatened terrorists attacks and ongoing military action in the Middle
      East and other parts of the world.

These forward-looking statements and such risks, uncertainties and other factors
speak only as of the date of this Annual Report, and we expressly disclaim any
obligation or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein, to reflect any change in our
expectations with regard thereto, or any other change in events, conditions or
circumstances on which any such statement is based.

    This Annual Report includes information concerning OpenTV Corp. and other
public companies that file reports and other information with the SEC in
accordance with the Securities Exchange Act of 1934. Information contained in
this Annual Report concerning those companies has been derived from the reports
and other information filed by them with the SEC. If you would like further
information about these companies, the reports and other information they file
with the SEC can be accessed on the Internet website maintained by the SEC at
www.sec.gov. Those reports and other information are not incorporated by
reference in this Annual Report.

    (b) FINANCIAL INFORMATION ABOUT OPERATING SEGMENTS

    Through our ownership of interests in subsidiaries and other companies, we
are primarily engaged in the electronic retailing, media, communications and
entertainment industries. Each of these businesses is separately managed. We
have divided our businesses into three Groups based upon each businesses'
services or products: Interactive Group, Networks Group and Corporate and Other.
In analyzing our operating results, our management reviews the combined results
of operations of each of these Groups (including consolidated subsidiaries and
equity method affiliates), as well as the results of operations of each
individual business in each Group.

    We identify our reportable segments as (A) those consolidated subsidiaries
that (1) represent 10% or more of our consolidated revenue, earnings before
income taxes or total assets or (2) are significant to an evaluation of the
performance of a Group; and (B) those equity method affiliates (1) whose share
of earnings represent 10% or more of our pre-tax earnings or (2) are significant
to an evaluation of the performance of a Group. Financial information related to
our operating segments can be found in note 18 to our consolidated financial
statements found in Part II of this report.

    (c) NARRATIVE DESCRIPTION OF BUSINESS

    Our subsidiaries, significant equity affiliates and other assets are divided
into three Groups: the Interactive Group, the Networks Group and Corporate and
Other (which includes our technology assets). The following table identifies the
more significant businesses included in each of these Groups.

       INTERACTIVE GROUP

       QVC, Inc.
       Ascent Media Group, Inc.
       On Command Corporation
       OpenTV Corp. (Nasdaq:OPTV)
       IAC/InterActiveCorp (Nasdaq:IACI)

                                      I-3

       NETWORKS GROUP

       Starz Entertainment Group LLC (f/k/a Starz Encore Group LLC)
       Discovery Communications, Inc.
       Courtroom Television Network, LLC
       GSN, LLC
       News Corporation (NYSE:NWS; NYSE:NWSa)

       CORPORATE AND OTHER

       TruePosition, Inc.
       WildBlue Communications, Inc.
       IDT Corporation (NYSE: IDT-C)
       Time Warner Inc (NYSE:TWX)
       Sprint Corporation (NYSE:FON)
       Viacom, Inc. (NYSE:VIAb)

                               INTERACTIVE GROUP

    Our Interactive Group includes companies that provide a wide array of
interactive services. Electronic retailing operators, like QVC, offer a wide
variety of goods for sale via televised shopping programs, including 24-hour
dedicated shopping channels, and over the Internet. Electronic retailing
operators generally derive their revenue by obtaining a high volume of goods at
wholesale prices and reselling them at a profit.

    Interactive technology services are offered by many digital television
network operators to subscribers with digital television set-top boxes and to
hotels, motels and resorts seeking to provide their guests with in-room video
entertainment and information services. Interactive service providers combine
and market their software, content and applications to these providers, who in
turn provide their users with such interactive television services as electronic
commerce, targeted advertising, "video on demand" and multiplayer gaming.
Interactive service providers derive their revenue from software licenses,
affiliation agreements and other contracts with the network operators and other
providers that offer their services.

    Creative media services are offered to the media and entertainment industry.
Providers of creative media services provide services necessary to distribute
programming content including services necessary to complete the creation of
original content and the management of existing content libraries.

    QVC, INC.

    QVC, Inc. and its subsidiaries market and sell a wide variety of consumer
products in the U.S. and several foreign countries primarily by means of
televised shopping programs on the QVC networks and via the Internet through its
domestic and international websites. QVC programming is divided into segments
that are televised live with a host who presents the merchandise, sometimes with
the assistance of a guest representing the product vendor, and conveys
information relating to the product to QVC's viewers. QVC's websites offer a
complement to televised shopping by allowing consumers to purchase a wide
assortment of goods that were previously offered on the QVC networks as well as
other items that are available from QVC only via its websites. For the year
ended December 31, 2004, approximately 15% of QVC's domestic revenue and
approximately 13% of QVC's total revenue was generated from sales of merchandise
ordered through its various websites.

    QVC offers a variety of merchandise at competitive prices. QVC purchases, or
obtains on consignment, products from domestic and foreign manufacturers and
wholesalers, often on favorable terms based upon the volume of the transactions.
QVC classifies its merchandise into three groups: home, apparel/accessories and
jewelry. In the year ended December 31, 2004, home, apparel/accessories

                                      I-4

and jewelry accounted for approximately 47%, 32% and 21%, respectively, of QVC's
net revenue generated by its United States operations. QVC offers products in
each of these merchandise groups that are exclusive to QVC as well as popular
brand name products. QVC's exclusive products are often endorsed by celebrities,
designers and other well known personalities. QVC does not depend on any single
supplier or designer for a significant portion of its inventory.

    QVC distributes its television programs, via satellite or optical fiber, to
multichannel video program distributors for retransmission to subscribers in the
United States, the United Kingdom, Germany, Japan and neighboring countries that
receive QVC's broadcast signals. In the U.S., QVC uplinks its programming from
its uplink facility in Pennsylvania to a protected, non-preemptible transponder
on a domestic satellite. "Protected" status means that, in the event of a
transponder failure, QVC's signal will be transferred to a spare transponder or,
if none is available, to a preemptible transponder located on the same satellite
or, in certain cases, to a transponder on another satellite owned by the same
lessor if one is available at the time of the failure. QVC's international
business units each lease uplinking facilities from third parties for their
uplinking and transmit their programming to non-preemptible transponders on five
international satellites. "Non-preemptible" status means that, in the event of a
transponder failure, QVC's transponders cannot be preempted in favor of a user
of a "protected" failure. QVC's transponder lease for its domestic transponder
expires in 2019. QVC's transponder leases for its international transponders
expire in 2006 through 2013.

    QVC enters into long-term affiliation agreements with satellite and cable
television operators who downlink QVC's programming and distribute the
programming to their customers. QVC's affiliation agreements with these
distributors have termination dates ranging from 2005 to 2014. QVC's ability to
continue to sell products to its customers is dependent on its ability to
maintain and renew these affiliation agreements in the future.

    In return for carrying the QVC signals, each programming distributor in the
United States, the UK and Germany receives an allocated portion, based upon
market share, of up to 5% of the net sales of merchandise sold via the
television programs to customers located in the programming distributor's
service areas. In Japan, some programming distributors receive an agreed upon
monthly fee per subscriber regardless of the net sales, while others earn a
variable percentage of net sales. In addition to sales-based commissions or
per-subscriber fees, QVC also makes payments to distributors in the United
States for carriage and to secure favorable positioning on channel 35 or below
on the distributor's channel line-up. QVC believes that a portion of its sales
are attributable to purchases resulting from channel "browsing" and that a
channel position near broadcast and more popular cable networks increases the
likelihood of such purchases. As more U.S. cable operators convert their analog
customers to digital, channel positioning will become more critical due to the
increased channel options on the digital line-up.

    QVC's shopping programs are telecast 24 hours a day to 88 million homes in
the United States. QVC Shopping Channel reaches 16 million households in the
United Kingdom and the Republic of Ireland and is broadcast live 19 hours a day.
QVC Deutschland GmbH, QVC's shopping network in Germany, reaches 36 million
households throughout Germany and Austria and is broadcast live 24 hours a day.
QVC Japan, QVC's joint venture with Mitsui & Co., LTD, reaches 15 million
households and is broadcast live 24 hours a day.

    QVC strives to maintain promptness and efficiency in order taking and
fulfillment. QVC has four domestic phone centers that can direct calls from one
call center to another as volume mandates, which reduces a caller's hold time,
helping to ensure that orders will not be lost as a result of hang-ups. QVC also
has one phone center in each of the UK and Japan and two call centers in
Germany. QVC also utilizes computerized voice response units, which handle
approximately 38% of all orders taken. QVC has seven distribution centers
worldwide and is able to ship approximately 90% of its orders within 48 hours.

                                      I-5

    QVC's business is seasonal due to a higher volume of sales in the fourth
calendar quarter related to year-end holiday shopping. In recent years, QVC has
earned 22%-23% of its revenue in each of the first three quarters of the year
and 32%-33% of its revenue in the fourth quarter of the year.

    We have an approximate 98% ownership interest in QVC. The QVC management
team owns the remaining interest.

    ASCENT MEDIA GROUP, INC.

    Ascent Media Group, Inc. is a wholly-owned subsidiary, which through its
Creative Services group, Media Management Services group and Networks Services
group, provides creative, management and distribution services to the media and
entertainment industries. Its clients include major motion picture studios,
independent producers, broadcast networks, cable channels, advertising agencies
and other companies that produce, own and/or distribute entertainment, news,
sports, corporate, educational, industrial and advertising content.

    Ascent Media's Creative Services group provides services necessary to
complete the creation of original media content. Creative Services is comprised
of several boutique branded companies that operate in the United States, Mexico
and the United Kingdom, with primary operations in Los Angeles, New York and
London. The Creative Services companies provide services for feature films,
independent and documentary films, episodic television, movies-of-the-week and
mini-series, television specials, commercials, music videos, interstitial and
promotional material, and identity, corporate image campaigns, and interactive
games and new media. Many of the Creative Services companies provide services
that include creative editorial, transferring film to digital media, creating
visual effects, and assembling source material into final form. The Creative
Sound Services companies provide services that include sound design, supervision
and editorial services, sound recording and re-recording, and music recording,
and maintaining a large sound effects library used by producers in over 35
countries.

    The Media Management Services group provides owners of content libraries
with an entire complement of services necessary to optimize, archive, manage and
repurpose media assets for global distribution via freight, satellite, fiber and
the Internet. This group's services include providing access to all forms of
content, duplication and formatting services, language conversions and laybacks,
captioning and subtitling, restoration and preservation of old or damaged
content and other laboratory services, mastering from motion picture film to
high resolution or data formats, DVD menu design and interactive services, and
digital audio and video encoding services. The group's emerging media services
include digital media management for global home video, broadcast, pay-per-view,
video-on-demand (VOD), streaming media and other new media distribution
channels.

    The Network Services group provides the facilities and services necessary to
assemble and distribute programming content for cable and broadcast networks via
fiber and satellite to end users in North America, Europe and Asia. Network
Services' facilities and major video switching centers supply the broadcast
operations support needed to reliably distribute cable and DTH programming.
Related services include: network origination and master control; language
translation and subtitling; on-air promotion and post-production services; fiber
transport; uplink and satellite transponder services. The division also provides
systems integration and field service support, encompassing technology
consulting services; the design and implementation of advanced video systems;
engineering project management; an around-the-clock call center, technical help
desk, and over 40 field service locations, as well as broadcast and industrial
video equipment rentals. Ascent Media Network Services has operations, teleport
and office facilities in New York, New Jersey, Connecticut, Minnesota, Florida,
California, London and Singapore.

    Ascent Media's groups earn revenue through the provision of the
aforementioned services. Ascent Media's primary expenses are personnel,
materials and equipment costs. No single customer accounted for more than 10% of
Ascent Media's consolidated revenue in 2004.

                                      I-6

    The demand for Ascent Media's core motion picture services has historically
been seasonal, with higher demand in the spring (second fiscal quarter) and fall
(fourth fiscal quarter), and lower in the winter and summer, corresponding to
Ascent Media's first and third fiscal quarters, respectively. Similarly, demand
for Ascent Media's television program services is higher in the first and fourth
quarters and lower in the summer, or third quarter. However, recent trends in
the demand for television program services may result in increased business for
Ascent Media in the summer. In addition, the timing of projects in Ascent
Media's Media Management Services Group and Network Services Group are beginning
to offset the quarters in which there has been historically lower demand for
Ascent Media's motion picture and television services. Accordingly, Ascent Media
expects to experience less dramatic quarterly fluctuations in its operating
performance in the future.

    ON COMMAND CORPORATION

    On Command Corporation, a wholly-owned subsidiary, is a leading provider
(based on number of hotel rooms served) of in-room video entertainment and
information services to hotels, motels and resorts (which we collectively refer
to as hotels) in the United States. On Command's base of installed rooms was
approximately 831,000 rooms at December 31, 2004.

    On Command provides in-room video entertainment and information services on
two main technology platforms: the OCX video system and the OCV video system.
The OCX video system is a digital platform that provides enhanced multimedia
applications, including an improved graphical interface for movies and games,
digital music, television-based Internet with a wireless keyboard and other
guest services. The OCV video system is a video selection and distribution
technology platform that allows hotel guests to select, at any time, movies and
games through the television sets in their hotel rooms. In addition, both of On
Command's platforms provide for in-room viewing of select cable channels (such
as HBO, Starz, ESPN, CNN, Disney Channel and Discovery). At December 31, 2004,
On Command provided its OCX and OCV video systems in 427,000 and 404,000 rooms,
respectively.

    The hotels providing On Command's services collect fees from their guests
for the use of On Command's services and are provided a commission equal to a
negotiated percentage of the net revenue earned by On Command for such usage.
The amount of revenue realized by On Command is affected by a variety of
factors, including among others, hotel occupancy rates, the "buy rate" or
percentage of occupied rooms that buy movies or services, the quality of On
Command's pay-per-view movie offerings, business and leisure travel patterns and
changes in the number of rooms served. With the exception of December, which is
generally On Command's lowest month for revenue, On Command typically does not
experience significant variations in its monthly revenue that can be attributed
solely to seasonal factors.

    On Command primarily provides its services under long-term contracts to
hotel corporations, hotel management companies, and individually owned and
franchised hotel properties. On Command's services are offered predominantly in
the large deluxe, luxury, and upscale hotel categories serving business
travelers, such as Marriott, Hilton, Six Continents, Hyatt, Wyndham, Starwood,
Radisson, Fairmont, Four Seasons and other select hotels. On Command's contracts
with hotels generally provide that On Command will be the exclusive provider of
in-room, pay-per-view video entertainment services to the hotel and generally
permit On Command to set its prices. On Command's contracts with hotels
typically set forth the terms governing On Command's provision of free-to-guest
programming as well. At December 31, 2004, contracts covering approximately 31%
of On Command's installed rooms have expired, or are scheduled to expire, if not
otherwise renewed, during the two-year period ending December 31, 2006.
Marriott, Hilton and Hyatt accounted for approximately 35%, 8% and 8%
respectively, of On Command's room revenues for the year ended December 31,
2004. These revenue percentages represent all chain affiliations including
owned, managed and franchised hotels.

                                      I-7

    On Command's master contract with Hilton Hotels Corporation expired on
April 27, 2000. In October 2000, Hilton announced that it would not be renewing
its master contract with On Command. On Command currently provides service to
approximately 48,000 rooms in 207 hotels that are owned, managed or franchised
by Hilton. Hotel contracts are written at the individual hotel level and
expirations will occur over an extended period of time depending on the
installation date of the individual hotel. On Command expects that hotels owned
by Hilton will not renew their contracts as they expire. Hotels that are managed
or franchised by Hilton are not precluded from renewing their contracts with On
Command, but On Command cannot predict the number of managed and franchised
Hilton hotels that will renew.

    OPENTV CORP.

    OpenTV provides technology, content and applications, and services that
enable digital television network operators to deliver and manage interactive
television services on all major digital television platforms--cable, satellite
and terrestrial--in all major geographic areas of the world. OpenTV's software
products, including its core middleware and its interactive service platform,
have been shipped in more than 50 million digital set-top boxes worldwide.
OpenTV offers its customers a comprehensive suite of interactive and enhanced
television solutions that leverage its proprietary software and technologies and
worldwide patent portfolio. OpenTV's core software products enable network
operators to manage the creation and delivery of interactive and enhanced
television services to their subscribers. OpenTV develops and manages branded
television channels that allow viewers to play interactive games, and it offers
applications that enable viewers to engage in commerce transactions, retrieve
information such as weather reports and sports updates, and engage in other
interactive services, including fixed-odds gaming, through their televisions.
OpenTV also recently began efforts to market and commercially deploy targeted
and addressable advertising solutions and research analyses detailing how
viewers engage and interact with programs and advertisements. To complement its
technologies and interactive content and applications, OpenTV also offers a full
suite of professional engineering and consulting services. These services allow
OpenTV to manage various interactive television projects, from discrete
integration or development assignments to complete end-to-end digital
programming solutions for network operators.

    OpenTV derives revenue from (1) royalties from the sale of set-top boxes
that incorporate OpenTV software; (2) fees for consulting engagements for
set-top box manufacturers, network operators and system integrators and
maintenance and support for set-top box manufacturers; (3) channel fees from
consumers of the PlayJam interactive games channel who pay to play games and
register for prizes; and (4) license fees from the sale of products such as
Device Mosaic, OpenTV Core, OpenTV Measure and various applications, including
OpenTV Publisher. Sky Italia, BSkyB and Echostar accounted for 18%, 17% and 15%,
respectively, of OpenTV's revenue in 2004.

    While OpenTV is one of the world's leading interactive television companies,
the interactive television industry is still in its infancy. The growth of the
industry and of OpenTV is highly dependent upon a number of factors, including
(i) consumer acceptance of interactive services and products; (ii) deployment of
capital by broadband service providers for interactive hardware and software;
(iii) acceptance by broadband service providers of OpenTV's interactive
technology and products; and (iv) continued development of interactive
technology, products and services. These factors are not within OpenTV's control
and no assurance can be given that interactive television will expand beyond its
current state.

    We own shares of OpenTV's Class A common stock and Class B common stock,
representing an approximate 32% equity interest and an approximate 79% voting
interest in OpenTV. Each share of OpenTV Class B common stock has 10 votes per
share and is convertible into one share of OpenTV Class A common stock, which
has one vote per share.

                                      I-8

    IAC/INTERACTIVECORP

    IAC/InterActiveCorp, in which we have an approximate 20% ownership interest,
is a multi-brand interactive commerce company transacting business worldwide via
the Internet, television and the telephone. IAC's portfolio of companies
collectively enables direct-to-consumer transactions across many areas,
including home shopping, ticketing, personals, travel, teleservices and local
services.

    IAC consists of the following segments:

    - IAC Travel, which includes Expedia.com, Hotels.com, Hotwire and Interval
      International;

    - Electronic Retailing, which includes HSN U.S. and HSN International;

    - Ticketing, which includes Ticketmaster;

    - Personals, which includes Match.com;

    - IAC Local and Media Services, which includes Citysearch, Evite,
      Entertainment Publications, TripAdvisor and ServiceMagic;

    - Financial Services and Real Estate, which includes Lending Tree;

    - Teleservices, which includes Precision Response Corporation; and

    - Interactive Development.

    IAC's businesses largely act as intermediaries between suppliers and
consumers. IAC aggregates supply from a variety of sources and captures consumer
demand across a variety of channels. In December 2004, IAC announced that its
Board of Directors had approved a spin-off plan to separate IAC into two
publicly traded companies, Expedia (which would include the IAC Travel business)
and IAC.

                                 NETWORKS GROUP

    Programming networks distribute their services through a number of
distribution technologies, including cable television, direct-to-home satellite,
broadcast television and the Internet. Programming services may be delivered to
subscribers as part of a video distributor's analog or digital package of
programming services for a fixed monthly fee, or may be delivered individually
as a "premium" programming service for a separate monthly charge. Whether a
programming service is a basic or premium channel, the programmer generally
enters into separate multi-year affiliation agreements with those distributors
that agree to carry the service. Basic programming services derive their revenue
principally from the sale of advertising time on their networks and from per
subscriber license fees received from distributors. Premium services do not sell
advertising and primarily generate their revenue from subscriber fees. A basic
programming service may derive a significant portion of its revenue from the
sale of advertising and may receive only limited amounts of revenue from
subscriber license fees. It should be noted, however, that the sale of
advertising by these services is only made possible through their affiliation
with distributors. Thus the continued ability to generate both advertising
revenue and subscriber license fees is dependent on these services' ability to
maintain and renew their affiliation agreements.

    STARZ ENTERTAINMENT GROUP LLC (F/K/A STARZ ENCORE GROUP LLC)

    Starz Entertainment Group LLC, a wholly-owned subsidiary, provides premium
movie networks distributed by cable, direct-to-home satellite, or DTH, and other
distribution media in the United States. It currently owns and operates 14
full-time domestic movie channels, consisting of STARZ!, primarily a first-run
movie service; ENCORE, which airs first-run movies and classic contemporary
movies; a number of thematic multiplex channels, a group of channels, each of
which exhibits movies based

                                      I-9

upon individual themes; and MOVIEPLEX, a "theme by day" channel featuring a
different ENCORE or thematic multiplex channel each day, on a weekly rotation.
Starz Entertainment has launched a Starz On Demand service, as well as high
definition feeds of certain of its channels. In addition, in June 2004, Starz
Entertainment made STARZ! and Starz On Demand available over the Internet in a
subscription package called STARZ! Ticket. At December 31, 2004, Starz
Entertainment had 172.8 million subscription units of which approximately 75%
were subscription units for the thematic multiplex channels and the remainder
were comprised of subscription units for STARZ!, ENCORE and MOVIEPLEX.
Subscription units represent the number of Starz Entertainment services which
are purchased by cable, DTH and other distribution media customers.

    The majority of Starz Entertainment's revenue is derived from the delivery
of movies to subscribers under long-term affiliation agreements with cable
systems and direct broadcast satellite systems, including Comcast Cable,
DirecTV, Echostar, Time Warner, Charter Communications, Cox Communications,
Adelphia Communications, Cablevision Systems, Insight Communications, Mediacom
Communications and the National Cable Television Cooperative. The majority of
Starz Entertainment's affiliation agreements, including its agreements with
Comcast Cable, DirecTV and Echostar, provide for payments based on the number of
subscribers that receive Starz Entertainment's services and expire between
June 2005 and December 2010. For the year ended December 31, 2004, Starz
Entertainment earned 24%, 24% and 11% of its total revenue from Comcast, DirecTV
and Echostar, respectively.

    The costs of acquiring rights to programming are Starz Entertainment's
principal expenses. In order to exhibit theatrical motion pictures, Starz
Entertainment enters into agreements to acquire rights from major and
independent motion picture producers. Starz Entertainment currently has access
to approximately 4,750 movies through long-term licensing agreements. Eighty
three percent of the first-run output titles available to Starz Entertainment
for airing are available pursuant to exclusive licenses from Hollywood Pictures,
Touchstone Pictures, Miramax Films, Disney, Revolution Studios, Universal
Studios, New Line Cinema and Fine Line Cinema. Starz Entertainment also has
exclusive rights to air first-run output from four independent studios and has
licensed the exclusive rights to first-run output from Sony's Columbia Pictures,
Screen Gems and Sony Pictures Classics for pay television availabilities
beginning on January 1, 2006. Starz Entertainment's agreements with Universal
Studios, New Line Cinema, and Fine Line Cinema expire December 31, 2005 for pay
television availabilities. Its remaining output agreements expire between 2006
and 2011, with extensions, at the option of the respective studio, potentially
extending the expiration date of certain of these agreements to 2014.

    Starz Entertainment uplinks its programming to ten transponders on three
domestic communications satellites. Starz Entertainment leases its transponders
under long-term lease agreements. At December 31, 2004, Starz Entertainment's
transponder leases had termination dates ranging from 2018 to 2021. Starz
Entertainment transmits to these transponders from its uplink center in
Englewood, Colorado.

    DISCOVERY COMMUNICATIONS, INC.

    Discovery Communications, Inc. is a global media and entertainment company
whose operations are organized into four business units: Discovery Networks
U.S., Discovery International Networks, Discovery Commerce and Discovery
Education. Discovery has grown from its core property, DISCOVERY CHANNEL, to
current global operations in over 160 countries with over 1 billion total
cumulative subscription units, that include subscription units carried by joint
venture networks and subscription units that are reached through branded
programming blocks in China. Discovery subscription units are carried under
various pricing plans that include free periods and free carriage.

    Discovery produces original programming and acquires content from numerous
producers worldwide that is tailored to the specific needs of viewers around the
globe. Discovery has 21 network

                                      I-10

entertainment brands including TLC, ANIMAL PLANET, TRAVEL CHANNEL, DISCOVERY
HEALTH CHANNEL, DISCOVERY KIDS, and a family of digital channels. Discovery's
networks are carried by the largest cable television and satellite distributors
in the United States and abroad. Discovery also distributes BBC AMERICA in the
United States.

    Discovery earns revenue from the sale of advertising on its network, from
affiliation agreements with cable television and direct-to-home satellite
operators and by licensing its programs for international distribution.
Discovery's affiliation agreements typically have terms of 3 to 10 years and
provide for payments based on the number of subscribers that receive Discovery's
services. No single distributor represented more than 10% of Discovery's
consolidated revenue for the year ended December 31, 2004.

    Discovery's other properties consist of DISCOVERY.COM and approximately 115
retail outlets that offer lifestyle, health, science and education oriented
products, as well as products related to other programming offered by Discovery.
Additionally, Discovery's newest division, Discovery Education, distributes
educational materials to over 85,000 schools in the United States and to schools
in 19 countries around the world.

    We hold a 50% interest in Discovery. Cox Communications, Inc. and
Advance/Newhouse Programming Partnership each hold a 25% interest in Discovery.

    Discovery is managed by its stockholders rather than a board of directors.
Generally, all actions to be taken by Discovery require the approval of the
holders of a majority of Discovery's shares, subject to certain exceptions,
including certain fundamental actions, which require the approval of the holders
of at least 80% of Discovery's shares. The stockholders of Discovery have agreed
that they will not be required to make additional capital contributions to
Discovery unless they all consent. They have also agreed not to own another
basic programming service carried by domestic cable systems that consists
primarily of documentary, science and nature programming, subject to certain
exceptions.

    Each stockholder has been granted preemptive rights on share issuances by
Discovery. Any proposed transfer of Discovery shares by a stockholder will be
subject to rights of first refusal in favor of the other stockholders, subject
to certain exceptions, with our right of first refusal being secondary under
certain circumstances. In addition, we are not permitted to hold in excess of
50% of Discovery's stock unless our increased ownership results from exercises
of our preemptive rights or rights of first refusal.

    COURTROOM TELEVISION NETWORK, LLC

    Courtroom Television Network, LLC owns and operates Court TV, a basic cable
network that provides informative and entertaining programming based on the
American legal system. Court TV's day-time programming focuses on trial
coverage. Night-time programming includes original programming such as FORENSIC
FILES and PSYCHIC DETECTIVES, original movies such as EXONERATED and GUILT BY
ASSOCIATION, reality-based documentary specials and off-network series such as
NYPD BLUE and COPS. Court TV was launched in 1991, and as of December 31, 2004
had nearly 83 million subscribers. Court TV earns revenue from the sale of
advertising on its network, from affiliation agreements with cable television
and direct-to-home satellite operators and by licensing its programs for
international distribution. At December 31, 2004, Court TV's affiliation
agreements have remaining terms of one to six years and provide for payments
based on the number of subscribers that receive Court TV's services. No single
distributor represented more than 10% of Court TV's consolidated revenue for
2004.

    We and Time Warner Entertainment each own 50% of Court Television Network.
Pursuant to Court Television Network's operating agreement, no action may be
taken with respect to certain material matters without our approval and that of
Time Warner Entertainment. Also pursuant to Court

                                      I-11

Television Network's operating agreement, each member has a right of first offer
with respect to any proposed transfer by the other member of its interest in
Court Television Network other than to an affiliate of the transferring member
or to NBC Cable Courtroom Holdings, Inc. upon exercise of its option (as
described below). In addition, at any time after January 7, 2006, we may require
Time Warner Entertainment to purchase all but not less than all of our ownership
interest, and Time Warner Entertainment may require us to sell all but not less
than all of our ownership interest, in Court Television Network. Furthermore,
pursuant to an option agreement among us, Time Warner Entertainment, Court
Television Network and NBC Cable Courtroom, NBC Cable Courtroom has the option
to purchase a 50.1% voting interest in Court Television Network, if on or before
August 31, 2005, we and Time Warner Entertainment convert the service
distributed by Court Television Network into a service that provides regularly
scheduled general business or financial news or personal finance programming. In
addition, if NBC Cable Courtroom exercises its right under the option agreement
and becomes a member of Court Television Network, neither we nor Time Warner
Entertainment may transfer all or any part of our interest to the other, or more
than 50% of our interest to a third party, without first offering to include a
portion of NBC Cable Courtroom's membership interest in the sale.

    GSN, LLC

    GSN, LLC owns and operates GSN. With more than 56 million subscribers as of
December 31, 2004, GSN is a basic cable network dedicated to game-related
programming and interactive game playing. GSN offers 24-hour cable programming
consisting of game shows, casino games, reality series, documentaries and other
game-related shows. GSN currently features 84 hours per week of interactive
programming, which allows viewers a chance to win prizes by playing along with
GSN's televised games. Players can play along using their remote control through
a digital cable box or by using their computer at GSN.com. GSN's interactive
programming is expected to expand to 24 hours per day beginning in the second
quarter of 2005.

    GSN's revenue is derived from the delivery of its programming to subscribers
under long-term affiliation agreements with cable systems and direct broadcast
satellite systems and from the sale of advertising on its network. GSN's
affiliation agreements provide for payments based on the number of subscribers
that receive GSN's services and expire between 2005 and 2008. GSN is currently
out of contract with an affiliate that accounts for approximately 24% of GSN's
current subscriber base, and is in negotiations for the renewal of such
contract. For the year ended December 31, 2004, GSN earned 11% of its total
revenue from DirectTV.

    We and Sony Pictures Entertainment, a division of Sony Corporation of
America, which is a subsidiary of Sony Corporation, each own 50% of GSN, LLC.
GSN's day-to-day operations are managed by a management committee of its board
of managers. Pursuant to GSN's operating agreement, we and Sony each have the
right to designate half of the members of the management committee. Also
pursuant to the operating agreement, we and Sony have agreed that direct
transfers of our interests in GSN and certain indirect transfers that result in
a change of control of the transferring party are subject to a right of first
refusal in favor of the non-transferring member.

    NEWS CORPORATION

    News Corp. is a diversified international media and entertainment company
with operations in eight industry segments, including filmed entertainment,
television, cable network programming, direct broadcast satellite television,
magazines and inserts, newspapers, book publishing and other. News Corp.'s
activities are conducted principally in the United States, Continental Europe,
the United Kingdom, Asia, Australia and the Pacific Basin. News Corp. is a
holding company that conducts all of its activities through subsidiaries and
affiliates. Its principal subsidiaries and affiliates are Fox Entertainment
Group, Inc., Twentieth Century Fox Film Corporation, Fox Television
Holdings, Inc., Fox Broadcasting Company, Fox Sports Networks, Inc., NDS Group
plc, News America Marketing In-Store

                                      I-12

Services, Inc., News America Marketing FSI, Inc., News International Limited,
News Limited, HarperCollins Publishers, Inc., HarperCollins Publishers Limited,
STAR Group Limited, BSkyB and The DIRECTV Group.

                              CORPORATE AND OTHER

    TRUEPOSITION, INC.

    TruePosition, Inc., a consolidated subsidiary, develops and markets
technology for locating wireless phones and other wireless devices, enabling
wireless carriers, application providers and other enterprises to provide E-911
and other location-based services to mobile users worldwide. "E-911" or
"Enhanced 911" refers to an FCC mandate requiring wireless carriers to implement
wireless location capability. Cingular Wireless began deploying TruePosition's
technology in late 2002 and throughout 2003 and 2004, and T-Mobile USA began
deploying such technology in 2003 and throughout 2004. In addition, two smaller
wireless carriers deployed TruePosition's technology in 2004. Although many of
these services have not yet been developed, TruePosition's wireless location
technology can also be used to implement a number of commercial location based
services including (1) convenience/information services such as "concierge" and
"personal navigation" which identify and provide directions to the nearest
restaurant, ATM, or gas station or allow travelers to obtain other information
specific to their location; (2) corporate applications, such as fleet or asset
tracking which could enable enterprises to better manage mobile assets to
optimize service or cut costs; (3) entertainment/community services such as
"friend finder" or "m-dating" which could allow mobile users to create a
localized community of people with similar interests and receive notification
when another group member is close-by; (4) mobile commerce services which could
help users shop or purchase goods or services from the retailer closest to their
current location; and (5) safety related applications which could help public or
private safety organizations find or track mobile users in need of assistance or
help locate stolen property.

    The TruePosition-Registered Trademark- Finder-TM- system is a passive
overlay system designed to enable mobile wireless service providers to determine
the location of wireless devices, including cellular and PCS telephones. Using
patented time difference of arrival (TDOA) and angle of arrival (AOA)
technology, the TruePosition Finder-TM- system calculates the latitude and
longitude of a designated wireless telephone or transmitter and forwards this
information in real time to application software. TruePosition technology
offerings cover all of the major wireless air interfaces such as Time Division
Multiple Access (TDMA), Code Division Multiple Access (CDMA), Analog Mobile
Phone Service (AMPS) and Global System Mobile (GSM).

    We own approximately 89% of the common equity of TruePosition and 100% of
the TruePosition preferred stock with a liquidation preference of $347 million
at December 31, 2004.

REGULATORY MATTERS

    PROGRAMMING AND INTERACTIVE TELEVISION SERVICES

    In the United States, the FCC regulates the providers of satellite
communications services and facilities for the transmission of programming
services, the cable television systems that carry such services, and, to some
extent, the availability of the programming services themselves through its
regulation of program licensing. Cable television systems in the United States
are also regulated by municipalities or other state and local government
authorities. Cable television companies are currently subject to federal rate
regulation on the provision of basic service, and continued rate regulation or
other franchise conditions could place downward pressure on the fees cable
television companies are willing or able to pay for programming services in
which we have interests. Regulatory carriage requirements also could adversely
affect the number of channels available to carry the programming services in
which we have an interest.

                                      I-13

    REGULATION OF PROGRAM LICENSING.  The Cable Television Consumer Protection
and Competition Act of 1992 (the 1992 Cable Act) directed the FCC to promulgate
regulations regarding the sale and acquisition of cable programming between
multi-channel video programming distributors (including cable operators) and
satellite-delivered programming services in which a cable operator has an
attributable interest. The legislation and the implementing regulations adopted
by the FCC preclude virtually all exclusive programming contracts between cable
operators and satellite programmers affiliated with any cable operator (unless
the FCC first determines the contract serves the public interest) and generally
prohibit a cable operator that has an attributable interest in a satellite
programmer from improperly influencing the terms and conditions of sale to
unaffiliated multi-channel video programming distributors. Further, the 1992
Cable Act requires that such affiliated programmers make their programming
services available to cable operators and competing multi-channel video
programming distributors such as multi-channel multi-point distribution systems,
which we refer to as MMDS, and direct broadcast satellite distributors on terms
and conditions that do not unfairly discriminate among distributors. The
Telecommunications Act of 1996 extended these rules to programming services in
which telephone companies and other common carriers have attributable ownership
interests. The FCC revised its program licensing rules by implementing a damages
remedy in situations where the defendant knowingly violates the regulations and
by establishing a timeline for the resolution of complaints, among other things.
Although we no longer own Liberty Cablevision of Puerto Rico Ltd. ("LCPR"), FCC
rules continue to attribute an ownership interest in LCPR to us, thereby
subjecting us and satellite-delivered programming services in which we have an
interest to the program access rules.

    REGULATION OF CARRIAGE OF PROGRAMMING.  Under the 1992 Cable Act, the FCC
has adopted regulations prohibiting cable operators from requiring a financial
interest in a programming service as a condition to carriage of such service,
coercing exclusive rights in a programming service or favoring affiliated
programmers so as to restrain unreasonably the ability of unaffiliated
programmers to compete.

    REGULATION OF OWNERSHIP.  The 1992 Cable Act required the FCC, among other
things, (1) to prescribe rules and regulations establishing reasonable limits on
the number of channels on a cable system that will be allowed to carry
programming in which the owner of such cable system has an attributable interest
and (2) to consider the necessity and appropriateness of imposing limitations on
the degree to which multi-channel video programming distributors (including
cable operators) may engage in the creation or production of video programming.
In 1993, the FCC adopted regulations limiting carriage by a cable operator of
national programming services in which that operator holds an attributable
interest to 40% of the first 75 activated channels on each of the cable
operator's systems. The rules provided for the use of two additional channels or
a 45% limit, whichever is greater, provided that the additional channels carried
minority-controlled programming services. The regulations also grandfathered
existing carriage arrangements that exceeded the channel limits, but required
new channel capacity to be devoted to unaffiliated programming services until
the system achieved compliance with the regulations. These channel occupancy
limits applied only up to 75 activated channels on the cable system, and the
rules did not apply to local or regional programming services. However, on
March 2, 2001, the United States Court of Appeals for the District of Columbia
Circuit found that the FCC had failed to justify adequately the channel
occupancy limit, vacated the FCC's decision and remanded the rule to the FCC for
further consideration. In response to the Court's decision, the FCC issued a
further notice of proposed rulemaking in 2001 to consider channel occupancy
limitations. Even if these rules were readopted by the FCC, they would have
little impact on programming companies in which we have interests based upon our
current attributable ownership interests in cable systems.

    In its March 2, 2001 decision, the Court of Appeals also vacated the FCC's
rule imposing a thirty percent limit on the number of subscribers served by
systems nationwide in which a multiple system

                                      I-14

operator can have an attributable ownership interest. The FCC presently is
conducting a rulemaking regarding this ownership limitation and its ownership
attribution standards.

    The FCC's rules also generally had prohibited common ownership of a cable
system and broadcast television station with overlapping service areas. On
February 19, 2002, the United States Court of Appeals for the District of
Columbia Circuit held that the FCC's decision to retain the cable/broadcast
cross-ownership rule was arbitrary and capricious and vacated the rule. The FCC
did not seek Supreme Court review of this decision or initiate a new rulemaking
proceeding. The FCC rules continue to prohibit common ownership of a cable
system and MMDS with overlapping service areas.

    REGULATION OF CARRIAGE OF BROADCAST STATIONS.  The 1992 Cable Act granted
broadcasters a choice of must carry rights or retransmission consent rights. The
rules adopted by the FCC generally provided for mandatory carriage by cable
systems of all local full-power commercial television broadcast signals
selecting must carry rights and, depending on a cable system's channel capacity,
non-commercial television broadcast signals. Such statutorily mandated carriage
of broadcast stations coupled with the provisions of the Cable Communications
Policy Act of 1984, which require cable television systems with 36 or more
"activated" channels to reserve a percentage of such channels for commercial use
by unaffiliated third parties and permit franchise authorities to require the
cable operator to provide channel capacity, equipment and facilities for public,
educational and government access channels, could adversely affect some or
substantially all of the programming companies in which we have interests by
limiting the carriage of such services in cable systems with limited channel
capacity. On January 18, 2001, the FCC adopted rules relating to the cable
carriage of digital television signals. Among other things, the rules clarify
that a digital-only television station can assert a right to analog or digital
carriage on a cable system. The FCC initiated a further proceeding to determine
whether television stations may assert rights to carriage of both analog and
digital signals during the transition to digital television and to carriage of
all digital signals. On February 10, 2005, the FCC denied mandatory dual
carriage of a television station's analog and digital signals during the digital
television transition and also denied mandatory carriage of all of a television
station's digital signals, other than its "primary" signal. Television station
owners may seek judicial review or legislative change of the FCC's decision.

    CLOSED CAPTIONING AND VIDEO DESCRIPTION REGULATION.  The Telecommunications
Act of 1996 also required the FCC to establish rules and an implementation
schedule to ensure that video programming is fully accessible to the hearing
impaired through closed captioning. The rules adopted by the FCC will require
substantial closed captioning over an eight to ten year phase-in period, which
began in 2000, with only limited exemptions. As a result, the programming
companies in which we have interests are expected to incur significant
additional costs for closed captioning.

    A LA CARTE PROCEEDING.  In 2004, the FCC's Media Bureau conducted a notice
of inquiry proceeding regarding the feasibility of selling video programming
services "a la carte", i.e. on an individual or small tier basis. The Media
Bureau released a report on November 19, 2004, which concluded that a la carte
sales of video programming services would not result in lower video programming
costs for most consumers and that they would adversely affect video programming
networks. Although the FCC concluded this proceeding, it is possible that
Congress may consider a la carte proposals in the future.

    COPYRIGHT REGULATION.  The programming companies in which we have interests
must obtain any necessary music performance rights from the rights holders.
These rights generally are controlled by the music performance rights
organizations of the American Society of Composers, Authors and Publishers
(ASCAP), Broadcast Music, Inc. (BMI) and the Society of European Stage Authors
and Composers (SESAC), each with rights to the music of various artists.
Although the programming companies in which we have interests generally have
obtained the necessary rights through separate agreements with ASCAP, BMI and
SESAC, certain of the agreements are being negotiated on an industry-wide basis,

                                      I-15

including new rate structures that may require retroactive rate increases.
Certain of the programming companies also have obtained licenses for music
performance rights outside the United States through various licensing agencies
located in the foreign countries in which their services are distributed.

    SATELLITES AND UPLINK.  In general, authorization from the FCC must be
obtained for the construction and operation of a communications satellite. The
FCC authorizes utilization of satellite orbital slots assigned to the United
States by the World Administrative Radio Conference. Such slots are finite in
number, thus limiting the number of carriers that can provide satellite
transponders and the number of transponders available for transmission of
programming services. At present, however, there are numerous competing
satellite service providers that make transponders available for video services
to the cable industry. The FCC also regulates the earth stations uplinking to
and/or downlinking from such satellites.

    INTERNET SERVICES

    The Internet companies in which we have interests are subject, both directly
and indirectly, to various laws and governmental regulations relating to their
respective businesses. There are currently few laws or regulations directly
applicable to access to or commerce on commercial online services or the
Internet. For example, the Digital Millennium Copyright Act, enacted into law in
1998, protects certain qualifying online service providers from copyright
infringement liability, and, under the Communications Decency Act, an Internet
service provider will not be treated as the publisher or speaker of any
information provided by another information content provider. Legislation
enacted by Congress in 2004 extended the moratorium on state and local taxes on
Internet access and commerce until November 1, 2007.

    Other Internet-related laws and regulations may cover issues such as user
privacy, defamatory speech, copyright infringement, pricing and characteristics
and quality of products and services. The adoption of such laws or regulations
in the future may slow the growth of commercial online services and the
Internet, which could in turn cause a decline in the demand for the services and
products of the Internet companies in which we have interests and increase such
companies' costs of doing business or otherwise have an adverse effect on their
businesses, operating results and financial conditions. Moreover, the
applicability to commercial online services and the Internet of existing laws
governing issues such as property ownership, libel, personal privacy and
taxation is uncertain and could expose these companies to substantial liability.

    OTHER REGULATION

    We also have significant ownership interests on a cost basis in other
entities, such as News Corporation and Sprint Corporation, which are extensively
regulated. For example, the broadcast stations owned and the direct broadcast
satellite service controlled by News Corp. are subject to a variety of FCC
regulations. Sprint is subject not only to federal regulation but also to
regulation in varying degrees, depending on the jurisdiction, by state and local
regulatory authorities.

    PROPOSED CHANGES IN REGULATION

    The regulation of programming services, cable television systems and
satellite licensees is subject to the political process and has been in constant
flux over the past decade. Further material changes in the law and regulatory
requirements must be anticipated and there can be no assurance that our business
will not be adversely affected by future legislation, new regulation or
deregulation.

                                      I-16

COMPETITION

    INTERACTIVE GROUP

    In the U.S. and elsewhere, QVC competes with a number of home shopping
services, including Home Shopping Network. QVC also competes with other
businesses that are engaged in retail merchandising.

    The businesses of providing software and related technologies, content and
applications and professional services for interactive and enhanced television
are highly competitive and rapidly changing. The interactive television
technology companies with which OpenTV competes include NDS Group plc.,
Microsoft Corporation, Liberate Technologies (which recently agreed to sell
substantially all of its assets to a joint venture owned by Comcast Corporation
and Cox Communications) and Scientific Atlanta. NDS Group plc., a company
controlled by News Corp., is expanding into the interactive television platform
market and recently extended its market share with the acquisition of Media
Highway from Thomson Multimedia. News Corp. also has a significant ownership
interest in BSkyB and Sky Italia, which are two of OpenTV's largest customers,
DirecTV and other satellite operators around the world. Companies that develop
interactive television content and applications include dedicated applications
providers, interactive television technology companies, and independent third
parties that develop and provide applications for middleware platforms.
Competition is also faced from media companies that have publicly announced
interactive television initiatives, such as The Discovery Channel (in which we
also own an interest) and CNN. In addition, certain network operators such as
BSkyB in the United Kingdom have entered into agreements, joint ventures, and
other relationships with technology and entertainment companies. We expect
competition in the interactive content and applications area to intensify as the
general market for interactive television services further develops,
particularly in the case of independent third parties that have the ability to
develop applications for middleware platforms at relatively modest expense
through the use of applications development tools.

    In the interactive television professional services area, competition is
faced primarily from third party system integrators, as well as from internal
information technology staffs at our network operator customers. Other
interactive television technology providers also provide a level of professional
services in conjunction with their product offerings.

    The creative media services industry is highly competitive. Much of the
competition is centered in Los Angeles, California, the largest and most
competitive market, particularly for domestic television and feature film
production as well as for the management of content libraries. We expect that
competition will increase both domestically and internationally as a result of
industry consolidation and alliances, as well as the emergence of new
competitors. In particular, although major motion picture studios such as
Paramount Pictures, Sony Pictures Corporation, Twentieth Century Fox, Universal
Pictures, The Walt Disney Company, Metro-Goldwyn-Mayer and Warner Brothers are
customers of these services, they can also perform similar services in-house
with substantially greater financial, technical, creative, marketing and other
resources. These studios could devote substantially greater resources to the
development and marketing of services that compete with those of Ascent Media.
Ascent Media also actively competes with certain industry participants that may
be smaller but have a unique operating niche or specialty business.

    There are numerous providers of in-room entertainment services to the hotel
industry. Market participants include, but are not limited to, (i) other full
service in-room providers, (ii) cable television companies, (iii) direct
broadcast satellite services, (iv) television networks and programmers,
(v) Internet service providers, (vi) broadband connectivity companies,
(vii) other telecommunications companies and (viii) certain hotels. In addition,
On Command's services compete for a guest's time and entertainment resources
with other forms of entertainment and leisure activities. On Command anticipates
that it will continue to face substantial competition from traditional as well
as new competitors. Many of On Command's potential competitors are developing
ways to use their existing

                                      I-17

infrastructure to provide in-room entertainment and/or informational services.
Certain of these competitors are already providing guest programming services
and are beginning to provide video-on-demand, Internet and high-speed
connectivity services to hotels.

    NETWORKS GROUP

    The business of distributing programming for cable and satellite television
is highly competitive, both in the United States and in foreign countries. The
programming companies in which we have interests directly compete with other
programmers for distribution on a limited number of channels. Increasing
concentration in the multichannel video distribution industry could adversely
affect the programming companies in which we have interests by reducing the
number of distributors to whom they sell their programming, subjecting more of
their programming sales to volume discounts and increasing the distributors'
bargaining power in negotiating new affiliation agreements. Once distribution is
obtained, our programming services and our business affiliates' programming
services compete, in varying degrees, for viewers and advertisers with other
cable and off-air broadcast television programming services as well as with
other entertainment media, including home video, pay-per-view services, online
activities, movies and other forms of news, information and entertainment. The
programming companies in which we have interests also compete, to varying
degrees, for creative talent and programming content. Our management believes
that important competitive factors include the prices charged for programming,
the quantity, quality and variety of the programming offered and the
effectiveness of marketing efforts.

EMPLOYEES

    As of December 31, 2004, we had approximately 60 corporate employees, and
our consolidated subsidiaries had an aggregate of approximately 17,100
employees. We believe that our employee relations are good.

    (d) FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS

    For financial information related to the geographic areas in which we do
business, see note 18 to our consolidated financial statements found in Part II
of this report.

    (e) AVAILABLE INFORMATION

    All of our filings with the Securities and Exchange Commission (the "SEC"),
including our Form 10-Ks, Form 10-Qs and Form 8-Ks, as well as amendments to
such filings are available on our Internet website free of charge generally
within 24 hours after we file such material with the SEC. Our website address is
www.libertymedia.com.

    Our corporate governance guidelines, code of ethics, compensation committee
charter, nominating and corporate governance committee charter, and audit
committee charter are available on our website. In addition, we will provide a
copy of any of these documents, free of charge, to any shareholder who calls or
submits a request in writing to Investor Relations, Liberty Media Corporation,
12300 Liberty Boulevard, Englewood, Colorado 80112, Tel. No. (877) 772-1518.

    The information contained on our website is not incorporated by reference
herein.

ITEM 2. PROPERTIES.

    We own our corporate headquarters in Englewood, Colorado. All of our other
real or personal property is owned or leased by our subsidiaries and business
affiliates.

    QVC owns its corporate headquarters and operations center in West Chester,
Pennsylvania. It also owns call centers in San Antonio, Texas, Port St. Lucie,
Florida, Chesapeake, Virginia and Bochum, Germany, as well as a call center and
warehouse in Knowsley, United Kingdom. QVC owns a

                                      I-18

warehouse in Hucklehoven, Germany and distribution centers in Lancaster,
Pennsylvania, Suffolk, Virginia and Rocky Mount, North Carolina. To supplement
the facilities it owns, QVC also leases various facilities in the United States,
United Kingdom, Germany and Japan for retail outlet stores, office space,
warehouse space and call center locations.

    Starz Encore owns its corporate headquarters in Englewood, Colorado. In
addition, Starz Encore leases office space for its sales staff at 6 locations
around the United States.

    Ascent Media owns or leases over 100 facilities. Domestically, Ascent Media
leases facilities with approximately 1 million square feet and owns facilities
with approximately 320,000 square feet. Outside of the United States, Ascent
Media leases facilities with approximately 300,000 square feet and owns
facilities with 50,000 square feet. Nearly all of Ascent Media's facilities are
built specifically for their technical and creative service operations.

    On Command leases its corporate headquarters in Denver, Colorado. It also
leases 77,000 square feet and 42,000 square feet of light manufacturing and
storage space in Denver, Colorado and San Jose, California, respectively. On
Command also has a number of small leased facilities in the United States,
Canada and Mexico.

    Our other subsidiaries and business affiliates own or lease the fixed assets
necessary for the operation of their respective businesses, including office
space, transponder space, headends, cable television and telecommunications
distribution equipment, telecommunications switches and customer equipment
(including converter boxes). Our management believes that our current facilities
are suitable and adequate for our business operations for the foreseeable
future.

ITEM 3. LEGAL PROCEEDINGS.

    KLESCH & COMPANY LIMITED V. LIBERTY MEDIA CORPORATION, JOHN C. MALONE AND
ROBERT R. BENNETT. On September 4, 2001, we entered into agreements with
Deutsche Telekom AG pursuant to which we would purchase its entire interest in
six of nine regional cable television companies in Germany. In February 2002, we
failed to receive regulatory approval for our proposed acquisition. On July 27,
2001, Klesch & Company Limited initiated a lawsuit against us, our chairman,
John C. Malone, and our chief executive officer, Robert R. Bennett, in the
United States District Court for the District of Colorado alleging, among other
things, breach of fiduciary duty, fraud and breach of contract in connection
with actions alleged to have been taken by us with respect to what then was a
proposed transaction with Deutsche Telekom. Klesch sought damages in an
unspecified amount in that action, which was the subject of a jury trial that
began on August 30, 2004. On September 28, 2004, the jury returned a verdict in
our favor on all of the legal claims asserted by the plaintiff. The jury also
rejected the plaintiff's claims that Messrs. Malone and Bennett had committed
fraud in their dealings with the plaintiff. A final judgment in the case will be
entered after the court has ruled on various equitable claims asserted by the
parties. Those claims include claims for recovery by the plaintiff for unjust
enrichment and promissory estoppel theories. We believe all the plaintiff's
equitable claims to be without merit, but there is no assurance that the court
will agree with our position The plaintiff's counsel has made public statements
indicating that the plaintiff will appeal the judgment, assuming it is entered
in our favor.

    DR. LEO KIRCH, INDIVIDUALLY AND AS ASSIGNEE, KGL POOL GMBH, AND
INTERNATIONAL TELEVISION TRADING CORP. V. LIBERTY MEDIA CORPORATION, JOHN
MALONE, DEUTSCHE BANK, AG, AND DR. ROLF-ERNST BREUER. Dr. Kirch was the primary
owner of KirchGroup, a German cable television and media conglomerate. On
September 4, 2001, we entered into agreements with Deutsche Telekom AG pursuant
to which we would purchase its entire interest in six of nine regional cable
television companies in Germany. In February 2002, we failed to receive
regulatory approval for our proposed acquisition and the transactions with
Deutsche Telekom were never consummated. On January 14, 2004, Dr. Kirch, KGL
Pool GBH, and International Television Trading Corp. added our company, and our
chairman, John C.

                                      I-19

Malone, to a lawsuit they had initiated against Deutsche Bank and Dr. Breuer on
February 3, 2003. In that lawsuit, the plaintiffs' claims against us included,
among other things, interference with contract, and interference with
prospective economic advantage arising from an alleged conspiracy among our
company, Dr. Malone, Deutsche Bank and Dr. Breuer pursuant to which we allegedly
were involved in effecting transactions that led to the collapse of the
KirchGroup's control of the German cable market in an effort to facilitate our
agreements with Deutsche Telekom. Dr. Kirch, KGL Pool and International
Television sought damages in an unspecified amount. We and Dr. Malone filed a
motion to dismiss the lawsuit for failure to state a claim upon which relief can
be granted. That motion, as well as the other defendants' motion to dismiss on
the same grounds, was granted by the court on September 24, 2004. The plaintiffs
have appealed the court's dismissal of the case. We continue to believe that
their claims are without merit, and we intend to contest the appeal vigorously.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    None.

                                      I-20

                                    PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    MARKET INFORMATION

    We have two series of common stock, Series A and Series B, which trade on
the New York Stock Exchange under the symbols L and LMC.B, respectively. The
following table sets forth the range of high and low sales prices of shares of
our Series A and Series B common stock for the years ended December 31, 2004 and
2003.



                                                                   SERIES A              SERIES B
                                                              -------------------   -------------------
                                                                HIGH       LOW        HIGH       LOW
                                                              --------   --------   --------   --------
                                                                                   
2004
  First quarter.............................................   $12.45     10.57      14.15      11.25
  Second quarter through June 7, 2004.......................   $11.45     10.12      12.75      11.00
  June 8 through June 30, 2004*.............................   $ 9.65      8.86      11.00       9.80
  Third quarter.............................................   $ 9.02      8.33      10.20       9.00
  Fourth quarter............................................   $11.21      8.68      11.92       8.80
2003
  First quarter.............................................   $10.38      8.45      10.60       8.65
  Second quarter............................................   $12.25      9.52      12.25       9.50
  Third quarter.............................................   $12.27      9.86      12.47      10.11
  Fourth quarter............................................   $12.20      9.78      14.05       9.90


- ------------------------

*   Our spin off of LMI was completed on June 7, 2004.

    HOLDERS

    As of February 11, 2005, there were approximately 4,800 and 270 record
holders of our Series A common stock and Series B common stock, respectively
(which amounts do not include the number of shareholders whose shares are held
of record by banks, brokerage houses or other institutions, but include each
such institution as one shareholder).

    DIVIDENDS

    We have not paid any cash dividends on our Series A common stock and
Series B common stock, and we have no present intention of so doing. Payment of
cash dividends, if any, in the future will be determined by our Board of
Directors in light of our earnings, financial condition and other relevant
considerations.

    SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

    Information required by this item is incorporated by reference to our
definitive proxy statement for our 2005 Annual Meeting of shareholders.

                                      II-1

ITEM 6. SELECTED FINANCIAL DATA.

    The following tables present selected historical information relating to our
financial condition and results of operations for the past five years. The
following data should be read in conjunction with our consolidated financial
statements.



                                                                         DECEMBER 31,
                                                     ----------------------------------------------------
                                                       2004     2003(2)      2002       2001       2000
                                                     --------   --------   --------   --------   --------
                                                                     AMOUNTS IN MILLIONS
                                                                                  
SUMMARY BALANCE SHEET DATA(1):
Investments in available-for-sale securities and
  other cost investments...........................  $21,847     19,566     14,181     20,268     16,639
Investment in affiliates...........................  $ 3,734      3,613      6,241      9,649     19,271
Total assets.......................................  $50,181     54,225     40,324     48,539     54,268
Long-term debt(3)..................................  $ 8,566      9,417      4,291      4,592      5,231
Stockholders' equity...............................  $24,586     28,842     24,682     30,123     34,109




                                                                    YEARS ENDED DECEMBER 31,
                                                      ----------------------------------------------------
                                                        2004     2003(2)      2002       2001       2000
                                                      --------   --------   --------   --------   --------
                                                         AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
                                                                                   
SUMMARY STATEMENT OF OPERATIONS DATA(1):
Revenue.............................................  $ 7,682      3,738      1,804      1,774      1,322
Operating income (loss)(4)..........................  $   742       (939)       (80)    (1,008)       438
Share of earnings (losses) of affiliates, net(5)....  $    97         45        (89)    (4,345)    (3,316)
Realized and unrealized gains (losses) on financial
  instruments, net..................................  $(1,284)      (662)     2,139        361        225
Gains (losses) on dispositions, net.................  $ 1,406      1,125       (541)      (310)     7,338
Nontemporary declines in fair value of
  investments.......................................  $  (129)       (22)    (5,806)    (4,099)    (1,463)
Earnings (loss) from continuing operations(4)(5)....  $   161     (1,225)    (3,062)    (5,938)     1,620
Basic and diluted earnings (loss) from continuing
  operations per common share(6)....................  $   .06       (.44)     (1.18)     (2.29)       .63


- ------------------------

(1) On June 7, 2004, we completed the spin off of our wholly-owned subsidiary,
    Liberty Media International, Inc. or LMI, to our shareholders. During the
    fourth quarter of 2004, the executive committee of our board of directors
    approved a plan to dispose of our approximate 56% ownership interest in
    Maxide Acquisition, Inc. (d/b/a DMX Music, "DMX"). On February 14, 2005, DMX
    commenced proceedings under Chapter 11 of the United States Bankruptcy Code.
    As a result of marketing efforts conducted prior to the bankruptcy filing,
    DMX has entered into an arrangement, subject to the approval by the
    Bankruptcy Court, to sell substantially all of its operating assets to an
    independent third party. Other prospective buyers will have an opportunity
    to submit offers to purchase all or a portion of those assets by a date to
    be determined by the Bankruptcy Court. After competitive bids, if any, have
    been submitted, we expect that the Bankruptcy Court will make a
    determination as to the appropriate buyer, and the operating assets of DMX
    will be sold. Our consolidated financial statements and selected financial
    information have been prepared to reflect LMI and DMX as discontinued
    operations. Accordingly, the assets and liabilities, and revenue, costs and
    expenses of LMI and DMX have been excluded from the respective captions in
    our consolidated financial statements and selected financial information and
    have been reported under the heading of discontinued operations. See note 5
    to our consolidated financial statements for additional information
    regarding LMI and DMX.

(2) On September 17, 2003, we completed our acquisition of Comcast Corporation's
    approximate 56.5% ownership in QVC, Inc. for approximately $7.9 billion,
    comprised of cash, floating rate

                                      II-2

    senior notes and shares of our Series A common stock. When combined with our
    previous ownership of approximately 41.7% of QVC, we owned 98.2% of QVC upon
    consummation of the transaction, which is deemed to have occurred on
    September 1, 2003, and we have consolidated QVC's financial position and
    results of operations since that date.

(3) Excludes the call option portion of our exchangeable debentures. See note 9
    to our consolidated financial statements.

(4) Our 2003 operating loss and loss from continuing operations include a
    $1,352 million goodwill impairment charge related to Starz Entertainment.
    See footnote 2 to our consolidated financial statements for additional
    information.

    Effective January 1, 2002, we adopted Statement of Financial Accounting
    Standards No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS ("Statement 142"),
    which among other matters, provides that goodwill and other indefinite-lived
    assets no longer be amortized. Amortization expense for such assets
    aggregated $565 million and $550 million for the years ended December 31,
    2001 and 2000, respectively.

(5) Included in share of losses of affiliates are other-than-temporary declines
    in value aggregating $71 million, $76 million and $2,396 million for
    the years ended December 31, 2003, 2002, and 2001, respectively. In
    addition, share of losses of affiliates includes excess basis amortization
    of $705 million, $1,017 million for the years ended December 31, 2001 and
    2000, respectively. Pursuant to Statement 142, excess costs that are
    considered equity method goodwill are no longer amortized, but are evaluated
    for impairment under APB Opinion No. 18.

(6) The basic and diluted net earnings (loss) per common share for periods prior
    to August 10, 2001, the date of our split off from AT&T Corp., is based upon
    2,588 million shares of our Series A and Series B common stock issued upon
    consummation of the split off.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.

    The following discussion and analysis provides information concerning our
results of operations and financial condition. This discussion should be read in
conjunction with our accompanying consolidated financial statements and the
notes thereto.

OVERVIEW

    We are a holding company that owns controlling and non-controlling interests
in a broad range of electronic retailing, media, communications and
entertainment companies. In recent years we have shifted our corporate focus to
the acquisition and exercise of control over our affiliated companies. A
significant step in this process was our September 2003 acquisition of Comcast
Corporation's approximate 56% ownership interest in QVC, Inc., which when
combined with our previous 42% ownership interest, increased our ownership to
over 98% of QVC, and we now consolidate the financial position and results of
operations of QVC. Our businesses are currently organized in three Groups:
Interactive Group, Networks Group and Corporate and Other. See
"Business--Narrative Description of Business" included in Part I of this Annual
Report on Form 10-K for a description of the more significant businesses in each
of these Groups.

    On June 7, 2004, we completed the spin off of our wholly-owned subsidiary,
Liberty Media International, Inc. ("LMI"), to our shareholders. Substantially
all of the assets and businesses of LMI were attributed to our International
Group segment. In connection with the spin off, holders of our common stock on
June 1, 2004 received 0.05 of a share of LMI Series A common stock for each
share of Liberty Series A common stock owned at 5:00 p.m. New York City time on
June 1, 2004 and 0.05 of a share of LMI Series B common stock for each share of
Liberty Series B common stock owned at 5:00 p.m. New York City time on June 1,
2004. The spin off is intended to qualify as a tax-free spin off.

                                      II-3

For accounting purposes, the spin off is deemed to have occurred on June 1,
2004, and we recognized no gain or loss in connection with the spin off.

    During the fourth quarter of 2004, the executive committee of our board of
directors approved a plan to dispose of our approximate 56% ownership interest
in Maxide Acquisition, Inc. (d/b/a DMX Music, "DMX"). DMX is principally engaged
in programming, distributing and marketing digital and analog music services to
homes and businesses and was included in our Networks Group operating segment.
On February 14, 2005, DMX commenced proceedings under Chapter 11 of the United
States Bankruptcy Code. As a result of marketing efforts conducted prior to the
bankruptcy filing, DMX has entered into an arrangement, subject to the approval
by the Bankruptcy Court, to sell substantially all of its operating assets to an
independent third party. Other prospective buyers will have an opportunity to
submit offers to purchase all or a portion of those assets by a date to be
determined by the Bankruptcy Court. After competitive bids, if any, have been
submitted, we expect that the Bankruptcy Court will make a determination as to
the appropriate buyer, and the operating assets of DMX will be sold.

    Our consolidated financial statements and accompanying notes have been
prepared to reflect LMI and DMX as discontinued operations. Accordingly, the
assets and liabilities, revenue, costs and expenses, and cash flows of LMI and
DMX have been excluded from the respective captions in the accompanying
consolidated balance sheets, statements of operations, statements of
comprehensive earnings (loss) and statements of cash flows and have been
reported under the heading of discontinued operations in such consolidated
financial statements.

    Our Interactive Group is focused on three areas within the interactive
arena: commerce, games and targeted advertising. In addition, the Interactive
Group is charged with helping our other businesses take advantage of interactive
opportunities that may be available to them. In this regard, QVC has partnered
with several of our other businesses, including Discovery Communications, OpenTV
Corp. and On Command Corporation, to develop new interactive services. Our
primary businesses in the Interactive Group are QVC and Ascent Media
Group, Inc. In addition, we own approximately 20% of the outstanding common
stock of IAC/InterActiveCorp, which we account for as an available-for-sale
("AFS") security. QVC has identified improved domestic growth and continued
international growth as key areas of focus in 2005. QVC's steps to achieving
these goals will include (1) continued domestic and international efforts to
increase the number of customers who have access to and use its service and
(2) continued expansion of brand selection and available domestic products. The
key challenges to achieving these goals in both the U.S. and international
markets are (1) increased competition from other home shopping and internet
retailers, (2) advancements in technology, such as video on demand and personal
video recorders, which may alter TV viewing habits, and (3) maintaining
favorable channel positioning as digital TV penetration increases.

    In 2005, Ascent Media intends to focus on leveraging its broad array of
media services to market itself as a full service provider to new and existing
customers within the movie and television production industry. With facilities
in the U.S., the United Kingdom and Asia, Ascent Media also hopes to increase
its services to multinational companies. The challenges that Ascent Media faces
include differentiating its products and services to help maintain or increase
operating margins and financing capital expenditures for equipment and other
items to satisfy customers' desire for services using the latest technology.

    Our primary businesses in the Networks Group are Starz Entertainment Group
LLC, Discovery Communications, Inc., Courtroom Television Network, LLC and GSN,
LLC. In addition we own approximately 17% of News Corporation ("News Corp."),
which we account for as an AFS security. We view the development of digital and
interactive services, our ability to expand these networks and increase
international distribution and our ability to increase advertising rates
relative to broadcast networks and other cable networks as key opportunities for
growth in the coming months and years.

                                      II-4

We face several key obstacles in our attempt to meet these goals, including:
continued consolidation in the broadband and satellite distribution industries;
the impact on viewer habits of new technologies such as video on demand and
personal video recorders; and alternative movie and programming sources.

    Certain of our subsidiaries and affiliates are dependent on others for
entertainment, educational and informational programming. In addition, a
significant portion of the revenue of certain of our subsidiaries and affiliates
is generated by the sale of advertising on their networks. A downturn in the
economy could reduce (i) the development of new television and motion picture
programming, thereby adversely impacting their supply of service offerings;
(ii) consumer disposable income and consumer demand for their products and
services; and (iii) the amount of resources allocated for network and cable
television advertising by major corporations.

    In addition to the businesses included in the foregoing Groups, we continue
to maintain significant investments and related derivative positions in public
companies such as Time Warner Inc. and Sprint Corporation, which are accounted
for as AFS securities and are included in our Corporate and Other Group. We view
these holdings as financial assets that we can monetize and use the resulting
proceeds for debt repayments, stock buybacks or additional investments in any of
our operating Groups.

    Also included in our Corporate and Other Group are our technology assets,
which include our consolidated subsidiary TruePosition, Inc., as well as
minority stakes in WildBlue Communications, Inc. and IDT Corporation.
TruePosition provides equipment and technology that provide location-based
services to wireless users. WildBlue Communications has initiated testing of its
high speed Internet and data services via satellite to rural residential and
small business customers. IDT Corporation, an AFS investment, is a multinational
communications company whose primary businesses are prepaid debit and
rechargeable calling cards, wholesale telecommunications carrier services and
consumer telephone services.

RESULTS OF OPERATIONS

    To assist you in understanding and analyzing our business in the same manner
we do, we have organized the following discussion of our results of operations
into two parts: Consolidated Operating Results, and Operating Results by
Business Group. The Operating Results by Business Group section includes a
discussion of the more significant businesses within each Group.

CONSOLIDATED OPERATING RESULTS



                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2004       2003       2002
                                                              --------   --------   --------
                                                                   AMOUNTS IN MILLIONS
                                                                           
REVENUE
Interactive Group...........................................   $6,627      2,778       794
Networks Group..............................................      984        933       969
Corporate and Other.........................................       71         27        41
                                                               ------     ------     -----
  Consolidated revenue......................................   $7,682      3,738     1,804
                                                               ======     ======     =====
OPERATING CASH FLOW (DEFICIT)
Interactive Group...........................................   $1,375        540       109
Networks Group..............................................      236        368       371
Corporate and Other.........................................      (74)      (108)      (77)
                                                               ------     ------     -----
  Consolidated operating cash flow..........................   $1,537        800       403
                                                               ======     ======     =====
OPERATING INCOME (LOSS)
Interactive Group...........................................   $  715        194      (279)
Networks Group..............................................      145        264       296
Corporate and Other.........................................     (118)    (1,397)      (97)
                                                               ------     ------     -----
  Consolidated operating income (loss)......................   $  742       (939)      (80)
                                                               ======     ======     =====


                                      II-5

    REVENUE.  Our consolidated revenue increased over 100% in each of 2004 and
2003, as compared to the corresponding prior year. These increases are due
primarily to our September 2003 acquisition of a controlling interest in QVC.
Our consolidated financial statements include $5,687 million and $1,973 million
of revenue from QVC for the years ended December 31, 2004 and 2003,
respectively. Our 2004 revenue was also positively impacted by increases in our
Interactive Group due to an increase at Ascent Media of $123 million and in our
Networks Group due to an increase at Starz Entertainment of $57 million. In
2003, revenue for the Interactive Group increased $45 million due to our
acquisition of OpenTV Corp. in August 2002 and decreased $30 million at Ascent
Media. The Networks Group revenue decreased in 2003 due primarily to a reduction
in rates in former AT&T Broadband systems resulting from the re-negotiation of
Starz Entertainment's affiliation agreement with Comcast in 2003. See "OPERATING
RESULTS BY BUSINESS GROUP" below for a more complete discussion of these
fluctuations.

    OPERATING CASH FLOW.  We define Operating Cash Flow as revenue less cost of
sales, operating expenses and selling, general and administrative ("SG&A")
expenses (excluding stock compensation). Our chief operating decision maker and
management team use this measure of performance in conjunction with other
measures applied on a Group by Group basis to evaluate our businesses and make
decisions about allocating resources among our businesses. We believe this is an
important indicator of the operational strength and performance of our
businesses, including each business's ability to service debt and fund capital
expenditures. In addition, this measure allows us to view operating results,
perform analytical comparisons and benchmarking between businesses and identify
strategies to improve performance. This measure of performance excludes such
costs as depreciation and amortization, stock compensation, litigation
settlements and impairments of long-lived assets that are included in the
measurement of operating income pursuant to generally accepted accounting
principles ("GAAP"). Accordingly, Operating Cash Flow should be considered in
addition to, but not as a substitute for, operating income, net income, cash
flow provided by operating activities and other measures of financial
performance prepared in accordance with GAAP. See note 18 to the accompanying
consolidated financial statements for a reconciliation of Operating Cash Flow to
Earnings (Loss) From Continuing Operations Before Income Taxes and Minority
Interest.

    Consolidated Operating Cash Flow increased $737 million and $397 million in
2004 and 2003, respectively, as compared to the corresponding prior year. These
increases are due primarily to our acquisition of QVC, which contributed
$1,230 million and $434 million in 2004 and 2003, respectively, to our
consolidated Operating Cash Flow. In 2004, this increase was partially offset by
a decrease in Starz Entertainment's operating cash flow ($129 million) primarily
due to higher programming costs. In 2003, the increase due to QVC was partially
offset by a decrease in our Corporate and Other Group ($31 million), which
resulted from lower revenue from ancillary sources and higher legal and
consulting expenses.

    STOCK COMPENSATION.  Stock compensation includes compensation related to
(1) options and stock appreciation rights for shares of our common stock that
are granted to certain of our officers and employees, (2) phantom stock
appreciation rights ("PSARs") granted to officers and employees of certain of
our subsidiaries pursuant to private equity plans and (3) amortization of
restricted stock grants. The amount of expense associated with stock
compensation is generally based on the vesting of the related stock options and
stock appreciation rights and the market price of the underlying common stock,
as well as the vesting of PSARs and the equity value of the related subsidiary.
The increase in stock compensation in 2004 is due primarily to an increase in
our stock price. The decrease in stock compensation in 2003 is primarily a
result of a decrease in the equity value of Starz Entertainment. The expense
reflected in the table is based on the market price of the underlying common
stock as of the date of the financial statements and is subject to future
adjustment based on market price fluctuations, vesting percentages and,
ultimately, on the final determination of market value when the options are
exercised.

                                      II-6

    DEPRECIATION AND AMORTIZATION.  The increase in depreciation in 2004 and
2003 is due to increases in our depreciable asset base resulting from the
acquisition of QVC and subsidiary capital expenditures. The increase in
amortization in 2004 and 2003 is due primarily to the acquisition of QVC and
amortization of the related intangible assets.

    IMPAIRMENT OF LONG-LIVED ASSETS.  Starz Entertainment obtained an
independent third party valuation in connection with its 2003 annual year-end
evaluation of the recoverability of its goodwill. The result of this valuation,
which was based on a discounted cash flow analysis of projections prepared by
the management of Starz Entertainment, indicated that the fair value of this
reporting unit was less than its carrying value. This reporting unit fair value
was then used to calculate an implied value of the goodwill related to Starz
Entertainment. The $1,352 million excess of the carrying amount of the goodwill
(including $1,195 million of allocated enterprise-level goodwill) over its
implied value was recorded as an impairment charge in the fourth quarter of
2003. Starz Entertainment's operating income includes $157 million of the
foregoing impairment charge and $1,195 million is included in Corporate and
Other. The reduction in the value of Starz Entertainment reflected in the third
party valuation is believed to be attributable to a number of factors. Those
factors include the reliance placed in that valuation on projections by
management reflecting a lower rate of revenue growth compared to earlier
projections based, among other things, on the possibility that revenue growth
may be negatively affected by (1) a reduction in the rate of growth in total
digital video subscribers and in the subscription video on demand business as a
result of cable operators' increased focus on the marketing and sale of other
services, such as high speed Internet access and telephony, and the uncertainty
as to the success of marketing efforts by distributors of Starz Entertainment's
services and (2) lower per subscriber rates under a new affiliation agreement
with Comcast.

    During the year ended December 31, 2002, we determined that the carrying
value of certain of our subsidiaries' assets exceeded their respective fair
values. Accordingly, we recorded impairments of goodwill related to OpenTV
($92 million), Ascent Media ($84 million) and On Command ($9 million). Such
impairments were calculated as the difference between the carrying value and the
estimated fair value of the related assets.

    OPERATING INCOME (LOSS).  We generated consolidated operating income of
$742 million in 2004 compared to operating losses of $939 million and
$80 million in 2003 and 2002, respectively. The higher operating loss in 2003 is
due primarily to the goodwill impairment charge recorded by Starz Entertainment
noted above. Our operating income in 2004 is attributable to QVC ($760 million)
and Starz Entertainment ($148 million) partially offset by operating losses of
our other consolidated subsidiaries and corporate expenses.

    OTHER INCOME AND EXPENSE

    INTEREST EXPENSE.  Interest expense was $615 million, $529 million and
$410 million, for the years ended December 31, 2004, 2003 and 2002,
respectively, including $83 million, $61 million and $7 million, respectively,
of accretion of our exchangeable debentures. In addition, the increase in 2004
is due to our issuance of debt for our acquisition of QVC in September 2003,
partially offset by decreases due to our debt retirements in 2004 and the fourth
quarter of 2003. The remaining increase in interest expense in 2003 is due
primarily to an increase in our debt balance in 2003.

    DIVIDEND AND INTEREST INCOME.  Dividend and interest income was
$131 million, $164 million and $183 million for the years ended December 31,
2004, 2003 and 2002, respectively. These decreases are due primarily to
decreases in the interest we earned on invested cash balances. Interest and
dividend income for the year ended December 31, 2004 was comprised of interest
income earned on invested cash ($35 million), dividends on News Corp. common
stock ($46 million), dividends on Sprint Corporation common stock
($15 million), dividends on ABC Family Worldwide preferred stock ($13 million)
and other ($22 million). In connection with our spin off of LMI, we contributed
99.9% of

                                      II-7

our economic interest in the ABC Family Worldwide preferred stock to LMI.
Accordingly, this will not be a source of dividend income for us in the future.

    INVESTMENTS IN AFFILIATES ACCOUNTED FOR USING THE EQUITY METHOD.  A summary
of our share of earnings (losses) of affiliates, including nontemporary declines
in value, is included below:



                                                               PERCENTAGE              YEARS ENDED
                                                              OWNERSHIP AT             DECEMBER 31,
                                                              DECEMBER 31,    ------------------------------
                                                                  2004          2004       2003       2002
                                                              -------------   --------   --------   --------
                                                                                         AMOUNTS IN MILLIONS
                                                                                        
Discovery...................................................       50%          $84         38         (32)
Court TV....................................................       50%           17         (1)         (2)
GSN.........................................................       50%           (1)        --          (6)
QVC.........................................................     *               --        107         154
Other.......................................................  Various            (3)       (99)       (203)
                                                                                ---        ---        ----
                                                                                $97         45         (89)
                                                                                ===        ===        ====


- ------------------------

*   QVC was an equity method affiliate until September 2003 when it became a
    consolidated subsidiary

    Included in share of losses for the years ended December 31, 2003 and 2002,
are adjustments for nontemporary declines in value aggregating $71 million and
$76 million, respectively. See "OPERATING RESULTS BY BUSINESS GROUP" below for a
discussion of our more significant equity method affiliates.

    REALIZED AND UNREALIZED GAINS (LOSSES) ON DERIVATIVE INSTRUMENTS.  Realized
and unrealized gains (losses) on derivative instruments are comprised of the
following:



                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2004       2003       2002
                                                              --------   --------   --------
                                                                   AMOUNTS IN MILLIONS
                                                                           
Change in fair value of exchangeable debenture call option
  features..................................................  $  (129)     (158)        784
Change in fair value of equity collars......................     (941)     (483)      4,032
Change in fair value of borrowed shares.....................     (227)     (121)         --
Change in fair value of put options.........................        2       108        (445)
Change in fair value of put spread collars..................        8        21          71
Change in fair value of hedged AFS securities...............       --        --      (2,378)
Change in fair value of other derivatives(1)................        3       (29)         75
                                                              -------      ----      ------
  Total realized and unrealized gains (losses), net.........  $(1,284)     (662)      2,139
                                                              =======      ====      ======


- ------------------------

(1) Comprised primarily of forward foreign exchange contracts and interest rate
    swap agreements.

    During 2002, we had designated our equity collars as fair value hedges.
Pursuant to Statement of Financial Accounting Standards No. 133, "ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," the equity collars were recorded
on the balance sheet at fair value, and changes in the fair value of the equity
collars and of the hedged securities were recognized in earnings. Effective
December 31, 2002, we elected to dedesignate our equity collars as fair value
hedges. This election had no impact on our financial position at December 31,
2002 or our results of operations for the year ended December 31, 2002.
Subsequent to December 31, 2002, changes in the fair value of our AFS securities
that previously had been reported in earnings due to the designation of equity
collars as fair value hedges are now reported as a component of other
comprehensive income on our balance sheet. Changes in the fair value of the
equity collars continue to be reported in earnings.

                                      II-8

    GAINS (LOSSES) ON DISPOSITIONS.  Aggregate gains (losses) from dispositions
are comprised of the following.



                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
TRANSACTION                                                     2004       2003       2002
- -----------                                                   --------   --------   --------
                                                                   AMOUNTS IN MILLIONS
                                                                           
Sale of News Corp. non-voting shares........................   $  844       236         --
Exchange transaction with Comcast...........................      387        --         --
Sale of investment in Cendant Corporation...................       --       510         --
Sale of investment in Vivendi...............................       --       262         --
Exchange of USAI equity securities for Vivendi common
  stock.....................................................       --        --       (817)
Sale of Telemundo Communications Group......................       --        --        344
Other, net..................................................      175       117        (68)
                                                               ------     -----       ----
                                                               $1,406     1,125       (541)
                                                               ======     =====       ====


    In the above described exchange transactions, the gains or losses were
calculated based upon the difference between the carrying value of the assets
relinquished, as determined on an average cost basis, compared to the fair value
of the assets received. See notes 6, 8 and 11 to the accompanying consolidated
financial statements for a discussion of the foregoing transactions.

    NONTEMPORARY DECLINES IN FAIR VALUE OF INVESTMENTS.  During 2004, 2003 and
2002, we determined that certain of our cost investments experienced
other-than-temporary declines in value. As a result, the cost bases of such
investments were adjusted to their respective fair values based primarily on
quoted market prices at the date each adjustment was deemed necessary. These
adjustments are reflected as nontemporary declines in fair value of investments
in the consolidated statements of operations. Other-than-temporary declines in
value recorded in 2002 related primarily to our investments in Time
Warner Inc., News Corporation and Sprint Corporation. Other-than-temporary
declines in value in 2004 and 2003 were not significant.

    INCOME TAXES.  Our effective tax rate was 49.5% in 2004, was not meaningful
in 2003 and was 33.1% for the year ended December 31, 2002. Our effective tax
rate in 2004 differed from the U.S. federal income tax rate of 35% primarily due
to foreign and state taxes, partially offset by a benefit generated by the
recognition of our tax basis in the equity of DMX. Although we had a loss before
tax expense for book purposes in 2003, we recorded tax expense of $354 million
primarily due to our impairment of goodwill which is not deductible for tax
purposes. In addition, we incurred state and foreign taxes and an increase in
our valuation allowance for losses of subsidiaries that we do not consolidate
for tax purposes. The effective tax rate in 2002 differed from the U.S. federal
income tax rate primarily due to state and local taxes and amortization for book
purposes that is not deductible for income tax purposes.

    CUMULATIVE EFFECT OF ACCOUNTING CHANGE.  We and our subsidiaries adopted
Statement 142 effective January 1, 2002. Upon adoption, we determined that the
carrying value of certain of our reporting units (including allocated
enterprise-level goodwill) was not recoverable. Accordingly, in the first
quarter of 2002, we recorded an impairment loss of $1,528 million, net of
related taxes, as the cumulative effect of a change in accounting principle.
This transitional impairment loss includes an adjustment of $61 million for our
proportionate share of transition adjustments that our equity method affiliates
recorded.

OPERATING RESULTS BY BUSINESS GROUP

    The tables in this section present 100% of each business' revenue, operating
cash flow and operating income even though we own less than 100% of many of
these businesses. These amounts are

                                      II-9

combined on an unconsolidated basis and are then adjusted to remove the effects
of the equity method investments to arrive at the consolidated amounts for each
Group. This presentation is designed to reflect the manner in which management
reviews the operating performance of individual businesses within each Group
regardless of whether the investment is accounted for as a consolidated
subsidiary or an equity investment. It should be noted, however, that this
presentation is not in accordance with GAAP since the results of operations of
equity method investments are required to be reported on a net basis. Further,
we could not, among other things, cause any noncontrolled affiliate to
distribute to us our proportionate share of the revenue or operating cash flow
of such affiliate.

    The financial information presented below for equity method affiliates was
obtained directly from those affiliates. We do not control the decision-making
process or business management practices of our equity affiliates. Accordingly,
we rely on the management of these affiliates to provide us with accurate
financial information prepared in accordance with GAAP that we use in the
application of the equity method. In addition, we rely on audit reports that are
provided by the affiliates' independent auditors on the financial statements of
such affiliates. We are not aware, however, of any errors in or possible
misstatements of the financial information provided by our equity affiliates
that would have a material effect on our consolidated financial statements.

    INTERACTIVE GROUP



                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2004       2003       2002
                                                              --------   --------   --------
                                                                   AMOUNTS IN MILLIONS
                                                                           
REVENUE
QVC(1)......................................................   $5,687      4,889      4,362
Ascent Media................................................      631        508        538
Other consolidated subsidiaries.............................      309        297        256
                                                               ------     ------     ------
  Combined Interactive Group revenue........................    6,627      5,694      5,156
Eliminate revenue of equity method affiliates(1)............       --     (2,916)    (4,362)
                                                               ------     ------     ------
  Consolidated Interactive Group revenue....................   $6,627      2,778        794
                                                               ======     ======     ======
OPERATING CASH FLOW
QVC(1)......................................................   $1,230      1,013        861
Ascent Media................................................       98         75         87
Other consolidated subsidiaries.............................       47         31         22
                                                               ------     ------     ------
  Combined Interactive Group operating cash flow............    1,375      1,119        970
Eliminate operating cash flow of equity method
  affiliates(1).............................................       --       (579)      (861)
                                                               ------     ------     ------
  Consolidated Interactive Group operating cash flow........   $1,375        540        109
                                                               ======     ======     ======
OPERATING INCOME (LOSS)
QVC(1)......................................................   $  760        785        737
Ascent Media................................................       18          1        (65)
Other consolidated subsidiaries.............................      (63)       (99)      (214)
                                                               ------     ------     ------
  Combined Interactive Group operating income...............      715        687        458
Eliminate operating income of equity method affiliates(1)...       --       (493)      (737)
                                                               ------     ------     ------
  Consolidated Interactive Group operating income (loss)....   $  715        194       (279)
                                                               ======     ======     ======


- ------------------------

(1) QVC was an equity method affiliate until September 2003 when it became a
    consolidated subsidiary.

                                     II-10

    QVC.  QVC is a retailer of a wide range of consumer products, which are
marketed and sold primarily by merchandise-focused televised shopping programs
and, to a lesser extent, via the Internet. In the United States, the programs
are aired through its nationally televised shopping network--24 hours a day,
7 days a week ("QVC-US"). Internationally, QVC has electronic retailing program
services based in the United Kingdom ("QVC-UK"), Germany ("QVC-Germany") and
Japan ("QVC-Japan"). QVC-UK broadcasts live 19 hours a day. In October 2003,
QVC-Germany increased its daily broadcast time from 19 to 24 hours; and in
May 2004, QVC-Japan increased its daily broadcast time from 17 to 24 hours. As
more fully described in note 4 to the accompanying consolidated financial
statements, we acquired a controlling interest in QVC on September 17, 2003. For
financial reporting purposes, the acquisition is deemed to have occurred on
September 1, 2003, and we have consolidated QVC's results of operations since
that date. Accordingly, increases in the Interactive Group's revenue and
expenses for the years ended December 31, 2004 and 2003 are primarily the result
of the September 2003 acquisition of QVC.

    The following discussion describes QVC's results of operations for the
full years ended December 31, 2004, 2003 and 2002. Depreciation and amortization
for periods prior and subsequent to our acquisition of Comcast's interest in QVC
are not comparable as a result of the effects of purchase accounting. However,
in order to provide a more meaningful basis for comparing the 2004, 2003 and
2002 periods, the operating results of QVC for the four months ended
December 31, 2003 have been combined with the eight months ended August 31, 2003
in the following table and discussion. The combining of predecessor and
successor accounting periods is not permitted by GAAP.



                                                         YEARS ENDED DECEMBER 31,
                                                      ------------------------------
                                                        2004       2003       2002
                                                      --------   --------   --------
                                                           AMOUNTS IN MILLIONS
                                                                   
Net revenue.........................................   $5,687      4,889      4,362
Cost of sales.......................................   (3,594)    (3,107)    (2,784)
                                                       ------     ------     ------
  Gross profit......................................    2,093      1,782      1,578
Operating expenses..................................     (497)      (447)      (413)
SG&A expenses.......................................     (366)      (322)      (304)
                                                       ------     ------     ------
  Operating cash flow...............................    1,230      1,013        861
Stock compensation..................................      (33)        (6)        (5)
Depreciation and amortization.......................     (437)      (222)      (119)
                                                       ------     ------     ------
  Operating income..................................   $  760        785        737
                                                       ======     ======     ======


    Net revenue for the years ended December 31, 2004, 2003 and 2002 includes
the following revenue by geographical area:



                                                           YEARS ENDED DECEMBER 31,
                                                        ------------------------------
                                                          2004       2003       2002
                                                        --------   --------   --------
                                                             AMOUNTS IN MILLIONS
                                                                     
QVC-US................................................   $4,141     3,845      3,705
QVC-UK................................................      487       370        296
QVC-Germany...........................................      643       429        275
QVC-Japan.............................................      416       245         86
                                                         ------     -----      -----
Consolidated..........................................   $5,687     4,889      4,362
                                                         ======     =====      =====


    QVC's net revenue increased 16.3% and 12.1% for the years ended
December 31, 2004 and 2003, respectively, as compared to the corresponding prior
year. The 2004 increase is due primarily to an increase in the number of units
shipped, an increase in average sales per customer and favorable foreign
currency exchange rates. In 2004, the number of units shipped increased from
121.0 million to 138.0 million, or 14.0%, and average sales per customer
increased in each of QVC's markets with

                                     II-11

Germany increasing 41.6%, Japan 19.0%, United Kingdom 12.4% and the U.S. 7.7%.
While the number of units shipped increased, the average sales price per unit
("ASP") in the U.S. market decreased due to purchases of lower priced items
within the home category and a shift in product mix to lower priced apparel and
accessories. QVC-Germany and QVC-Japan also experienced a drop in ASP in their
respective local currencies due primarily to a shift in product mix from jewelry
to home products and apparel products. However, these decreases were more than
offset by favorable exchange rate fluctuations resulting in an increase in U.S.
dollar-denominated ASP in both markets. The 2003 increase in revenue is due to
increases in average sales per customer for QVC-Germany and QVC-Japan of 48.4%
and 73.0%, respectively, and a 13.0% increase in the number of units shipped, as
compared to 2002. Additional increases in 2003 net revenue were due to a 2.8%
and a 6.3% increase in net sales per customer in the U.S. and the U.K.,
respectively. In 2003, QVC-US experienced a 5.7% decrease in ASP, while the ASP
in local currency for QVC-UK and QVC-Japan increased 5.0% and 2.3%,
respectively. Returns as a percent of gross product revenue decreased from 18.3%
in 2002 to 17.8% in 2003 and to 17.6% in 2004. Each of QVC's markets added
subscribers in 2004 and 2003. The number of homes receiving QVC's services are
as follows:



                                                                     HOMES
                                                                 (IN MILLIONS)
                                                              -------------------
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2004       2003
                                                              --------   --------
                                                                   
QVC-US......................................................    88.4       85.9
QVC-UK......................................................    15.6       13.1
QVC-Germany.................................................    35.7       34.6
QVC-Japan...................................................    14.7       11.8


    As the QVC service is already received by substantially all of the cable
television and direct broadcast satellite homes in the U.S., future growth in
U.S. sales will depend on continued additions of new customers from homes
already receiving the QVC service and continued growth in sales to existing
customers. QVC's future sales may also be affected by (i) the willingness of
cable and satellite distributors to continue carrying QVC's programming service,
(ii) QVC's ability to maintain favorable channel positioning, which may become
more difficult as distributors convert analog customers to digital,
(iii) changes in television viewing habit because of personal video recorders
and video-on-demand and (iv) general economic conditions.

    As noted above, during the years ended December 31, 2004 and 2003 the
increases in revenue and expenses were also impacted by changes in the exchange
rates for the UK pound sterling, the euro and the Japanese yen. In the event the
U.S. dollar strengthens against these foreign currencies in the future, QVC's
revenue and operating cash flow will be negatively impacted. The percentage
increase in revenue for each of QVC's geographic areas in dollars and in local
currency is as follows:



                                           PERCENTAGE INCREASE IN NET REVENUE
                                ---------------------------------------------------------
                                  YEAR ENDED DECEMBER 31,       YEAR ENDED DECEMBER 31,
                                           2004                          2003
                                ---------------------------   ---------------------------
                                US DOLLARS   LOCAL CURRENCY   US DOLLARS   LOCAL CURRENCY
                                ----------   --------------   ----------   --------------
                                                               
QVC-US........................      7.7%                          3.8%
QVC-UK........................     31.6%          17.5%          25.0%           14.2%
QVC-Germany...................     49.9%          36.3%          56.0%           31.0%
QVC-Japan.....................     69.8%          58.3%         184.9%          170.2%


    Gross profit increased from 36.2% of net revenue for the year ended
December 31, 2002 to 36.4% for the year ended December 31, 2003 and to 36.8% for
2004. Such increases are due primarily to lower inventory obsolescence provision
and higher product margins due to a shift in the product mix from lower margin
home products to higher margin apparel and accessory categories.

                                     II-12

    QVC's operating expenses are comprised of commissions and license fees,
order processing and customer service, provision for doubtful accounts, and
credit card processing fees. Operating expenses increased 11.2% and 8.2% for
the years ended December 31, 2004 and 2003, respectively, as compared to the
corresponding prior year period. These increases are primarily due to increases
in sales volume. As a percentage of net revenue, operating expenses were 8.7%,
9.1% and 9.5% for 2004, 2003 and 2002, respectively. As a percent of net
revenue, commissions and license fees decreased in both 2004 and 2003, as
compared to the corresponding prior year. The decrease in 2004 is primarily due
to a decrease in QVC-UK resulting from the termination of commissions to one
distributor and an increase in the mix of non-commissionable sales. In 2003, the
commissions and license fee expense decreased as a percentage of net revenue for
QVC-Japan where certain distributors receive payments based on number of
subscribers rather than sales volume. In addition for both periods, there has
been an increase in Internet sales for which lower commissions are required to
be paid. As a percent of net revenue, order processing and customer service
expenses decreased in each international segment in 2004 compared to 2003 as a
result of reduced personnel expense due to increased Internet sales, and
operator efficiencies in call handling and staffing. Order processing and
customer service expenses remained consistent at 3.5% of net revenue for
the years ended December 31, 2003 and 2002. QVC's bad debt provision remained
constant from 2003 to 2004. The bad debt provision as a percentage of net
revenue decreased in 2003 compared to 2002 as the result of a one-time provision
related to a bankrupt freight payment agent that occurred in 2002. Credit card
processing fees remained consistent at 1.4% of net revenue for each of
the years ended December 31, 2004, 2003 and 2002.

    QVC's SG&A expenses increased 13.7% and 5.9% during the years ended
December 31, 2004 and 2003, respectively, as compared to the corresponding prior
year. The majority of the increase in 2004 is due to increases in personnel
costs due to the addition of employees to support the increased sales of QVC's
foreign operations and increased broadcasting hours. Information technology and
marketing and advertising costs also increased in 2004. Information technology
expenditure increases are the result of higher third-party service costs related
to various software projects as well as higher software maintenance fees. The
increase in advertising and marketing expenditures can largely be attributed to
QVC-Japan and QVC-Germany. These increases are partially offset by decreases in
transponder fees and a lower provision for statutory local sales and use tax. In
connection with our consolidation of QVC in 2003, transponder leases that
previously had been accounted for as operating leases are now accounted for as
capital leases pursuant to the provisions of EITF Issue No. 01-8. Accordingly,
QVC's transponder expense has decreased while depreciation and interest expense
have increased in 2004.

    The 2003 increase in SG&A expenses is primarily the net result of increases
in personnel, transponder and occupancy costs, partially offset by decreases in
advertising and marketing costs. Personnel cost increases reflect the addition
of personnel to support the increased sales of the foreign operations. The
increase in transponder fees is primarily the result of QVC-UK purchasing
greater band-width as well as incurring a full year of digital transmission
fees. Occupancy costs increased primarily as the result of higher costs for
expanded office space in QVC-Japan. Decreases in advertising and marketing were
primarily due to decreased domestic spending related to U.S. infomercial
ventures as well as lower payments to affiliates for short-term carriage and
incentive programs.

    QVC's depreciation and amortization expense increased for the years ended
December 31, 2004 and 2003 due primarily to the amortization of intangible
assets recorded in connection with our purchase of QVC.

    ASCENT MEDIA.  Ascent Media provides sound, video and ancillary post
production and distribution services to the motion picture and television
industries in the United States, Europe, Asia and Mexico. Accordingly, Ascent
Media is dependent on the television and movie production industries and the
commercial advertising market for a substantial portion of its revenue.

                                     II-13

    Ascent Media's revenue increased 24.2% and decreased 5.6% during the years
ended December 31, 2004 and 2003, respectively, as compared to the corresponding
prior year. The 2004 increase is due primarily to acquisitions ($62 million) and
new business ($34 million) by Ascent Media's Networks Group. In addition,
revenue for Ascent Media's Creative Services Group and Audio Group increased
$14 million and $11 million, respectively, due to increases in projects for
feature films and episodic television. The 2003 decrease is due primarily to a
decrease in revenue for Ascent Media's Networks Group ($29 million) due to the
disposition of a business unit in December 2002 and the re-negotiation of
certain contracts resulting in lower rates for services.

    Ascent Media's operating expenses increased $79 million or 26.3% and
decreased $21 million or 6.5% during the years ended December 31, 2004 and 2003,
respectively, as compared to the corresponding prior year. These fluctuations
are due to changes in variable expenses such as personnel and material costs. In
addition, the 2003 decrease is due to the sale of a Networks Group business unit
referred to above.

    Ascent Media's SG&A expenses increased $29 million or 23.8% for the year
ended December 31, 2004, as compared to 2003. This increase is due primarily to
acquisitions by Ascent Media's Networks Group and various individually
insignificant increases. Ascent Media's general and administrative expenses were
relatively comparable over the 2002 and 2003 periods.

    In connection with its 2002 Statement 142 impairment analysis, Ascent Media
recorded an $84 million charge to write off a portion of the goodwill related to
its Entertainment Television reporting unit. No significant impairments were
recorded by Ascent Media in 2004 or 2003.

    OTHER.  Other consolidated subsidiaries included in the Interactive Group
are On Command, which provides in-room, on demand video entertainment and
information services to hotels, motels and resorts; and OpenTV, which provides
interactive television solutions, including operating middleware, web browser
software, interactive applications, and consulting and support services. Revenue
for our other consolidated subsidiaries was relatively comparable in 2003 and
2004. The changes in operating cash flow and operating loss in 2004 for our
other consolidated subsidiaries are due to improvements in the operating results
of Open TV. Other consolidated subsidiary revenue increased $41 million in 2003
due primarily to the operations of OpenTV ($46 million), which we acquired in
August 2002. The decrease in operating loss from 2002 to 2003 resulted from a
$92 million impairment charge recorded by OpenTV in 2002.

                                     II-14

    NETWORKS GROUP

    The following table combines information regarding our equity method
affiliates with our consolidated subsidiaries, which presentation is not in
accordance with GAAP. See--"Operating Results by Business Group" above.



                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2004       2003       2002
                                                              --------   --------   --------
                                                                   AMOUNTS IN MILLIONS
                                                                           
REVENUE
Starz Entertainment.........................................   $  963        906        945
Discovery(1)................................................    2,365      1,995      1,717
Court TV(1).................................................      227        186        148
GSN(1)......................................................       88         76         53
Other consolidated subsidiaries.............................       21         27         24
                                                               ------     ------     ------
  Combined Networks Group revenue...........................    3,664      3,190      2,887
Eliminate revenue of equity method affiliates...............   (2,680)    (2,257)    (1,918)
                                                               ------     ------     ------
  Consolidated Networks Group revenue.......................   $  984        933        969
                                                               ======     ======     ======
OPERATING CASH FLOW
Starz Entertainment.........................................   $  239        368        371
Discovery(1)................................................      663        508        379
Court TV(1).................................................       52         43         (1)
GSN(1)......................................................       (2)         1        (11)
Other consolidated subsidiaries.............................       (3)        --         --
                                                               ------     ------     ------
  Combined Networks Group operating cash flow...............      949        920        738
Eliminate operating cash flow of equity method affiliates...     (713)      (552)      (367)
                                                               ------     ------     ------
  Consolidated Networks Group operating cash flow...........   $  236        368        371
                                                               ======     ======     ======
OPERATING INCOME (LOSS)
Starz Entertainment.........................................   $  148        266        297
Discovery(1)................................................      484        314        169
Court TV(1).................................................       36         13        (18)
GSN(1)......................................................       (3)        (1)       (12)
Other consolidated subsidiaries.............................       (3)        (2)        (1)
                                                               ------     ------     ------
  Combined Networks Group operating income..................      662        590        435
Eliminate operating income of equity method affiliates......     (517)      (326)      (139)
                                                               ------     ------     ------
  Consolidated Networks Group operating income..............   $  145        264        296
                                                               ======     ======     ======


- ------------------------

(1) Represents an equity method affiliate. Equity ownership percentages for
    significant equity affiliates at December 31, 2004 are as follows:

                                                           
Discovery...................................................     50%
Court TV....................................................     50%
GSN.........................................................     50%



    STARZ ENTERTAINMENT.  Starz Entertainment provides premium programming
distributed by cable operators, direct-to-home ("DTH") satellite providers and
other distributors throughout the United States. The majority of Starz
Entertainment's revenue is derived from the delivery of movies to subscribers
under affiliation agreements with these video programming distributors.

    Starz Entertainment's revenue increased 6.3% and decreased 4.1% for
the years ended December 31, 2004 and 2003, respectively, as compared to the
corresponding prior year. The increase in 2004 is due primarily to an increase
in the average number of subscription units for Starz

                                     II-15

Entertainment's Thematic Multiplex and Encore services. The Thematic Multiplex
service is a group of up to six channels, each of which exhibits movies based on
an individual theme. Total average subscription units, which represent the
number of Starz Entertainment services which are purchased by cable, DTH and
other distribution media customers, increased 13.0% during the year ended
December 31, 2004, as compared to the prior year. In addition, Starz
Entertainment's period-end subscription units increased 21.8 million units or
14.4% since the end of 2003. These increases in subscription units are due in
part to (i) new affiliation agreements between Starz Entertainment and certain
multichannel video programming distributors and (ii) participation with
distributors in national marketing campaigns and other marketing strategies.
Under these new affiliation agreements, Starz Entertainment has obtained
benefits such as more favorable promotional offerings of its services and
increased co-operative marketing commitments. Starz Entertainment is negotiating
with certain of its other multichannel video programming distributors, including
Echostar Communications whose affiliation agreement has been extended until
June 2005, to obtain similar promotions and increased co-operative marketing
commitments.

    Starz Entertainment's affiliation agreements generally do not provide for
the inclusion of its services in specific programming packages of the
distributors. The affiliation agreement with Comcast, however, does include a
short-term packaging commitment to carry the Encore and Thematic Multiplex
channels (EMP) in specified digital tiers on Comcast's cable systems. Although
the affiliation agreement expires at the end of 2010, Comcast's packaging
commitment expires at the end of 2005. Starz Entertainment and Comcast are
currently negotiating an extension of this packaging commitment. At this time,
Starz Entertainment is unable to predict whether it will be able to obtain an
extended packaging commitment from Comcast comparable to the current commitment
on economic terms that are acceptable to Starz Entertainment. If such an
extension cannot be obtained, Comcast may elect to place the EMP services on a
less favorable digital tier, which could negatively affect Starz Entertainment's
ability to retain and add EMP subscribers in Comcast service areas.

    As noted above, the increase in subscription units is due primarily to
subscription units for the Thematic Multiplex service, which has a lower
subscription rate than other Starz Entertainment services. In addition, Starz
Entertainment has entered into fixed-rate affiliation agreements with certain of
its customers. Pursuant to these agreements, the customers pay a fixed rate
regardless of the number of subscribers. The fixed rate is increased annually or
semi-annually as the case may be. These agreements expire in 2006 through 2008.
Due to the foregoing factors, the percentage increase in average subscription
units exceeds the percentage increase in revenue. Comcast, DirecTV, Echostar
Communications and Time Warner Inc. generated 24.2%, 23.6%, 11.3% and 9.7%,
respectively, of Starz Entertainment's revenue for the year ended December 31,
2004.

    The 2003 decrease in revenue is primarily due to a new seven-year
affiliation agreement with Comcast, which Starz Entertainment and Comcast
entered into in September 2003. The new affiliation agreement provides for the
carriage of the STARZ! and Encore movie services on all of Comcast's owned and
operated cable systems, including those systems acquired by Comcast in
November 2002 from AT&T Broadband LLC. The AT&T Broadband systems had previously
been the subject of an affiliation agreement which provided for AT&T Broadband's
unlimited access to all of the existing STARZ! and Encore services in exchange
for fixed monthly payments to Starz Entertainment. The effective per-subscriber
fee for the AT&T Broadband systems under the new Comcast affiliation agreement
is lower than the effective rate under the old AT&T Broadband affiliation
agreement, which in conjunction with a loss in STARZ! subscription units in
Comcast cable systems resulted in a $77 million decrease in revenue from Comcast
in 2003. This decrease was partially offset by a $35 million increase in revenue
from other distributors, which resulted from a 13.6% increase in the number of
average subscription units.

                                     II-16

    Starz Entertainment's subscription units at December 31, 2004, 2003 and 2002
are presented in the table below.



                                                                SUBSCRIPTIONS AT
                                                                  DECEMBER 31,
                                                         ------------------------------
SERVICE OFFERING                                           2004       2003       2002
- ----------------                                         --------   --------   --------
                                                                  IN MILLIONS
                                                                      
Thematic Multiplex.....................................   130.3      111.4       96.8
Encore.................................................    24.5       21.9       20.9
STARZ!.................................................    14.1       12.3       13.2
Movieplex..............................................     3.9        5.4        5.0
                                                          -----      -----      -----
                                                          172.8      151.0      135.9
                                                          =====      =====      =====


    At December 31, 2004, cable, direct broadcast satellite, and other
distribution represented 65.8%, 33.1% and 1.1%, respectively, of Starz
Entertainment's total subscription units.

    Starz Entertainment's operating expenses increased $173 million or 40.3% and
$22 million or 5.4% for the years ended December 31, 2004 and 2003,
respectively, as compared to the corresponding prior year. Such increases are
due primarily to increases in programming costs, which increased from
$358 million in 2002 to $398 million in 2003 and to $564 million in 2004. Such
increases are due to (i) higher cost per title due to new rate cards for movie
titles under certain of its license agreements that were effective for movies
made available to Starz Entertainment in 2004 and (ii) amortization of deposits
previously made under the output agreements. Starz Entertainment's 2003
programming costs were also impacted by increases in the box office performance
of movie titles that became available to Starz Entertainment in 2003. In
addition, in the first quarter of 2003, Starz Entertainment entered into a
settlement agreement regarding the payment of certain music license fees, which
resulted in the reversal of a related accrual in the amount of $8 million.

    Starz Entertainment expects that its programming costs in 2005 will exceed
the 2004 costs by approximately $115 million to $135 million due to the factors
described above. Assuming a similar quantity of movie titles is available to
Starz Entertainment in 2006 and the box office performance of such titles is
consistent with the performance of titles received in 2005, Starz Entertainment
expects that its 2006 programming expense will be less than 10% higher than its
2005 programming expense. These estimates are subject to a number of assumptions
that could change depending on the number and timing of movie titles actually
becoming available to Starz Entertainment and their ultimate box office
performance. Accordingly, the actual amount of cost increases experienced by
Starz Entertainment may differ from the amounts noted above. Starz Entertainment
currently does not expect to generate sufficient increases in revenue or
reductions in other costs to fully offset the programming increases.
Accordingly, we are expecting a reduction to Starz Entertainment's operating
cash flow and operating income in 2005.

    Starz Entertainment's SG&A expenses increased $13 million or 12.5% and
decreased $58 million or 35.0% during 2004 and 2003, respectively, as compared
to the corresponding prior year. The 2004 increase is due primarily to increases
in sales and marketing expenses partially offset by decreases in bad debt and
payroll tax expense. As noted above, Starz Entertainment has entered into new
affiliation agreements with certain multichannel television distributors, which,
in some cases, has resulted in new packaging of Starz Entertainment's services
and increased co-operative marketing commitments. As a result, sales and
marketing expenses increased $33 million for the year ended December 31, 2004,
as compared to 2003. During the year ended December 31, 2004, Starz
Entertainment sold a portion of its pre-petition accounts receivable from
Adelphia Communications to an independent third party. Starz Entertainment had
previously provided an allowance against the Adelphia accounts receivable based
on Starz Entertainment's estimate of the amount it would collect. The proceeds
from the sale of the Adelphia accounts receivable exceeded the net accounts
receivable balance by approximately $8 million,

                                     II-17

resulting in a corresponding reduction in bad debt expense of $8 million. In
addition, Starz Entertainment recovered approximately $4 million of additional
accounts receivable from various customers for which a reserve had previously
been provided. The 2003 decrease in SG&A expenses is due primarily to a
$57 million decrease in sales and marketing expenses and a $7 million decrease
in bad debt expense. The decrease in sales and marketing expenses is due to the
reduced number of co-operative promotions by certain multichannel television
distributors and the reversal of an accrual recorded in prior years. The higher
bad debt expense in 2002 resulted from the bankruptcy filing of Adelphia
Communications Corporation.

    Starz Entertainment has outstanding phantom stock appreciation rights held
by certain of its officers and employees (including its former chief executive
officer). Compensation relating to the phantom stock appreciation rights has
been recorded based upon the estimated fair value of Starz Entertainment. The
amount of expense associated with the phantom stock appreciation rights is
generally based on the vesting of such rights and the change in the fair value
of Starz Entertainment. Starz Entertainment's stock compensation decreased in
2003 as a result of a decrease in the estimated equity value of Starz
Entertainment.

    As more fully described above under "--Consolidated Operating
Results--Impairment of Long-lived Assets," we recorded a $1,352 million
impairment charge in 2003 related to Starz Entertainment, of which
$1,195 million relates to enterprise-level goodwill and is included in Corporate
and Other.

    DISCOVERY.  Discovery's revenue increased 18.5% and 16.2% for the years
ended December 31, 2004 and 2003, respectively, as compared to the corresponding
prior year. These increases are due to 12.2% and 21.8% increases in advertising
revenue and 30.5% and 15.7% increases in affiliate revenue, respectively. The
2004 increase in advertising revenue was due to an increase in advertising rates
in the United States and positive developments in International advertising
sales. Although advertising rates increased, the advertising revenue growth was
slowed in 2004 due primarily to ratings challenges on one of its U.S. networks.
Affiliate revenue increased in 2004 due to overall subscription unit growth,
subscription units coming off free periods on developing domestic networks, and
the extension of domestic networks carriage arrangements with large affiliates
that reduced the amortization of launch costs during the period. The 2003
increase in advertising revenue was due to increased audience delivery in the
United States and Europe and an increase in overall subscription units.
Affiliate revenue increased in 2003 due to overall subscription unit growth,
combined with subscription units coming off free periods on developing domestic
networks.

    Discovery's operating expenses increased 12.6% and 7.4% in 2004 and 2003,
respectively. Such increases were due primarily to a 19.4% and 13.3% increase in
programming costs, respectively, as the company continues to invest in original
programming. Discovery's SG&A expenses increased 16.5% and 15.1% in 2004 and
2003, respectively. These increases were driven by increased personnel and
general and administrative expense, combined with increased marketing and sales
related expenses. As a percent of revenue Discovery's SG&A expenses were 36.2%,
36.8% and 37.2% in 2004, 2003 and 2002, respectively, due to Discovery
continuing to realize economies of scale.

    COURT TV.  Court TV's revenue increased 22.0% and 25.7% for the years ended
December 31, 2004 and 2003, respectively, as compared to the corresponding prior
year. These increases are due to 21.1% and 26.9% increases in advertising
revenue and 26.9% and 20.6% increases in net affiliate revenue. Advertising
revenue increased as a result of a 7.6% and a 7.5% increase in subscribers in
2004 and 2003, respectively, combined with continued ratings strength. Affiliate
revenue increased in both periods due to subscriber growth combined with
decreases in launch support from 2003 to 2004.

    Court TV's operating expenses, which are comprised primarily of programming
costs, increased 20.0% in 2004 and decreased 11.8% in 2003. Operating costs
decreased in 2003 due to a reduction in various acquired programming costs
combined with a delay in the release of certain original

                                     II-18

programming into 2004. Operating costs increased in 2004 due to increased
investment in original and acquired programming. Court TV's SG&A expenses
increased 25.9% in 2004 due to growth in the business combined with a
significant increase in marketing initiatives. SG&A expenses were relatively
comparable from 2002 to 2003. As a percent of revenue, SG&A expenses increased
from 40.8% in 2003 to 42.0% in 2004 due to the increased marketing investment.

    GSN.  GSN's revenue increased 15.8% and 43.4% for the years ended
December 31, 2004 and 2003, respectively, as compared to the corresponding prior
year. These increases are due to 13.4% and 30.8% increases in advertising
revenue and 18.9% and 60.7% increases in net affiliate revenue. Affiliate
revenue increased due to 5.7% and 13.2% growth in subscribers during 2004 and
2003, respectively, combined with modest rate increases in both years and a
decrease in amortization of subscriber launch costs in 2003. Advertising revenue
increased due to an improved audience delivery, stemming from subscriber growth
and improved delivery of key demographics, as well as improved sales efforts
yielding higher rates and an increased percentage of inventory sold to
advertisers.

    GSN's operating expenses, which are comprised primarily of programming
costs, increased 17.9% and 46.7% in 2004 and 2003, respectively, as compared to
the corresponding prior year and represented 47.4% and 46.6% of revenue for 2004
and 2003, respectively. The increase in operating costs in both years is due
primarily to continued investments in programming. GSN's SG&A expenses increased
19.8% in 2004 due to a 86.6% increase in marketing expense associated with the
rebranding of the network. SG&A expenses in 2003 were comparable to the prior
year. As a percent of revenue, SG&A expenses increased from 52.6% in 2003 to
54.5% in 2004.

LIQUIDITY AND CAPITAL RESOURCES

    CORPORATE

    Our sources of liquidity include our available cash balances, cash generated
by the operating activities of our privately-owned subsidiaries (to the extent
such cash exceeds the working capital needs of the subsidiaries and is not
otherwise restricted), proceeds from asset sales, monetization of our public
investment portfolio (including derivatives), debt and equity issuances, and
dividend and interest receipts.

    During the year ended December 31, 2004, our primary corporate uses of cash
were investments in and loans to cost investees ($930 million), debt repayments
pursuant to our debt reduction program ($994 million), cash used by discontinued
operations ($833 million) and the exchange of stock of one of our subsidiaries
that held cash and other assets for shares of our common stock held by Comcast
($547 million). These uses of cash were funded primarily by cash on hand, cash
transfers from our subsidiaries ($887 million), proceeds from sales of assets
($483 million) and net proceeds from our various derivative transactions
($492 million).

    At December 31, 2004, we have $1,725 million in cash and marketable debt
securities, $8,612 million of non-strategic AFS securities (including related
derivatives with an estimated fair value of $644 million) and $10,776 million of
total face amount of corporate debt. In addition, we own $9,667 million of News
Corp. common stock and $3,824 million of IAC/InterActiveCorp common stock, which
we consider to be strategic assets. Accordingly, we believe that our liquidity
position at December 31, 2004 is very strong.

    Our projected uses of cash in 2005 include $1.0 billion of additional debt
repayments as we complete the debt reduction program that we initiated in the
fourth quarter of 2003. In addition, we may make additional investments in
existing or new businesses. However, we are unable to quantify such investments
at this time.

    We expect that our investing and financing activities, including the
aforementioned debt reduction plan, will be funded with a combination of cash on
hand, cash provided by operating activities,

                                     II-19

proceeds from equity collar expirations and dispositions of non-strategic
assets. Based on the put price and assuming we physically settle each of our AFS
Derivatives and excluding any provision for income taxes, we would be entitled
to cash proceeds of approximately $1,014 million in 2005, $396 million in 2006,
$387 million in 2007, $101 million in 2008, $1,383 million in 2009, and
$3,021 million thereafter upon settlement of our AFS Derivatives.

    Prior to the maturity of our equity collars, the terms of certain of our
equity and narrow-band collars allow us to borrow against the future put option
proceeds at LIBOR or LIBOR plus an applicable spread, as the case may be. As of
December 31, 2004, such borrowing capacity aggregated approximately
$5,900 million. Such borrowings would reduce the cash proceeds upon settlement
noted in the preceding paragraph.

    Based on currently available information, we expect to receive approximately
$125 million in dividend and interest income during the year ended December 31,
2005. Based on current debt levels and current interest rates, we expect to make
interest payments of approximately $490 million during the year ended
December 31, 2005, primarily all of which relates to parent company debt.

    As of December 31, 2004, each of Standard and Poor's Rating Service ("S&P"),
Moody's Investors Service ("Moody's") and Fitch Ratings ("Fitch") rated our
senior debt at the lowest level of investment grade. At that date, S&P and
Moody's both had a negative ratings outlook, while Fitch had a stable outlook.
Subsequent to December 31, 2004, S&P affirmed its ratings, but placed us on
CreditWatch, and Fitch lowered its outlook to negative and placed us on Rating
Watch. Neither S&P nor Fitch provided an estimate of the time for their
respective Watch period. However, at the conclusion of the Watch period, we
anticipate that each agency will either (1) affirm our rating and outlook, or
(2) downgrade our rating to a level below investment grade. At this time we are
unable to predict which of these outcomes will occur. None of our existing
indebtedness includes any covenant under which a default could occur as a result
of a downgrade in our credit rating. However, any such downgrade could adversely
affect our access to the public debt markets and our overall cost of future
corporate borrowings. Notwithstanding the foregoing, we do not believe that a
downgrade would adversely impact the ability of our subsidiaries to arrange bank
financing or our ability to borrow against the value of our equity collars.

    SUBSIDIARIES

    In 2004, our subsidiaries funded capital expenditures ($226 million),
acquisitions ($137 million), an increase in working capital ($293 million) and
the repurchase of certain subsidiary common stock ($171 million) with cash on
hand and cash generated by their operating activities.

    Our subsidiaries currently expect to spend approximately $435 million for
capital expenditures in 2005, including $275 million by QVC. These amounts are
expected to be funded by the cash flows of the respective subsidiary.

    EQUITY AFFILIATES

    Various partnerships and other affiliates of ours accounted for using the
equity method finance a substantial portion of their acquisitions and capital
expenditures through borrowings under their own credit facilities and net cash
provided by their operating activities. Notwithstanding the foregoing, certain
of our affiliates may require additional capital to finance their operating or
investing activities. In the event our affiliates require additional financing
and we fail to meet a capital call, or other commitment to provide capital or
loans to a particular company, such failure may have adverse consequences to us.
These consequences may include, among others, the dilution of our equity
interest in that company, the forfeiture of our right to vote or exercise other
rights, the right of the other stockholders or partners to force us to sell our
interest at less than fair value, the forced dissolution of the company to which
we have made the commitment or, in some instances, a breach of contract action

                                     II-20

for damages against us. Our ability to meet capital calls or other capital or
loan commitments is subject to our ability to access cash.

OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS

    Starz Entertainment has entered into agreements with a number of motion
picture producers which obligate Starz Entertainment to pay fees ("Programming
Fees") for the rights to exhibit certain films that are released by these
producers. The unpaid balance under agreements for film rights related to films
that were available for exhibition by Starz Entertainment at December 31, 2004
is reflected as a liability in the accompanying consolidated balance sheet. The
balance due as of December 31, 2004 is payable as follows: $200 million in 2005
and $16 million in 2006.

    Starz Entertainment has also contracted to pay Programming Fees for the
rights to exhibit films that have been released theatrically, but are not
available for exhibition by Starz Entertainment until some future date. These
amounts have not been accrued at December 31, 2004. Starz Entertainment's
estimate of amounts payable under these agreements is as follows: $538 million
in 2005; $256 million in 2006; $125 million in 2007; $108 million in 2008;
$98 million in 2009 and $134 million thereafter.

    In addition, Starz Entertainment is also obligated to pay Programming Fees
for all qualifying films that are released theatrically in the United States by
studios owned by The Walt Disney Company through 2009, all qualifying films that
are released theatrically in the United States by studios owned by Sony Pictures
Entertainment from 2005 through 2010 and all qualifying films released
theatrically in the United States by Revolution Studios through 2006. Films are
generally available to Starz Entertainment for exhibition 10 - 12 months after
their theatrical release. The Programming Fees to be paid by Starz Entertainment
are based on the quantity and domestic theatrical exhibition receipts of
qualifying films. As these films have not yet been released in theatres, Starz
Entertainment is unable to estimate the amounts to be paid under these output
agreements. However, such amounts are expected to be significant.

    In addition to the foregoing contractual film obligations, each of Disney
and Sony has the right to extend its contract for an additional three years. If
Sony elects to extend its contract, Starz Entertainment has agreed to pay Sony a
total of $190 million in four annual installments of $47.5 million. This option
expires December 31, 2007. If made, Starz Entertainment's payments to Sony would
be amortized ratably over the extension period beginning in 2011. An extension
of this agreement would also result in the payment by Starz Entertainment of
Programming Fees for qualifying films released by Sony during the extension
period. If Disney elects to extend its contract, Starz Entertainment is not
obligated to pay any amounts in excess of its Programming Fees for qualifying
films released by Disney during the extension period.

    Liberty guarantees Starz Entertainment's obligations under the Disney and
Sony output agreements. At December 31, 2004, Liberty's guarantees for studio
output obligations for films released by such date aggregated $763 million.
While the guarantee amount for films not yet released is not determinable, such
amount is expected to be significant. As noted above, Starz Entertainment has
recognized the liability for a portion of its obligations under the output
agreements. As this represents a commitment of Starz Entertainment, a
consolidated subsidiary of ours, we have not recorded a separate liability for
our guarantees of these obligations.

    At December 31, 2004, we guaranteed Y4.7 billion ($46 million) of the bank
debt of Jupiter Telecommunications Co., Ltd ("J-COM"), a former equity affiliate
that provides broadband services in Japan. Our guarantees expire as the
underlying debt matures and is repaid. The debt maturity dates range from 2004
to 2018. Our investment in J-COM was attributed to LMI in the spin off. In
connection with the spin off of LMI, LMI has agreed to indemnify us for any
amounts we are required to fund under these guarantees.

                                     II-21

    Information concerning the amount and timing of required payments, both
accrued and off-balance sheet, under our contractual obligations is summarized
below:



                                                                   PAYMENTS DUE BY PERIOD
                                                  ---------------------------------------------------------
                                                             LESS THAN                              AFTER
CONTRACTUAL OBLIGATIONS                            TOTAL      1 YEAR     1-3 YEARS    4-5 YEARS    5 YEARS
- -----------------------                           --------   ---------   ----------   ----------   --------
                                                                     AMOUNTS IN MILLIONS
                                                                                    
Long-term debt(1)...............................  $10,885         10        3,000        2,724       5,151
Long-term derivative instruments................    1,889      1,179          336           13         361
Interest expense(2).............................    6,714        480          816          676       4,742
Operating lease obligations.....................      277         62           88           58          69
Programming Fees(3).............................    1,475        738          397          206         134
Purchase orders and other obligations...........      760        737           20            3          --
                                                  -------      -----        -----        -----      ------
Total contractual payments......................  $22,000      3,206        4,657        3,680      10,457
                                                  =======      =====        =====        =====      ======


- ------------------------

(1) Includes all debt instruments, including the call option feature related to
    our exchangeable debentures. Amounts are stated at the face amount at
    maturity and may differ from the amounts stated in our consolidated balance
    sheet to the extent debt instruments (i) were issued at a discount or
    premium or (ii) are reported at fair value in our consolidated balance
    sheet. Also includes capital lease obligations.

(2) Assumes the interest rates on our floating rate debt remain constant at the
    December 31, 2004 rates.

(3) Does not include Programming Fees for films not yet released theatrically,
    as such amounts cannot be estimated.

    Pursuant to a tax sharing agreement between us and AT&T when we were a
subsidiary of AT&T, we received a cash payment from AT&T in periods when we
generated taxable losses and such taxable losses were utilized by AT&T to reduce
the consolidated income tax liability. To the extent such losses were not
utilized by AT&T, such amounts were available to reduce federal taxable income
generated by us in future periods, similar to a net operating loss carryforward.
During the period from March 10, 1999 to December 31, 2002, we received cash
payments from AT&T aggregating $555 million as payment for our taxable losses
that AT&T utilized to reduce its income tax liability. In the fourth quarter of
2004, AT&T requested a refund from us of $70 million, plus accrued interest,
relating to losses that it generated in 2002 and 2003 and were able to carry
back to offset taxable income previously offset by our losses. In the event AT&T
generates capital losses in 2004 and is able to carry back such losses to offset
taxable income previously offset by our losses, we may be required to refund as
much as an additional $229 million (excluding any accrued interest) to AT&T. We
are currently unable to estimate how much, if any, we will ultimately refund to
AT&T, but we believe that any such refund, if made, would not be material to our
financial position.

    In connection with agreements for the sale of certain assets, we typically
retain liabilities that relate to events occurring prior to the sale, such as
tax, environmental, litigation and employment matters. We generally indemnify
the purchaser in the event that a third party asserts a claim against the
purchaser that relates to a liability retained by us. These types of
indemnification guarantees typically extend for a number of years. We are unable
to estimate the maximum potential liability for these types of indemnification
guarantees as the sale agreements typically do not specify a maximum amount and
the amounts are dependent upon the outcome of future contingent events, the
nature and likelihood of which cannot be determined at this time. Historically,
we have not made any significant indemnification payments under such agreements
and no amount has been accrued in the accompanying consolidated financial
statements with respect to these indemnification guarantees.

                                     II-22

    We have contingent liabilities related to legal and tax proceedings and
other matters arising in the ordinary course of business. Although it is
reasonably possible we may incur losses upon conclusion of such matters, an
estimate of any loss or range of loss cannot be made. In the opinion of
management, it is expected that amounts, if any, which may be required to
satisfy such contingencies will not be material in relation to the accompanying
consolidated financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

    In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (revised 2004), "SHARE-BASED PAYMENTS"
("Statement 123R"). Statement 123R, which is a revision of Statement 123 and
supersedes APB Opinion No. 25, establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services, primarily focusing on transactions in which an entity obtains employee
services. Statement 123R generally requires companies to measure the cost of
employee services received in exchange for an award of equity instruments (such
as stock options and restricted stock) based on the grant-date fair value of the
award, and to recognize that cost over the period during which the employee is
required to provide service (usually the vesting period of the award). Statement
123R also requires companies to measure the cost of employee services received
in exchange for an award of liability instruments (such as stock appreciation
rights) based on the current fair value of the award, and to remeasure the fair
value of the award at each reporting date.

    Public companies, such as Liberty, are required to adopt Statement 123R as
of the beginning of the first interim period that begins after June 15, 2005.
The provisions of Statement 123R will affect the accounting for all awards
granted, modified, repurchased or cancelled after July 1, 2005. The accounting
for awards granted, but not vested, prior to July 1, 2005 will also be impacted.
The provisions of Statement 123R allow companies to adopt the standard on a
prospective basis or to restate all periods for which Statement 123 was
effective. We expect to adopt Statement 123R on a prospective basis, and our
financial statements for periods that begin after June 15, 2005 will include pro
forma information as though the standard had been adopted for all periods
presented.

    While we have not yet quantified the impact of adopting Statement 123R, we
believe that such adoption could have a significant impact on our operating
income and net earnings in the future.

CRITICAL ACCOUNTING ESTIMATES

    The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Listed below are the accounting estimates
that we believe are critical to our financial statements due to the degree of
uncertainty regarding the estimates or assumptions involved and the magnitude of
the asset, liability, revenue or expense being reported. All of these accounting
estimates and assumptions, as well as the resulting impact to our financial
statements, have been discussed with our audit committee.

    CARRYING VALUE OF INVESTMENTS.  Our cost and equity method investments
comprise 43.5% and 7.4%, respectively, of our total assets at December 31, 2004
and 36.1% and 6.7%, respectively, at December 31, 2003. We account for these
investments pursuant to Statement of Financial Accounting Standards No. 115,
Statement of Financial Accounting Standards No. 142, Accounting Principles Board
Opinion No. 18, EITF Topic 03-1 and SAB No. 59. These accounting principles
require us to periodically evaluate our investments to determine if decreases in
fair value below our cost bases are other than temporary or "nontemporary." If a
decline in fair value is determined to be nontemporary, we are required to
reflect such decline in our statement of operations. Nontemporary declines in
fair value of our cost investments are recognized on a separate line in our
statement of operations, and

                                     II-23

nontemporary declines in fair value of our equity method investments are
included in share of losses of affiliates in our statement of operations.

    The primary factors we consider in our determination of whether declines in
fair value are nontemporary are the length of time that the fair value of the
investment is below our carrying value; and the financial condition, operating
performance and near term prospects of the investee. In addition, we consider
the reason for the decline in fair value, be it general market conditions,
industry specific or investee specific; analysts' ratings and estimates of
12 month share price targets for the investee; changes in stock price or
valuation subsequent to the balance sheet date; and our intent and ability to
hold the investment for a period of time sufficient to allow for a recovery in
fair value. Fair value of our publicly traded investments is based on the market
prices of the investments at the balance sheet date. We estimate the fair value
of our other cost and equity investments using a variety of methodologies,
including cash flow multiples, discounted cash flow, per subscriber values, or
values of comparable public or private businesses. Impairments are calculated as
the difference between our carrying value and our estimate of fair value. As our
assessment of the fair value of our investments and any resulting impairment
losses requires a high degree of judgment and includes significant estimates and
assumptions, actual results could differ materially from our estimates and
assumptions.

    Our evaluation of the fair value of our investments and any resulting
impairment charges are made as of the most recent balance sheet date. Changes in
fair value subsequent to the balance sheet date due to the factors described
above are possible. Subsequent decreases in fair value will be recognized in our
statement of operations in the period in which they occur to the extent such
decreases are deemed to be nontemporary. Subsequent increases in fair value will
be recognized in our statement of operations only upon our ultimate disposition
of the investment.

    At December 31, 2004, we had unrealized losses of $15 million related to one
of our AFS equity securities.

    ACCOUNTING FOR ACQUISITIONS.  We acquired QVC in 2003 and OpenTV in 2002. We
account for all acquisitions of companies such as these pursuant to Statement of
Financial Accounting Standards No. 141, "BUSINESS COMBINATIONS," which
prescribes the purchase method of accounting for business combinations. Pursuant
to Statement 141, the purchase price is allocated to all of the assets and
liabilities of the acquired company, based on their respective fair values. Any
excess purchase price over the estimated fair value of the net assets is
recorded as goodwill.

    In determining fair value, we are required to make estimates and assumptions
that affect the recorded amounts. To assist in this process, we often engage
third party valuation specialists to value certain of the assets and
liabilities. Estimates used in these valuations may include expected future cash
flows (including timing thereof), market rate assumptions for contractual
obligations, expected useful lives of tangible and intangible assets and
appropriate discount rates. Our estimates of fair value are based on assumptions
believed to be reasonable, but which are inherently uncertain.

    The allocation of the purchase price to tangible and intangible assets
impacts our statement of operations due to the amortization of these assets.
With respect to the acquisition of QVC, the total purchase price of
$7.9 billion was allocated to QVC's net assets based on their estimated fair
values as determined by an independent valuation firm. QVC's more significant
intangible assets included customer relationships and cable and satellite
distribution rights, which are amortized over their respective useful lives, and
trademarks, which have an indefinite useful life and are not amortized. We also
allocated a portion of the purchase price to goodwill, which is not amortized.
We estimate that amortization expense related to the amortizable intangible
assets will be $312 million annually. If the allocation to QVC's amortizable
assets had been 10% or $436 million more and the allocation to trademarks and
goodwill had been $436 million less, our annual amortization expense would be
$31 million higher.

                                     II-24

    ACCOUNTING FOR DERIVATIVE INSTRUMENTS.  We use various derivative
instruments, including equity collars, narrow-band collars, put spread collars,
written put and call options, interest rate swaps and foreign exchange
contracts, to manage fair value and cash flow risk associated with many of our
investments, some of our debt and transactions denominated in foreign
currencies. We account for these derivative instruments pursuant to Statement
133 and Statement of Financial Accounting Standards No. 149 "AMENDMENT OF
STATEMENT NO. 133 ON DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES." Statement
133 and Statement 149 require that all derivative instruments be recorded on the
balance sheet at fair value. Changes in derivatives designated as fair value
hedges and changes in derivatives not designated as hedges are included in
realized and unrealized gains (losses) on derivative instruments in our
statement of operations.

    We use the Black-Scholes model to estimate the fair value of our derivative
instruments ("AFS Derivatives") that we use to manage market risk related to
certain of our AFS securities. The Black-Scholes model incorporates a number of
variables in determining such fair values, including expected volatility of the
underlying security and an appropriate discount rate. We obtain volatility rates
from independent sources based on the expected volatility of the underlying
security over the term of the derivative instrument. The volatility assumption
is evaluated annually to determine if it should be adjusted, or more often if
there are indications that it should be adjusted. We obtain a discount rate at
the inception of the derivative instrument and update such rate each reporting
period based on our estimate of the discount rate at which we could currently
settle the derivative instrument. At December 31, 2004, the expected
volatilities used to value our AFS Derivatives generally ranged from 20% to 30%
and the discount rates ranged from 3.1% to 4.8%. Considerable management
judgment is required in estimating the Black-Scholes variables. Actual results
upon settlement or unwinding of our derivative instruments may differ materially
from these estimates.

    Changes in our assumptions regarding (1) the discount rate and (2) the
volatility rates of the underlying securities that are used in the Black-Scholes
model would have the most significant impact on the valuation of our AFS
Derivatives. The table below summarizes changes in these assumptions and the
resulting impacts on our estimate of fair value.



                                                  ESTIMATED AGGREGATE
                                                   FAIR VALUE OF AFS    DOLLAR VALUE
ASSUMPTION                                            DERIVATIVES          CHANGE
- ----------                                        -------------------   ------------
                                                         AMOUNTS IN MILLIONS
                                                                  
As recorded at December 31, 2004................         $1,340
25% increase in discount rate...................         $1,138             (202)
25% decrease in discount rate...................         $1,550              210
25% increase in expected volatilities...........         $1,298              (42)
25% decrease in expected volatilities...........         $1,386               46


    CARRYING VALUE OF LONG-LIVED ASSETS.  Our property and equipment, intangible
assets and goodwill (collectively, our "long-lived assets") also comprise a
significant portion of our total assets at December 31, 2004 and 2003. We
account for our long-lived assets pursuant to Statement of Financial Accounting
Standards No. 142 and Statement of Financial Accounting Standards No. 144. These
accounting standards require that we periodically, or upon the occurrence of
certain triggering events, assess the recoverability of our long-lived assets.
If the carrying value of our long-lived assets exceeds their estimated fair
value, we are required to write the carrying value down to fair value. Any such
writedown is included in impairment of long-lived assets in our consolidated
statement of operations. A high degree of judgment is required to estimate the
fair value of our long-lived assets. We may use quoted market prices, prices for
similar assets, present value techniques and other valuation techniques to
prepare these estimates. In addition, we may obtain independent appraisals in
certain circumstances. We may need to make estimates of future cash flows and
discount rates as well as other assumptions in order to implement these
valuation techniques. Accordingly, any value ultimately derived from our

                                     II-25

long-lived assets may differ from our estimate of fair value. As each of our
operating segments has long-lived assets, this critical accounting policy
affects the financial position and results of operations of each segment.

    In 2003, Starz Entertainment obtained an independent third party valuation
in connection with its annual year-end evaluation of the recoverability of its
goodwill. The result of this valuation, which was based on a discounted cash
flow analysis of projections prepared by the management of Starz Entertainment,
indicated that the fair value of this reporting unit was less than its carrying
value. This reporting unit fair value was then used to calculate an implied
value of the goodwill related to Starz Entertainment. The $1,352 million excess
of the carrying amount of the goodwill (including $1,195 million of allocated
enterprise-level goodwill) over its implied value has been recorded as an
impairment charge in the fourth quarter of 2003. The reduction in the value of
Starz Entertainment reflected in the third party valuation is believed to be
attributable to a number of factors. Those factors include the reliance placed
in that valuation on projections by management reflecting a lower rate of
revenue growth compared to earlier projections based, among other things, on the
possibility that revenue growth may be negatively affected by (1) a reduction in
the rate of growth in total digital video subscribers and in the subscription
video on demand business as a result of cable operators' increased focus on the
marketing and sale of other services, such as high speed Internet access and
telephony, and the uncertainty as to the success of marketing efforts by
distributors of Starz Entertainment's services and (2) lower per subscriber
rates under the new affiliation agreement with Comcast, as compared to the
payments required under the 1997 AT&T Broadband affiliation agreement (including
the programming pass-through provision).

    Due to the slow-down in the movie and television industries in 2002, Ascent
Media recorded a long-lived asset impairment charge of $84 million. In 2002, we
also recorded a $92 million impairment charge related to OpenTV Corp due to
slower than expected growth in the interactive television industry and cutbacks
in capital expenditures by broadband service providers.

    INCOME TAXES.  We are required to estimate the amount of tax payable or
refundable for the current year and the deferred income tax liabilities and
assets for the future tax consequences of events that have been reflected in our
financial statements or tax returns for each taxing jurisdiction in which we
operate. This process requires our management to make judgments regarding the
timing and probability of the ultimate tax impact of the various agreements and
transactions that we enter into. Based on these judgments we may record tax
reserves or adjustments to valuation allowances on deferred tax assets to
reflect the expected realizability of future tax benefits. Actual income taxes
could vary from these estimates due to future changes in income tax law,
significant changes in the jurisdictions in which we operate, our inability to
generate sufficient future taxable income or unpredicted results from the final
determination of each year's liability by taxing authorities. These changes
could have a significant impact on our financial position.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

    We are exposed to market risk in the normal course of business due to our
ongoing investing and financial activities and our subsidiaries in different
foreign countries. Market risk refers to the risk of loss arising from adverse
changes in stock prices, interest rates and foreign currency exchange rates. The
risk of loss can be assessed from the perspective of adverse changes in fair
values, cash flows and future earnings. We have established policies, procedures
and internal processes governing our management of market risks and the use of
financial instruments to manage our exposure to such risks.

    We are exposed to changes in interest rates primarily as a result of our
borrowing and investment activities, which include investments in fixed and
floating rate debt instruments and borrowings used to maintain liquidity and to
fund business operations. The nature and amount of our long-term and short-term
debt are expected to vary as a result of future requirements, market conditions
and other

                                     II-26

factors. We manage our exposure to interest rates by maintaining what we believe
is an appropriate mix of fixed and variable rate debt. We believe this best
protects us from interest rate risk. We have achieved this mix by (i) issuing
fixed rate debt that we believe has a low stated interest rate and significant
term to maturity and (ii) issuing short-term variable rate debt to take
advantage of historically low short-term interest rates. As of December 31,
2004, the face amount of our fixed rate debt (considering the effects of
interest rate swap agreements) was $7,149 million, which had a weighted average
interest rate of 4.7%. Our variable rate debt of $3,736 million had a weighted
average interest rate of 3.9% at December 31, 2004. Had market interest rates
been 100 basis points higher (representing an approximate 26% increase over our
variable rate debt effective cost of borrowing) throughout the year ended
December 31, 2004, we would have recognized approximately $37 million of
additional interest expense. Had the estimated value of the call option
obligations associated with our senior exchangeable debentures been 10% higher
during the year ended December 31, 2004, we would have recognized an additional
unrealized loss on derivative instruments of $110 million. For additional
information regarding the impacts of changes in discount rates and volatilities
on our derivative instruments, see "Critical Accounting Estimates--Accounting
for Derivatives."

    We are exposed to changes in stock prices primarily as a result of our
significant holdings in publicly traded securities. We continually monitor
changes in stock markets, in general, and changes in the stock prices of our
holdings, specifically. We believe that changes in stock prices can be expected
to vary as a result of general market conditions, technological changes,
specific industry changes and other factors. We use equity collars, put spread
collars, narrow-band collars, written put and call options and other financial
instruments to manage market risk associated with certain investment positions.
These instruments are recorded at fair value based on option pricing models.
Equity collars provide us with a put option that gives us the right to require
the counterparty to purchase a specified number of shares of the underlying
security at a specified price (the "Company Put Price") at a specified date in
the future. Equity collars also provide the counterparty with a call option that
gives the counterparty the right to purchase the same securities at a specified
price at a specified date in the future. The put option and the call option
generally have equal fair values at the time of origination resulting in no cash
receipts or payments. Narrow-band collars are equity collars in which the put
and call prices are set so that the call option has a relatively higher fair
value than the put option at the time of origination. In these cases we receive
cash equal to the difference between such fair values.

    Put spread collars provide us and the counterparty with put and call options
similar to equity collars. In addition, put spread collars provide the
counterparty with a put option that gives it the right to require us to purchase
the underlying securities at a price that is lower than the Company Put Price.
The inclusion of the secondary put option allows us to secure a higher call
option price while maintaining net zero cash to enter into the collar. However,
the inclusion of the secondary put exposes us to market risk if the underlying
security trades below the put spread price and may restrict our ability to
borrow against the derivative.

    Among other factors, changes in the market prices of the securities
underlying the AFS Derivatives affect the fair market value of the AFS
Derivatives. The following table illustrates the impact that changes in the
market price of the securities underlying our AFS Derivatives would have on the
fair

                                     II-27

market value of such derivatives. Such changes in fair market value would be
included in realized and unrealized gains (losses) on financial instruments in
our consolidated statement of operations.



                                                                  ESTIMATED AGGREGATE FAIR VALUE
                                                     --------------------------------------------------------
                                                       EQUITY     PUT SPREAD     PUT        CALL
                                                     COLLARS(1)    COLLARS     OPTIONS    OPTIONS     TOTAL
                                                     ----------   ----------   --------   --------   --------
                                                                       AMOUNTS IN MILLIONS
                                                                                      
Fair value at December 31, 2004....................    $1,618         291        (445)      (124)     1,340
5% increase in market prices.......................    $1,418         290        (423)      (141)     1,144
10% increase in market prices......................    $1,218         289        (401)      (158)       948
5% decrease in market prices.......................    $1,816         292        (467)      (108)     1,533
10% decrease in market prices......................    $2,013         292        (489)       (92)     1,724


- ------------------------

(1) Includes narrow-band collars.

    At December 31, 2004, the fair value of our AFS securities was
$21,763 million. Had the market price of such securities been 10% lower at
December 31, 2004, the aggregate value of such securities would have been
$2,176 million lower resulting in a decrease to unrealized gains in other
comprehensive earnings. Such decrease would be partially offset by an increase
in the value of our AFS Derivatives as noted in the table above.

    In connection with certain of our AFS Derivatives, we periodically borrow
shares of the underlying securities from a counterparty and deliver these
borrowed shares in settlement of maturing derivative positions. In these
transactions, a similar number of shares that we own have been posted as
collateral with the counterparty. These share borrowing arrangements can be
terminated at any time at our option by delivering shares to the counterparty.
The counterparty can terminate these arrangements upon the occurrence of certain
events which limit the trading volume of the underlying security. The liability
under these share borrowing arrangements is marked to market each reporting
period with changes in value recorded in unrealized gains or losses in the
consolidated statement of operations. The shares posted as collateral under
these arrangements continue to be treated as AFS securities and are marked to
market each reporting period with changes in value recorded as unrealized gains
or losses in other comprehensive earnings.

    We are exposed to foreign exchange rate fluctuations related primarily to
the monetary assets and liabilities and the financial results of QVC's and
Ascent Media's foreign subsidiaries. Assets and liabilities of foreign
subsidiaries for which the functional currency is the local currency are
translated into U.S. dollars at period-end exchange rates, and the statements of
operations are translated at actual exchange rates when known, or at the average
exchange rate for the period. Exchange rate fluctuations on translating foreign
currency financial statements into U.S. dollars that result in unrealized gains
or losses are referred to as translation adjustments. Cumulative translation
adjustments are recorded in other comprehensive income (loss) as a separate
component of stockholders' equity. Transactions denominated in currencies other
than the functional currency are recorded based on exchange rates at the time
such transactions arise. Subsequent changes in exchange rates result in
transaction gains and losses, which are reflected in income as unrealized (based
on period-end translations) or realized upon settlement of the transactions.
Cash flows from our operations in foreign countries are translated at actual
exchange rates when known, or at the average rate for the period. Accordingly,
we may experience economic loss and a negative impact on earnings and equity
with respect to our holdings solely as a result of foreign currency exchange
rate fluctuations.

    From time to time we enter into total return debt swaps in connection with
our own or third-party public and private indebtedness. We initially post
collateral with the counterparty equal to 10% of the value of the underlying
securities. We earn interest income based upon the face amount and stated
interest rate of the underlying debt securities, and we pay interest expense at
market rates on the

                                     II-28

amount funded by the counterparty. In the event the fair value of the underlying
debt securities declines 10%, we are required to post cash collateral for the
decline, and we record an unrealized loss on financial instruments. The cash
collateral is further adjusted up or down for subsequent changes in fair value
of the underlying debt security. At December 31, 2004, the aggregate purchase
price of debt securities underlying total return debt swap arrangements related
to our senior notes and debentures was $147 million. As of such date, we had
posted cash collateral equal to $15 million. In the event the fair value of the
purchased debt securities were to fall to zero, we would be required to post
additional cash collateral of $132 million. The posting of such collateral and
the related settlement of the agreements would reduce our outstanding debt by an
equal amount.

    We periodically assess the effectiveness of our derivative financial
instruments. With regard to interest rate swaps, we monitor the fair value of
interest rate swaps as well as the effective interest rate the interest rate
swap yields, in comparison to historical interest rate trends. We believe that
any losses incurred with regard to interest rate swaps would be offset by the
effects of interest rate movements on the underlying debt facilities. With
regard to equity collars, we monitor historical market trends relative to values
currently present in the market. We believe that any unrealized losses incurred
with regard to equity collars and swaps would be offset by the effects of fair
value changes on the underlying assets. These measures allow our management to
measure the success of its use of derivative instruments and to determine when
to enter into or exit from derivative instruments.

    Our derivative instruments are executed with counterparties who are well
known major financial institutions with high credit ratings. While we believe
these derivative instruments effectively manage the risks highlighted above,
they are subject to counterparty credit risk. Counterparty credit risk is the
risk that the counterparty is unable to perform under the terms of the
derivative instrument upon settlement of the derivative instrument. To protect
ourselves against credit risk associated with these counterparties we generally:

    - execute our derivative instruments with several different counterparties,
      and

    - execute equity derivative instrument agreements which contain a provision
      that requires the counterparty to post the "in the money" portion of the
      derivative instrument into a cash collateral account for our benefit, if
      the respective counterparty's credit rating for its senior unsecured debt
      were to reach certain levels, generally a rating that is below Standard &
      Poor's rating of A- and/or Moody's rating of A3.

    Due to the importance of these derivative instruments to our risk management
strategy, we actively monitor the creditworthiness of each of these
counterparties. Based on our analysis, we currently consider nonperformance by
any of our counterparties to be unlikely.

    Our counterparty credit risk by financial institution is summarized below:



                                                           AGGREGATE FAIR VALUE OF
                                                          DERIVATIVE INSTRUMENTS AT
COUNTERPARTY                                                  DECEMBER 31, 2004
- ------------                                              -------------------------
                                                             AMOUNTS IN MILLIONS
                                                       
Counterparty A..........................................            $  541
Counterparty B..........................................               506
Counterparty C..........................................               411
Counterparty D..........................................               342
Counterparty E..........................................               308
Other...................................................               320
                                                                    ------
                                                                    $2,428
                                                                    ======


                                     II-29

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    The consolidated financial statements of Liberty Media Corporation are filed
under this Item, beginning on Page II-33. The financial statement schedules
required by Regulation S-X are filed under Item 15 of this Annual Report on
Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE.

    None.

ITEM 9A. CONTROLS AND PROCEDURES.

    In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company carried
out an evaluation, under the supervision and with the participation of
management, including its chief executive officer, principal accounting officer
and principal financial officer (the "Executives"), of the effectiveness of its
disclosure controls and procedures as of the end of the period covered by this
report. Based on that evaluation, the Executives concluded that the Company's
disclosure controls and procedures were effective as of December 31, 2004 to
provide reasonable assurance that information required to be disclosed in its
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.

    See page II-31 for MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING.

    See page II-32 for REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
for our accountant's attestation regarding our internal controls over financial
reporting.

    There has been no change in the Company's internal controls over financial
reporting that occurred during the three months ended December 31, 2004 that has
materially affected, or is reasonably likely to materially affect, its internal
controls over financial reporting.

ITEM 9B. OTHER INFORMATION.

    None.

                                     II-30

                        MANAGEMENT'S REPORT ON INTERNAL
                        CONTROL OVER FINANCIAL REPORTING

    Liberty Media Corporation's management is responsible for establishing and
maintaining adequate internal control over the Company's financial reporting.
The Company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the consolidated financial statements and related
disclosures in accordance with generally accepted accounting principles. The
Company's internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions of the Company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of the consolidated financial statements and related
disclosures in accordance with generally accepted accounting principles;
(3) provide reasonable assurance that receipts and expenditures of the Company
are being made only in accordance with authorizations of management and
directors of the Company; and (4) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the Company's assets that could have a material effect on the consolidated
financial statements and related disclosures.

    Because of inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.

    The Company assessed the design and effectiveness of internal control over
financial reporting as of December 31, 2004. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO") in INTERNAL CONTROL--
INTEGRATED FRAMEWORK.

    Based upon our assessment using the criteria contained in COSO, management
has concluded that, as of December 31, 2004, Liberty Media Corporation's
internal control over financial reporting is effectively designed and operating
effectively.

    Liberty Media Corporation's independent registered public accountants
audited the consolidated financial statements and related disclosures in the
Annual Report on Form 10-K and have issued an audit report on management's
assessment of the Company's internal control over financial reporting. This
report appears on page II-32 of this Annual Report on Form 10-K.

                                     II-31

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Liberty Media Corporation:

    We have audited management's assessment, included in the accompanying
Management's Report on Internal Control over Financial Reporting appearing on
page II-31, that Liberty Media Corporation maintained effective internal control
over financial reporting as of December 31, 2004, based on the criteria
established in INTERNAL CONTROL--INTEGRATED FRAMEWORK issued by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO"). Management of
Liberty Media Corporation is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an
opinion on management's assessment and an opinion on the effectiveness of the
internal control over financial reporting of Liberty Media Corporation based on
our audit.

    We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.

    A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements and related disclosure in accordance with generally accepted
accounting principles; (3) provide reasonable assurance that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (4) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.

    Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

    In our opinion, management's assessment that Liberty Media Corporation
maintained effective internal control over financial reporting as of
December 31, 2004, is fairly stated, in all material respects, based on criteria
established in INTERNAL CONTROL--INTEGRATED FRAMEWORK issued by the COSO. Also,
in our opinion, Liberty Media Corporation maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2004,
based on the criteria established in INTERNAL CONTROL--INTEGRATED FRAMEWORK
issued by COSO.

    We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Liberty Media Corporation and subsidiaries as of December 31, 2004 and
December 31, 2003, and the related consolidated statements of operations,
comprehensive earnings (loss), stockholders' equity, and cash flows for each of
the years in the three-year period ended December 31, 2004, and our report dated
March 14, 2005 expressed an unqualified opinion on those consolidated financial
statements.

KPMG LLP
Denver, Colorado
March 14, 2005

                                     II-32

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Liberty Media Corporation:

    We have audited the accompanying consolidated balance sheets of Liberty
Media Corporation and subsidiaries as of December 31, 2004 and 2003, and the
related consolidated statements of operations, comprehensive earnings (loss),
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2004. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

    We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Liberty
Media Corporation and subsidiaries as of December 31, 2004 and 2003, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2004, in conformity with U.S. generally
accepted accounting principles.

    We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the internal
control over financial reporting of Liberty Media Corporation as of
December 31, 2004, based on the criteria established in INTERNAL
CONTROL--INTEGRATED FRAMEWORK issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO"), and our report dated
March 14, 2005 expressed an unqualified opinion on management's assessment of,
and the effective operation of, internal control over financial reporting.

                                          KPMG LLP

Denver, Colorado
March 14, 2005

                                     II-33

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2004 AND 2003



                                                               2004        2003*
                                                             ---------   ---------
                                                              AMOUNTS IN MILLIONS
                                                                   
Assets
Current assets:
  Cash and cash equivalents................................   $ 1,421      2,974
  Trade and other receivables, net.........................     1,186      1,049
  Inventory, net...........................................       712        588
  Prepaid expenses and program rights......................       579        479
  Derivative instruments (note 7)..........................       827        543
  Other current assets.....................................        63        352
                                                              -------     ------
    Total current assets...................................     4,788      5,985
                                                              -------     ------
Investments in available-for-sale securities and other cost
  investments (note 6).....................................    21,847     19,566
Long-term derivative instruments (note 7)..................     1,601      3,247
Investments in affiliates, accounted for using the equity
  method (note 8)..........................................     3,734      3,613

Property and equipment, at cost............................     2,105      1,869
Accumulated depreciation...................................      (713)      (492)
                                                              -------     ------
                                                                1,392      1,377
                                                              -------     ------

Intangible assets not subject to amortization (note 2):
  Goodwill.................................................     9,073      8,911
  Trademarks...............................................     2,385      2,385
                                                              -------     ------
                                                               11,458     11,296
                                                              -------     ------

Intangible assets subject to amortization, net (note 2)....     4,440      4,821
Other assets, at cost, net of accumulated amortization.....       770        577
Assets of discontinued operations (note 5).................       151      3,743
                                                              -------     ------
    Total assets...........................................   $50,181     54,225
                                                              =======     ======


- ------------------------

*   See note 5.

                                                                     (continued)

                                     II-34

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2004 AND 2003



                                                                2004        2003*
                                                              ---------   ---------
                                                               AMOUNTS IN MILLIONS
                                                                    
Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable..........................................  $    457         402
  Accrued interest payable..................................       143         152
  Other accrued liabilities.................................       694         628
  Accrued stock compensation................................       236         190
  Program rights payable....................................       200         177
  Derivative instruments (note 7)...........................     1,179         854
  Other current liabilities.................................       298         160
                                                              --------    --------
    Total current liabilities...............................     3,207       2,563
                                                              --------    --------
Long-term debt (note 9).....................................     8,566       9,417
Long-term derivative instruments (note 7)...................     1,812       1,756
Deferred income tax liabilities (note 10)...................    10,734      10,678
Other liabilities...........................................       826         377
Liabilities of discontinued operations (note 5).............       151         299
                                                              --------    --------
    Total liabilities.......................................    25,296      25,090
                                                              --------    --------
Minority interests in equity of subsidiaries................       299         293
Stockholders' equity (note 11):
  Preferred stock, $.01 par value. Authorized 50,000,000
    shares; no shares issued................................        --          --
  Series A common stock $.01 par value. Authorized
    4,000,000,000 shares; issued and outstanding
    2,678,895,158 shares at December 31, 2004 and
    2,669,835,166 shares at December 31, 2003...............        27          27
  Series B common stock $.01 par value. Authorized
    400,000,000 shares; issued 131,062,825 shares at
    December 31, 2004 and 217,100,515 shares at
    December 31, 2003.......................................         1           2
  Additional paid-in capital................................    33,765      39,001
  Accumulated other comprehensive earnings, net of taxes
    ("AOCE") (note 15)......................................     4,226       3,246
  AOCE from discontinued operations.........................         1         (45)
  Unearned compensation.....................................       (64)        (98)
  Accumulated deficit.......................................   (13,245)    (13,291)
                                                              --------    --------
                                                                24,711      28,842
  Series B common stock held in treasury, at cost
    (10,000,000 shares at December 31, 2004)................      (125)         --
                                                              --------    --------
    Total stockholders' equity..............................    24,586      28,842
                                                              --------    --------
Commitments and contingencies (note 17)
    Total liabilities and stockholders' equity..............  $ 50,181      54,225
                                                              ========    ========


- ------------------------

*   See note 5.

          See accompanying notes to consolidated financial statements.

                                     II-35

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002



                                                                2004        2003*       2002*
                                                              ---------   ---------   ---------
                                                               AMOUNTS IN MILLIONS, EXCEPT PER
                                                                        SHARE AMOUNTS
                                                                             
Revenue:
  Net sales from electronic retailing.......................   $ 5,687       1,973          --
  Communications and programming services...................     1,995       1,765       1,804
                                                               -------     -------     -------
                                                                 7,682       3,738       1,804
                                                               -------     -------     -------
Operating costs and expenses:
  Cost of sales--electronic retailing services..............     3,594       1,258          --
  Operating.................................................     1,736       1,161         943
  Selling, general and administrative ("SG&A")..............       815         519         458
  Stock compensation--SG&A (note 2).........................       101         (88)        (46)
  Litigation settlement.....................................       (42)         --          --
  Depreciation..............................................       247         195         164
  Amortization..............................................       489         270         178
  Impairment of long-lived assets (note 2)..................        --       1,362         187
                                                               -------     -------     -------
                                                                 6,940       4,677       1,884
                                                               -------     -------     -------
    Operating income (loss).................................       742        (939)        (80)
Other income (expense):
  Interest expense..........................................      (615)       (529)       (410)
  Dividend and interest income..............................       131         164         183
  Share of earnings (losses) of affiliates, net (note 8)....        97          45         (89)
  Realized and unrealized gains (losses) on derivative
    instruments, net (note 7)...............................    (1,284)       (662)      2,139
  Gains (losses) on dispositions, net (notes 6, 8 and 11)...     1,406       1,125        (541)
  Nontemporary declines in fair value of investments (note
    6)......................................................      (129)        (22)     (5,806)
  Other, net................................................       (24)        (55)          1
                                                               -------     -------     -------
                                                                  (418)         66      (4,523)
                                                               -------     -------     -------
    Earnings (loss) from continuing operations before income
      taxes and minority interest...........................       324        (873)     (4,603)
Income tax benefit (expense) (note 10)......................      (158)       (354)      1,512
Minority interests in losses (earnings) of subsidiaries.....        (5)          2          29
                                                               -------     -------     -------
    Earnings (loss) from continuing operations before
      cumulative effect of accounting change................       161      (1,225)     (3,062)
Earnings (loss) from discontinued operations, net of taxes
  (note 5)..................................................      (115)          3        (740)
Cumulative effect of accounting change, net of taxes (note
  2)........................................................        --          --      (1,528)
                                                               -------     -------     -------
    Net earnings (loss).....................................   $    46      (1,222)     (5,330)
                                                               =======     =======     =======
Earnings (loss) per common share (note 2):
  Basic and diluted earnings (loss) from continuing
    operations..............................................   $   .06        (.44)      (1.18)
  Discontinued operations...................................      (.04)         --        (.29)
  Cumulative effect of accounting change, net of taxes......        --          --        (.59)
                                                               -------     -------     -------
  Basic and diluted net earnings (loss).....................   $   .02        (.44)      (2.06)
                                                               =======     =======     =======
Number of common shares outstanding.........................     2,856       2,748       2,590
                                                               =======     =======     =======


- ------------------------

*   See note 5.

          See accompanying notes to consolidated financial statements.

                                     II-36

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

            CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002



                                                                2004      2003*      2002*
                                                              --------   --------   --------
                                                                   AMOUNTS IN MILLIONS
                                                                           
Net earnings (loss).........................................   $   46     (1,222)    (5,330)
                                                               ------    -------    -------
Other comprehensive earnings (loss), net of taxes (note 15):
  Foreign currency translation adjustments..................       30         42         77
  Unrealized holding gains (losses) arising during the
    period..................................................    1,489      3,343     (4,160)
  Recognition of previously unrealized losses (gains) on
    available-for-sale securities, net......................     (488)      (628)     3,598
  Other comprehensive earnings (loss) from discontinued
    operations (note 5).....................................      (61)       218       (129)
                                                               ------    -------    -------
  Other comprehensive earnings (loss).......................      970      2,975       (614)
                                                               ------    -------    -------
Comprehensive earnings (loss)...............................   $1,016      1,753     (5,944)
                                                               ======    =======    =======


- ------------------------

*   See note 5.

          See accompanying notes to consolidated financial statements.

                                     II-37

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002


                                                                                                     AOCE
                                                     COMMON STOCK        ADDITIONAL                  FROM
                                     PREFERRED   ---------------------    PAID-IN                DISCONTINUED     UNEARNED
                                       STOCK     SERIES A    SERIES B     CAPITAL       AOCE      OPERATIONS    COMPENSATION
                                     ---------   ---------   ---------   ----------   --------   ------------   ------------
                                                                       AMOUNTS IN MILLIONS
                                                                                           
Balance at January 1, 2002.........  $    --        24             2       35,996        974         (134)            --
  Net loss.........................       --        --            --           --         --           --             --
  Other comprehensive loss.........       --        --            --           --       (485)        (129)            --
  Issuance of common stock for
    acquisitions...................       --        --            --          195         --           --             --
  Issuance of common stock pursuant
    to rights offering.............       --         1            --          617         --           --             --
  Purchases of Series A common
    stock..........................       --        --            --         (281)        --           --             --
  Series A common stock put
    options, net of cash received
    (note 11)......................       --        --            --          (29)        --           --             --
                                     ---------      --       ---------     ------      -----         ----           ----
Balance at December 31, 2002.......       --        25             2       36,498        489         (263)            --
  Net loss.........................       --        --            --           --         --           --             --
  Other comprehensive earnings.....       --        --            --           --      2,757          218             --
  Issuance of Series A common stock
    for acquisitions...............       --         2            --        2,654         --           --             --
  Issuance of Series A common stock
    for cash.......................       --        --            --          141         --           --             --
  Purchases of Series A common
    stock..........................       --        --            --         (437)        --           --             --
  Issuance of restricted stock.....       --        --            --          102         --           --           (102)
  Amortization of deferred
    compensation...................       --        --            --           --         --           --              4
  Series A common stock put
    options, net of cash received
    (note11).......................       --        --            --           37         --           --             --
  Gain in connection with the
    issuance of stock of a
    subsidiary.....................       --        --            --            6         --           --             --
                                     ---------      --       ---------     ------      -----         ----           ----
Balance at December 31, 2003.......       --        27             2       39,001      3,246          (45)           (98)
  Net earnings.....................       --        --            --           --         --           --             --
  Other comprehensive earnings
    (loss).........................       --        --            --           --      1,031          (61)            --
  Issuance of Series A common stock
    for acquisitions...............       --        --            --          152         --           --             --
  Issuance of Series A common stock
    in exchange for Series B common
    stock (note 11)................       --         1            (1)         125         --           --             --
  Acquisition of Series A common
    stock (note 11)................       --        (1)           --       (1,016)        --           --             --
  Amortization of deferred
    compensation...................       --        --            --           --         --           --             31
  Distribution to stockholders for
    spin off of Liberty Media
    International ("LMI") (note
    5).............................       --        --            --       (4,512)       (51)         107             --
  Stock compensation for Liberty
    options held by LMI employees
    (note 13)......................       --        --            --           (4)        --           --             --
  Stock compensation for LMI
    options held by Liberty
    employees (note 13)............       --        --            --           17         --           --             --
  Cancellation of restricted
    stock..........................       --        --            --           (3)        --           --              3
  Other............................       --        --            --            5         --           --             --
                                     ---------      --       ---------     ------      -----         ----           ----
Balance at December 31, 2004.......  $    --        27             1       33,765      4,226            1            (64)
                                     =========      ==       =========     ======      =====         ====           ====



                                                                  TOTAL
                                     ACCUMULATED   TREASURY   STOCKHOLDERS'
                                       DEFICIT      STOCK        EQUITY
                                     -----------   --------   -------------
                                              AMOUNTS IN MILLIONS
                                                     
Balance at January 1, 2002.........     (6,739)        --         30,123
  Net loss.........................     (5,330)        --         (5,330)
  Other comprehensive loss.........         --         --           (614)
  Issuance of common stock for
    acquisitions...................         --         --            195
  Issuance of common stock pursuant
    to rights offering.............         --         --            618
  Purchases of Series A common
    stock..........................         --         --           (281)
  Series A common stock put
    options, net of cash received
    (note 11)......................         --         --            (29)
                                       -------       ----         ------
Balance at December 31, 2002.......    (12,069)        --         24,682
  Net loss.........................     (1,222)        --         (1,222)
  Other comprehensive earnings.....         --         --          2,975
  Issuance of Series A common stock
    for acquisitions...............         --         --          2,656
  Issuance of Series A common stock
    for cash.......................         --         --            141
  Purchases of Series A common
    stock..........................         --         --           (437)
  Issuance of restricted stock.....         --         --             --
  Amortization of deferred
    compensation...................         --         --              4
  Series A common stock put
    options, net of cash received
    (note11).......................         --         --             37
  Gain in connection with the
    issuance of stock of a
    subsidiary.....................         --         --              6
                                       -------       ----         ------
Balance at December 31, 2003.......    (13,291)        --         28,842
  Net earnings.....................         46         --             46
  Other comprehensive earnings
    (loss).........................         --         --            970
  Issuance of Series A common stock
    for acquisitions...............         --         --            152
  Issuance of Series A common stock
    in exchange for Series B common
    stock (note 11)................         --       (125)            --
  Acquisition of Series A common
    stock (note 11)................         --         --         (1,017)
  Amortization of deferred
    compensation...................         --         --             31
  Distribution to stockholders for
    spin off of Liberty Media
    International ("LMI") (note
    5).............................         --         --         (4,456)
  Stock compensation for Liberty
    options held by LMI employees
    (note 13)......................         --         --             (4)
  Stock compensation for LMI
    options held by Liberty
    employees (note 13)............         --         --             17
  Cancellation of restricted
    stock..........................         --         --             --
  Other............................         --         --              5
                                       -------       ----         ------
Balance at December 31, 2004.......    (13,245)      (125)        24,586
                                       =======       ====         ======


          See accompanying notes to consolidated financial statements.

                                     II-38

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002



                                                                2004      2003*      2002*
                                                              --------   --------   --------
                                                                   AMOUNTS IN MILLIONS
                                                                       (SEE NOTE 3)
                                                                           
Cash flows from operating activities:
  Earnings (loss) from continuing operations................  $   161     (1,225)    (4,590)
  Adjustments to reconcile earnings (loss) from continuing
    operations to net cash provided (used) by operating
    activities:
    Cumulative effect of accounting change, net of taxes....       --         --      1,528
    Depreciation and amortization...........................      736        465        342
    Impairment of long-lived assets.........................       --      1,362        187
    Stock compensation......................................      101        (88)       (46)
    Payments of stock compensation..........................      (10)      (360)      (117)
    Noncash interest expense................................       96         76         14
    Share of losses (earnings) of affiliates, net...........      (97)       (45)        89
    Nontemporary decline in fair value of investments.......      129         22      5,806
    Realized and unrealized losses (gains) on derivative
     instruments, net.......................................    1,284        662     (2,139)
    Losses (gains) on disposition of assets, net............   (1,406)    (1,125)       541
    Minority interests in earnings (losses) of
     subsidiaries...........................................        5         (2)       (29)
    Deferred income tax expense (benefit)...................     (197)       279     (1,519)
    Other noncash charges...................................       20         63         25
    Changes in operating assets and liabilities, net of the
     effect of acquisitions and dispositions:
      Receivables...........................................      (87)      (180)       (34)
      Inventory.............................................     (124)       (14)        --
      Prepaid expenses and other current assets.............     (351)      (152)       (85)
      Payables and other current liabilities................      657        179         13
                                                              -------     ------     ------
        Net cash provided (used) by operating activities....      917        (83)       (14)
                                                              -------     ------     ------
  Cash flows from investing activities:
  Cash proceeds from dispositions...........................      483      2,449      1,033
  Premium proceeds from origination of derivatives..........      193        763        521
  Net proceeds from settlement of derivatives...............      322      1,172        410
  Investments in and loans to equity affiliates.............      (30)       (48)       (65)
  Investments in and loans to cost investees................     (930)    (2,509)      (228)
  Cash paid for acquisitions, net of cash acquired..........     (137)      (711)       (44)
  Capital expended for property and equipment...............     (226)      (177)      (147)
  Net sales of short term investments.......................      272         95        148
  Repayments of notes receivable from LMI...................      117         --         --
  Other investing activities, net...........................      (14)         9         14
                                                              -------     ------     ------
    Net cash provided by investing activities...............       50      1,043      1,642
                                                              -------     ------     ------
Cash flows from financing activities:
  Borrowings of debt........................................       --      4,155        179
  Repayments of debt........................................   (1,006)    (3,480)      (772)
  Purchases of Liberty Series A common stock................     (547)      (437)      (281)
  Repurchases of subsidiary common stock....................     (171)        --         --
  Proceeds from issuance of common stock....................       --        141        618
  Other financing activities, net...........................       37        (42)        (2)
                                                              -------     ------     ------
    Net cash provided (used) by financing activities........   (1,687)       337       (258)
                                                              -------     ------     ------
    Net cash used by discontinued operations................     (833)      (485)    (1,272)
                                                              -------     ------     ------
        Net increase (decrease) in cash and cash
        equivalents.........................................   (1,553)       812         98
        Cash and cash equivalents at beginning of year......    2,974      2,162      2,064
                                                              -------     ------     ------
        Cash and cash equivalents at end of year............  $ 1,421      2,974      2,162
                                                              =======     ======     ======


- ------------------------------

*   See note 5.

          See accompanying notes to consolidated financial statements.

                                     II-39

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 2004, 2003 AND 2002

(1) BASIS OF PRESENTATION

    The accompanying consolidated financial statements include the accounts of
Liberty Media Corporation and its controlled subsidiaries ("Liberty" or the
"Company," unless the context otherwise requires). All significant intercompany
accounts and transactions have been eliminated in consolidation.

    Liberty is a holding company which, through its controlling and
noncontrolling ownership of interests in subsidiaries and other companies, is
primarily engaged in the electronic retailing, media, communications and
entertainment industries in the United States, Europe and Asia. In addition,
companies in which Liberty owns interests are engaged in, among other things,
(i) interactive commerce via the Internet, television and telephone,
(ii) domestic cable and satellite broadband services, and (iii) telephony and
other technology ventures. Prior to the June 7, 2004 spin off of Liberty Media
International, Inc., Liberty was also engaged in international broadband
distribution of video, voice and data services. See note 5.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    CASH AND CASH EQUIVALENTS

    Cash equivalents consist of investments which are readily convertible into
cash and have maturities of three months or less at the time of acquisition.

    RECEIVABLES

    Receivables are reflected net of an allowance for doubtful accounts. Such
allowance aggregated $77 million and $91 million at December 31, 2004 and 2003,
respectively. A summary of activity in the allowance for doubtful accounts is as
follows:



                                                                ADDITIONS
                                             BALANCE    -------------------------                  BALANCE
                                            BEGINNING    CHARGED                    DEDUCTIONS--    END OF
                                             OF YEAR    TO EXPENSE   ACQUISITIONS    WRITE-OFFS      YEAR
                                            ---------   ----------   ------------   ------------   --------
                                                                  AMOUNTS IN MILLIONS
                                                                                    
2004......................................     $91          21            --            (35)          77
                                               ===          ==            ==            ===           ==
2003......................................     $27          18            62            (16)          91
                                               ===          ==            ==            ===           ==
2002......................................     $18          17             1             (9)          27
                                               ===          ==            ==            ===           ==


    INVENTORY

    Inventory, consisting primarily of products held for sale, is stated at the
lower of cost or market. Cost is determined by the average cost method, which
approximates the first-in, first-out method.

                                     II-40

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    A summary of activity in the inventory obsolescence account is as follows:



                                                                ADDITIONS
                                             BALANCE    -------------------------                  BALANCE
                                            BEGINNING    CHARGED                    DEDUCTIONS--    END OF
                                             OF YEAR    TO EXPENSE   ACQUISITIONS    WRITE-OFFS      YEAR
                                            ---------   ----------   ------------   ------------   --------
                                                                  AMOUNTS IN MILLIONS
                                                                                    
2004......................................     $93          54            --            (59)          88
                                               ===          ==            ==            ===           ==
2003......................................     $--          19            93            (19)          93
                                               ===          ==            ==            ===           ==


    PROGRAM RIGHTS

    Prepaid program rights are amortized on a film-by-film basis over the
anticipated number of exhibitions. Committed program rights and program rights
payable are recorded at the estimated cost of the programs when the film is
available for airing less prepayments. These amounts are amortized on a
film-by-film basis over the anticipated number of exhibitions.

    INVESTMENTS

    All marketable equity and debt securities held by the Company are classified
as available-for-sale and are carried at fair value ("AFS Securities").
Unrealized holding gains and losses on AFS Securities are carried net of taxes
as a component of accumulated other comprehensive earnings in stockholders'
equity. Realized gains and losses are determined on an average cost basis. Other
investments in which the Company's ownership interest is less than 20% and are
not considered marketable securities are carried at cost.

    For those investments in affiliates in which the Company has the ability to
exercise significant influence, the equity method of accounting is used. Under
this method, the investment, originally recorded at cost, is adjusted to
recognize the Company's share of net earnings or losses of the affiliates as
they occur rather then as dividends or other distributions are received, limited
to the extent of the Company's investment in, advances to and commitments for
the investee. The Company's share of net earnings or loss of affiliates also
includes any other-than-temporary declines in fair value recognized during the
period.

    Changes in the Company's proportionate share of the underlying equity of a
subsidiary or equity method investee, which result from the issuance of
additional equity securities by such subsidiary or equity investee, are
recognized as increases or decreases in stockholders' equity.

    The Company continually reviews its investments to determine whether a
decline in fair value below the cost basis is other than temporary
("nontemporary"). The primary factors the Company considers in its determination
are the length of time that the fair value of the investment is below the
Company's carrying value; and the financial condition, operating performance and
near term prospects of the investee. In addition, the Company considers the
reason for the decline in fair value, be it general market conditions, industry
specific or investee specific; analysts' ratings and estimates of 12 month share
price targets for the investee; changes in stock price or valuation subsequent
to the balance sheet date; and the Company's intent and ability to hold the
investment for a period of time sufficient to allow for a recovery in fair
value. If the decline in fair value is deemed to be nontemporary, the cost basis
of the security is written down to fair value. In situations where the fair
value of an investment is not evident due to a lack of a public market price or
other factors, the

                                     II-41

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

Company uses its best estimates and assumptions to arrive at the estimated fair
value of such investment. The Company's assessment of the foregoing factors
involves a high degree of judgment and accordingly, actual results may differ
materially from the Company's estimates and judgments. Writedowns for cost
investments and AFS Securities are included in the consolidated statements of
operations as nontemporary declines in fair values of investments. Writedowns
for equity method investments are included in share of earnings (losses) of
affiliates.

    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

    The Company uses various derivative instruments including equity collars,
narrow-band collars, put spread collars, written put and call options, bond
swaps and interest rate swaps to manage fair value and cash flow risk associated
with many of its investments and some of its variable rate debt. Liberty's
derivative instruments are executed with counterparties who are well known major
financial institutions. While Liberty believes these derivative instruments
effectively manage the risks highlighted above, they are subject to counterparty
credit risk. Counterparty credit risk is the risk that the counterparty is
unable to perform under the terms of the derivative instrument upon settlement
of the derivative instrument. To protect itself against credit risk associated
with these counterparties the Company generally:

    - executes its derivative instruments with several different counterparties,
      and

    - executes equity derivative instrument agreements which contain a provision
      that requires the counterparty to post the "in the money" portion of the
      derivative instrument into a cash collateral account for the Company's
      benefit, if the respective counterparty's credit rating for its senior
      unsecured debt were to reach certain levels, generally a rating that is
      below Standard & Poor's rating of A- and/or Moody's rating of A3.

    Due to the importance of these derivative instruments to its risk management
strategy, Liberty actively monitors the creditworthiness of each of its
counterparties. Based on its analysis, the Company currently considers
nonperformance by any of its counterparties to be unlikely.

    Liberty accounts for its derivatives pursuant to Statement of Financial
Accounting Standards No. 133 "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES" ("Statement 133"). All derivatives, whether designated in hedging
relationships or not, are recorded on the balance sheet at fair value. If the
derivative is designated as a fair value hedge, the changes in the fair value of
the derivative and of the hedged item attributable to the hedged risk are
recognized in earnings. If the derivative is not designated as a hedge, changes
in the fair value of the derivative are recognized in earnings.

    During 2002, the only derivative instruments designated as hedges were the
Company's equity collars, which were designated as fair value hedges. Effective
December 31, 2002, the Company elected to dedesignate its equity collars as fair
value hedges. Such election had no effect on the Company's financial position at
December 31, 2002 or its results of operations for the year ended December 31,
2002. Subsequent to December 31, 2002, changes in the fair value of the
Company's AFS Securities that previously had been reported in earnings due to
the designation of equity collars as fair value hedges are reported as a
component of other comprehensive earnings (loss) on the Company's consolidated
balance sheet. Changes in the fair value of the equity collars continue to be
reported in earnings.

                                     II-42

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    The fair value of derivative instruments is estimated using third party
estimates or the Black-Scholes model. The Black-Scholes model incorporates a
number of variables in determining such fair values, including expected
volatility of the underlying security and an appropriate discount rate. The
Company obtains volatility rates from independent sources based on the expected
volatility of the underlying security over the term of the derivative
instrument. The volatility assumption is evaluated annually to determine if it
should be adjusted, or more often if there are indications that it should be
adjusted. A discount rate is obtained at the inception of the derivative
instrument and updated each reporting period based on the Company's estimate of
the discount rate at which it could currently settle the derivative instrument.
Considerable management judgment is required in estimating the Black-Scholes
variables. Actual results upon settlement or unwinding of derivative instruments
may differ materially from these estimates.

    PROPERTY AND EQUIPMENT

    Property and equipment, including significant improvements, is stated at
cost. Depreciation is computed using the straight-line method using estimated
useful lives of 3 to 20 years for support equipment and 10 to 40 years for
buildings and improvements.

    INTANGIBLE ASSETS

    ADOPTION OF STATEMENT NO. 142

    Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS ("Statement
142"). Statement 142 requires that goodwill and other intangible assets with
indefinite useful lives (collectively, "indefinite lived intangible assets") no
longer be amortized, but instead be tested for impairment at least annually in
accordance with the provisions of Statement 142. Equity method goodwill is also
no longer amortized, but continues to be considered for impairment under
Accounting Principles Board Opinion No. 18. Statement 142 also requires that
intangible assets with estimable useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with Statement of Financial Accounting Standards
No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
("Statement 144").

    Statement 142 required the Company to perform an assessment of whether there
was an indication that goodwill was impaired as of the date of adoption. To
accomplish this, the Company identified its reporting units and determined the
carrying value of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of the date of adoption. Statement 142 requires the Company to consider
equity method affiliates as separate reporting units. As a result, a portion of
the Company's enterprise-level goodwill balance was allocated to various
reporting units which included a single equity method investment as its only
asset. For example, goodwill was allocated to a separate reporting unit which
included only the Company's investment in Discovery Communications, Inc. This
allocation is performed for goodwill impairment testing purposes only and does
not change the reported carrying value of the investment. However, to the extent
that all or a portion of an equity method investment which is part of a
reporting unit containing allocated goodwill is disposed of in the future, the
allocated portion of goodwill will be relieved and included in the calculation
of the gain or loss on disposal.

    The Company determined the fair value of its reporting units using
independent appraisals, public trading prices and other means. The Company then
compared the fair value of each reporting unit to

                                     II-43

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

the reporting unit's carrying amount. To the extent a reporting unit's carrying
amount exceeded its fair value, the Company performed the second step of the
transitional impairment test. In the second step, the Company compared the
implied fair value of the reporting unit's goodwill, determined by allocating
the reporting unit's fair value to all of its assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price
allocation, to its carrying amount, both of which were measured as of the date
of adoption.

    In situations where the implied fair value of a reporting unit's goodwill
was less than its carrying value, Liberty recorded a transition impairment
charge. The Company recognized a $1,528 million transitional impairment loss,
net of taxes of $24 million, as the cumulative effect of a change in accounting
principle in 2002. The foregoing transitional impairment loss includes an
adjustment of $61 million for the Company's proportionate share of transition
adjustments that its equity method affiliates recorded.

    GOODWILL

    Changes in the carrying amount of goodwill for the year ended December 31,
2004 are as follows:



                                                         STARZ
                                                     ENTERTAINMENT
                                        QVC, INC.      GROUP LLC     OTHER(3)    TOTAL
                                        ----------   -------------   --------   --------
                                                      AMOUNTS IN MILLIONS
                                                                    
Balance at December 31, 2003..........    $3,889         1,383        3,639      8,911
  Acquisitions(1).....................        39            --           23         62
  Other(2)............................       120            --          (20)       100
                                          ------         -----        -----      -----
Balance at December 31, 2004..........    $4,048         1,383        3,642      9,073
                                          ======         =====        =====      =====


- ------------------------

(1) During the year ended December 31, 2004, subsidiaries of Liberty completed
    several small acquisitions and the buyout of minority partners for aggregate
    cash consideration of $137 million. In connection with these acquisitions,
    Liberty recorded additional goodwill of $62 million, which represents the
    excess of the purchase price over the estimated fair value of tangible and
    identifiable intangible assets acquired.

(2) Other activity for QVC, Inc. ("QVC") relates primarily to the repurchase of
    QVC stock held by employees of QVC. The differences between the carrying
    value of the minority interest acquired and the purchase price is recorded
    as goodwill.

(3) As noted above, the Company's enterprise-level goodwill of $3,148 million is
    allocable to reporting units, whether they are consolidated subsidiaries or
    equity method investments. Total enterprise-

                                     II-44

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    level goodwill at December 31, 2004, which is included in Other, is
    allocated as follows (amounts in millions).



                                                              ALLOCABLE
ENTITY                                                        GOODWILL
- ------                                                        ---------
                                                           
Discovery Communications, Inc. ("Discovery")................   $1,771
QVC.........................................................    1,220
Courtroom Television Network, LLC ("Court TV")..............      124
GSN, LLC ("GSN")............................................       17
Other.......................................................       16
                                                               ------
                                                               $3,148
                                                               ======


    Starz Entertainment Group LLC ("Starz Entertainment") obtained an
independent third party valuation in connection with its 2003 annual year-end
evaluation of the recoverability of its goodwill. The result of this valuation,
which was based on a discounted cash flow analysis of projections prepared by
the management of Starz Entertainment, indicated that the fair value of this
reporting unit was less than its carrying value. This reporting unit fair value
was then used to calculate an implied value of the goodwill (including
$1,195 million of allocated enterprise-level goodwill) related to Starz
Entertainment. The $1,352 million excess of the carrying amount of the goodwill
over its implied value was recorded as an impairment charge in the fourth
quarter of 2003. The reduction in the value of Starz Entertainment reflected in
the third party valuation is believed to be attributable to a number of factors.
Those factors include the reliance placed in that valuation on projections by
management reflecting a lower rate of revenue growth compared to earlier
projections based, among other things, on the possibility that revenue growth
may be negatively affected by (1) a reduction in the rate of growth in total
digital video subscribers and in the subscription video on demand business as a
result of cable operators' increased focus on the marketing and sale of other
services, such as high speed Internet access and telephony, and the uncertainty
as to the success of marketing efforts by distributors of Starz Entertainment's
services and (2) lower per subscriber rates under a new affiliation agreement
with Comcast.

    In August 2002, Liberty purchased 38% of the common equity and 85% of the
voting power of OpenTV Corp. ("OpenTV"), which when combined with Liberty's
previous ownership interest in OpenTV, brought Liberty's total ownership to 41%
of the equity and 86% of the voting power of OpenTV. During the period between
the execution of the purchase agreement in May 2002 and the consummation of the
acquisition in August 2002, OpenTV disclosed that it was lowering its revenue
and cash flow projections for 2002 and extending the time before it would be
cash flow positive. As a result, OpenTV wrote off all of its separately recorded
goodwill. In light of the announcement by OpenTV and the adverse impact on its
stock price, as well as other negative factors arising in its industry sector,
Liberty determined that the goodwill initially recorded in purchase accounting
($92 million) was not recoverable. This assessment is supported by an appraisal
performed by an independent third party. Accordingly, Liberty recorded an
impairment charge for the entire amount of the goodwill during the third quarter
of 2002. In addition to the goodwill impairment related to OpenTV, the Company
recorded 2002 impairments of $84 million related to Ascent Media and
$11 million related to other consolidated subsidiaries.

                                     II-45

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    INTANGIBLE ASSETS SUBJECT TO AMORTIZATION

    Intangible assets subject to amortization are comprised of the following:



                                                     DECEMBER 31, 2004                    DECEMBER 31, 2003
                                             ----------------------------------   ----------------------------------
                                              GROSS                      NET       GROSS                      NET
                                             CARRYING   ACCUMULATED    CARRYING   CARRYING   ACCUMULATED    CARRYING
                                              AMOUNT    AMORTIZATION    AMOUNT     AMOUNT    AMORTIZATION    AMOUNT
                                             --------   ------------   --------   --------   ------------   --------
                                                                       AMOUNTS IN MILLIONS
                                                                                          
Distribution rights........................   $2,618          (589)     2,029      2,580          (375)      2,205
Customer relationships.....................    2,347          (224)     2,123      2,336           (56)      2,280
Other......................................      636          (348)       288        591          (255)        336
                                              ------        ------      -----      -----          ----       -----
Total......................................   $5,601        (1,161)     4,440      5,507          (686)      4,821
                                              ======        ======      =====      =====          ====       =====


    Amortization of intangible assets with finite useful lives was
$489 million, $270 million and $178 million for the years ended December 31,
2004, 2003 and 2002, respectively. Based on its current amortizable intangible
assets, Liberty expects that amortization expense will be as follows for the
next five years (amounts in millions):

                                                           
2005........................................................    $469
2006........................................................    $434
2007........................................................    $390
2008........................................................    $358
2009........................................................    $337



    IMPAIRMENT OF LONG-LIVED ASSETS

    Statement 144 requires that the Company periodically review the carrying
amounts of its property and equipment and its intangible assets (other than
goodwill) to determine whether current events or circumstances indicate that
such carrying amounts may not be recoverable. If the carrying amount of the
asset is greater than the expected undiscounted cash flows to be generated by
such asset, an impairment adjustment is to be recognized. Such adjustment is
measured by the amount that the carrying value of such assets exceeds their fair
value. The Company generally measures fair value by considering sale prices for
similar assets or by discounting estimated future cash flows using an
appropriate discount rate. Considerable management judgment is necessary to
estimate the fair value of assets. Accordingly, actual results could vary
significantly from such estimates. Assets to be disposed of are carried at the
lower of their financial statement carrying amount or fair value less costs to
sell.

    MINORITY INTERESTS

    Recognition of minority interests' share of losses of subsidiaries is
generally limited to the amount of such minority interests' allocable portion of
the common equity of those subsidiaries. Further, the minority interests' share
of losses is not recognized if the minority holders of common equity of
subsidiaries have the right to cause the Company to repurchase such holders'
common equity.

    FOREIGN CURRENCY TRANSLATION

    The functional currency of the Company is the United States ("U.S.") dollar.
The functional currency of the Company's foreign operations generally is the
applicable local currency for each foreign

                                     II-46

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

subsidiary and foreign equity method investee. Assets and liabilities of foreign
subsidiaries and foreign equity investees are translated at the spot rate in
effect at the applicable reporting date, and the consolidated statements of
operations and the Company's share of the results of operations of its foreign
equity affiliates are translated at the average exchange rates in effect during
the applicable period. The resulting unrealized cumulative translation
adjustment, net of applicable income taxes, is recorded as a component of
accumulated other comprehensive earnings in stockholders' equity.

    Transactions denominated in currencies other than the functional currency
are recorded based on exchange rates at the time such transactions arise.
Subsequent changes in exchange rates result in transaction gains and losses
which are reflected in the accompanying consolidated statements of operations
and comprehensive earnings as unrealized (based on the applicable period-end
exchange rate) or realized upon settlement of the transactions.

    REVENUE RECOGNITION

    Revenue is recognized as follows:

    - Revenue from electronic retail sales is recognized at the time of shipment
      to customers. An allowance for returned merchandise is provided as a
      percentage of sales based on historical experience. The total reduction in
      sales due to returns for the year ended December 31, 2004 and the
      four months ended December 31, 2003 aggregated $1,089 million and
      $340 million, respectively.

    - Programming revenue is recognized in the period during which programming
      is provided, pursuant to affiliation agreements.

    - Revenue from post-production services is recognized in the period the
      services are rendered.

    - Revenue from sales and licensing of software and related service and
      maintenance is recognized pursuant to Statement of Position No. 97-2
      "SOFTWARE REVENUE RECOGNITION." For multiple element contracts with vendor
      specific objective evidence, the Company recognizes revenue for each
      specific element when the earnings process is complete. If vendor specific
      objective evidence does not exist, revenue is deferred and recognized on a
      straight-line basis over the term of the maintenance period.

    - Distribution revenue is recognized in the period that services are
      rendered.

    COST OF SALES--ELECTRONIC RETAILING

    Cost of sales primarily includes actual product cost, provision for obsolete
inventory, buying allowances received from suppliers, shipping and handling
costs and warehouse costs.

    ADVERTISING COSTS

    Advertising costs generally are expensed as incurred. Advertising expense
aggregated $53 million, $22 million and $40 million for the years ended
December 31, 2004, 2003 and 2002, respectively. Co-operative marketing costs are
recognized as advertising expense to the extent an identifiable benefit is
received and fair value of the benefit can be reasonably measured. Otherwise,
such costs are recorded as a reduction of revenue.

                                     II-47

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    STOCK BASED COMPENSATION

    As more fully described in note 13, the Company has granted to its employees
options, stock appreciation rights ("SARs") and options with tandem SARs to
purchase shares of Liberty Series A and Series B common stock. The Company
accounts for these grants pursuant to the recognition and measurement provisions
of Accounting Principles Board Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES" ("APB Opinion No. 25"). Under these provisions, options are accounted
for as fixed plan awards and no compensation expense is recognized because the
exercise price is equal to the market price of the underlying common stock on
the date of grant; whereas options with tandem SARs are accounted for as
variable plan awards unless there is a significant disincentive for employees to
exercise the SAR feature. Compensation for variable plan awards is recognized
based upon the percentage of the options that are vested and the difference
between the market price of the underlying common stock and the exercise price
of the options at the balance sheet date. The following table illustrates the
effect on net income and earnings per share if the Company had applied the fair
value recognition provisions of Statement of Financial Accounting Standards
No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION," ("Statement 123") to its
options. Compensation expense for SARs and options with tandem SARs is the same
under APB Opinion No. 25 and Statement 123. Accordingly, no pro forma adjustment
for such awards is included in the following table.



                                                           YEARS ENDED DECEMBER 31,
                                                        ------------------------------
                                                          2004       2003       2002
                                                        --------   --------   --------
                                                             AMOUNTS IN MILLIONS,
                                                           EXCEPT PER SHARE AMOUNTS
                                                                     
Earnings (loss) from continuing operations............    $161      (1,225)    (3,062)
  Add stock compensation as determined under the
    intrinsic value method, net of taxes..............       4           5         --
  Deduct stock compensation as determined under the
    fair value method, net of taxes...................     (51)        (55)       (78)
                                                          ----      ------     ------
Pro forma earnings (loss) from continuing
  operations..........................................    $114      (1,275)    (3,140)
                                                          ====      ======     ======
Basic and diluted earnings (loss) from continuing
  operations per share:
  As reported.........................................    $.06        (.44)     (1.18)
  Pro forma...........................................    $.04        (.46)     (1.21)


    Agreements that require Liberty to reacquire interests in subsidiaries held
by officers and employees in the future are marked-to-market at the end of each
reporting period with corresponding adjustments being recorded to stock
compensation expense.

    EARNINGS (LOSS) PER COMMON SHARE

    Basic earnings (loss) per common share ("EPS") is computed by dividing net
earnings (loss) by the weighted average number of common shares outstanding for
the period. Diluted EPS presents the dilutive effect on a per share basis of
potential common shares as if they had been converted at the beginning of the
periods presented. The basic EPS calculation is based on 2,856 million weighted
average shares outstanding for the year ended December 31, 2004. The diluted EPS
calculation for 2004 includes 14 million potential common shares. However, due
to the relative insignificance of these dilutive securities, their inclusion
does not impact the EPS amount as reported in the accompanying

                                     II-48

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

consolidated statement of operations. Excluded from diluted earnings per share
for the years ended December 31, 2004, 2003 and 2002, are 72 million,
84 million and 78 million potential common shares because their inclusion would
be anti-dilutive.

    RECLASSIFICATIONS

    Certain prior period amounts have been reclassified for comparability with
the 2004 presentation.

    ESTIMATES

    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. Liberty considers (i) the estimate of the
fair value of its long-lived assets (including goodwill) and any resulting
impairment charges, (ii) its accounting for income taxes, (iii) the fair value
of its derivative instruments and (iv) its assessment of nontemporary declines
in value of its investments to be its most significant estimates.

    Liberty holds a significant number of investments that are accounted for
using the equity method. Liberty does not control the decision making process or
business management practices of these affiliates. Accordingly, Liberty relies
on management of these affiliates to provide it with accurate financial
information prepared in accordance with GAAP that Liberty uses in the
application of the equity method. In addition, Liberty relies on audit reports
that are provided by the affiliates' independent auditors on the financial
statements of such affiliates. The Company is not aware, however, of any errors
in or possible misstatements of the financial information provided by its equity
affiliates that would have a material effect on Liberty's consolidated financial
statements.

    RECENT ACCOUNTING PRONOUNCEMENTS

    In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (revised 2004), "SHARE-BASED PAYMENTS"
("Statement 123R"). Statement 123R, which is a revision of Statement 123 and
supersedes APB Opinion No. 25, establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services, primarily focusing on transactions in which an entity obtains employee
services. Statement 123R generally requires companies to measure the cost of
employee services received in exchange for an award of equity instruments (such
as stock options and restricted stock) based on the grant-date fair value of the
award, and to recognize that cost over the period during which the employee is
required to provide service (usually the vesting period of the award). Statement
123R also requires companies to measure the cost of employee services received
in exchange for an award of liability instruments (such as stock appreciation
rights) based on the current fair value of the award, and to remeasure the fair
value of the award at each reporting date.

    Public companies, such as Liberty, are required to adopt Statement 123R as
of the beginning of the first interim period that begins after June 15, 2005.
The provisions of Statement 123R will affect the accounting for all awards
granted, modified, repurchased or cancelled after July 1, 2005. The accounting
for awards granted, but not vested, prior to July 1, 2005 will also be impacted.
The provisions of Statement 123R allow companies to adopt the standard on a
prospective basis or to restate all periods for which Statement 123 was
effective. Liberty expects to adopt Statement 123R on a

                                     II-49

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

prospective basis, and will include in its financial statements for periods that
begin after June 15, 2005 pro forma information as though the standard had been
adopted for all periods presented.

    While Liberty has not yet quantified the impact of adopting Statement 123R,
it believes that such adoption could have a significant impact on its operating
income and net earnings in the future.

(3) SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                  YEARS ENDED
                                                                  DECEMBER 31,
                                                         ------------------------------
                                                           2004       2003       2002
                                                         --------   --------   --------
                                                              AMOUNTS IN MILLIONS
                                                                      
Cash paid for acquisitions:
  Fair value of assets acquired........................    $146       9,996       424
  Net liabilities assumed..............................     (19)       (968)      (57)
  Long-term debt issued................................      --      (4,000)       --
  Deferred tax liability...............................      --      (1,612)      (14)
  Minority interest....................................      10         (49)     (114)
  Common stock issued..................................      --      (2,656)     (195)
                                                           ----      ------      ----
    Cash paid for acquisitions, net of cash acquired...    $137         711        44
                                                           ====      ======      ====
Cash paid for interest.................................    $515         425       398
                                                           ====      ======      ====
Cash paid for income taxes.............................    $ 51          57        --
                                                           ====      ======      ====


(4) ACQUISITION OF CONTROLLING INTEREST IN QVC, INC.

    On September 17, 2003, Liberty completed its acquisition of Comcast
Corporation's ("Comcast") approximate 56.5% ownership interest in QVC for an
aggregate purchase price of approximately $7.9 billion. QVC markets and sells a
wide variety of consumer products in the U.S. and several foreign countries
primarily by means of televised shopping programs on the QVC networks and via
the Internet through its domestic and international websites. Prior to the
closing, Liberty owned approximately 41.7% of QVC. Subsequent to the closing,
Liberty owned approximately 98% of QVC's outstanding shares, and the remaining
shares of QVC are held by members of the QVC management team.

    Liberty's purchase price for QVC was comprised of 217.7 million shares of
Liberty's Series A common stock valued, for accounting purposes, at
$2,555 million, Floating Rate Senior Notes due 2006 in an aggregate principal
amount of $4,000 million (the "Floating Rate Notes") and approximately
$1,358 million in cash (including acquisition costs). The foregoing value of the
Series A common stock issued was based on the average closing price for such
stock for the five days surrounding July 3, 2003, which was the date that
Liberty announced that it had reached an agreement with Comcast to acquire
Comcast's interest in QVC. Substantially all of the cash component of the
purchase price was funded with the proceeds from the Company's issuance of its
3.50% Senior Notes due 2006 in the aggregate principal amount of $1.35 billion.

    Subsequent to the closing, QVC is a consolidated subsidiary of Liberty. For
financial reporting purposes, the acquisition is deemed to have occurred on
September 1, 2003, and since that date QVC's results of operations have been
consolidated with Liberty's. Prior to its acquisition of Comcast's

                                     II-50

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

interest, Liberty accounted for its investment in QVC using the equity method of
accounting. Liberty has recorded the acquisition of QVC as a step acquisition,
and accordingly, QVC's assets and liabilities have been recorded at amounts
equal to (1) 56.5% of estimated fair value at the date of acquisition plus
(2) 43.5% of historical cost. The $2,048 million excess of the purchase price
over the estimated fair value of 56.5% of QVC's assets and liabilities combined
with Liberty's historical equity method goodwill of $1,848 million has been
recorded as goodwill in the accompanying consolidated balance sheet. The excess
of the purchase price for Comcast's interest in QVC over the estimated fair
value of QVC's assets and liabilities is attributable to the following:
(i) QVC's position as a market leader in its industry, (ii) QVC's ability to
generate significant cash from operations and Liberty's ability to obtain access
to such cash, and (iii) QVC's perceived significant international growth
opportunities.

    Liberty's total investment in QVC of $10,717 million is comprised of
$2,804 million attributable to its historical equity method investment and
$7,913 million representing the purchase price for Comcast's interest. This
total investment has been allocated based on a third party appraisal to QVC's
assets and liabilities as follows (amounts in millions):

                                                           
Current assets, including cash and cash equivalents of
  $632 million..............................................  $ 1,764
Property and equipment......................................      631
Intangible assets subject to amortization:
  Customer relationships(1).................................    2,336
  Cable and satellite television distribution rights(1).....    2,022
Intangible assets not subject to amortization:
  Trademarks................................................    2,385
  Goodwill..................................................    3,896
Other assets................................................      269
Liabilities.................................................     (888)
Minority interest...........................................     (101)
Deferred income taxes.......................................   (1,597)
                                                              -------
                                                              $10,717
                                                              =======



- ------------------------

(1) Customer relationships are being amortized over 10-14 years. Cable and
    satellite television distribution rights are being amortized primarily over
    14 years.

    The following unaudited pro forma information for Liberty and its
consolidated subsidiaries for the year ended December 31, 2003 was prepared
assuming the acquisition of QVC occurred on January 1, 2003. These pro forma
amounts are not necessarily indicative of operating results that would have
occurred if the QVC acquisition had occurred on January 1, 2003 (amounts
in millions, except per share amounts)

                                                           
Revenue.....................................................  $ 6,653
Loss from continuing operations.............................  $(1,178)
Net loss....................................................  $(1,175)
Loss per common share.......................................  $  (.41)



                                     II-51

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

(5) DISCONTINUED OPERATIONS

    SPIN OFF OF LIBERTY MEDIA INTERNATIONAL, INC.

    On June 7, 2004 (the "Spin Off Date"), Liberty completed the spin off (the
"Spin Off") of its wholly-owned subsidiary, Liberty Media International, Inc.
("LMI"), to its shareholders. Substantially all of the assets and businesses of
LMI were attributed to Liberty's International Group segment. In connection with
the Spin Off, holders of Liberty common stock on June 1, 2004 (the "Record
Date") received 0.05 of a share of LMI Series A common stock for each share of
Liberty Series A common stock owned at 5:00 pm, New York City time, on the
Record Date and 0.05 of a share of LMI Series B common stock for each share of
Liberty Series B common stock owned at 5:00 pm, New York City time, on the
Record Date. The Spin Off is intended to qualify as a tax-free spin off. For
accounting purposes, the Spin Off is deemed to have occurred on June 1, 2004,
and no gain or loss was recognized by Liberty in connection with the Spin Off.

    In addition to the assets in Liberty's International Group operating
segment, Liberty also contributed certain monetary assets to LMI in connection
with the Spin Off. These monetary assets consisted of $50 million in cash,
5 million American Depository Shares for preferred, limited voting ordinary
shares of News Corporation ("News Corp.") and related derivatives, and a 99.9%
economic interest in 345,000 shares of preferred stock of ABC Family
Worldwide, Inc.

    Summarized combined financial information for LMI is as follows:

    COMBINED BALANCE SHEETS



                                                         MAY 31,    DECEMBER 31,
                                                         2004(1)        2003
                                                         --------   -------------
                                                           AMOUNTS IN MILLIONS
                                                              
Cash...................................................  $ 1,819           13
Current assets.........................................      542           18
Equity investments.....................................    1,914        1,741
Cost investments.......................................    1,201          450
Property and equipment, net............................    3,221           98
Goodwill and franchise costs...........................    2,628          689
Deferred tax assets....................................       --          458
Other assets...........................................      468           84
                                                         -------        -----
  Total assets.........................................  $11,793        3,551
                                                         =======        =====
Current liabilities....................................  $ 1,170           83
Note payable to Liberty................................      117           --
Long term debt.........................................    4,211           42
Deferred income tax liabilities........................      511           --
Other liabilities......................................      267            8
Minority interests.....................................    1,061           --
Equity.................................................    4,456        3,418
                                                         -------        -----
  Total liabilities and equity.........................  $11,793        3,551
                                                         =======        =====


                                     II-52

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    COMBINED STATEMENTS OF OPERATIONS



                                                     FIVE MONTHS          YEARS ENDED
                                                        ENDED            DECEMBER 31,
                                                       MAY 31,      -----------------------
                                                       2004(1)        2003           2002
                                                     ------------   --------       --------
                                                              AMOUNTS IN MILLIONS
                                                                          
Revenue............................................     $ 956         109             104
Operating, selling, general and administrative
  expenses.........................................      (682)        (94)            (81)
Depreciation and amortization......................      (368)        (16)            (13)
Impairment of long-lived assets....................        --          --             (46)
                                                        -----         ---            ----
  Operating loss...................................       (94)         (1)            (36)
Other income (expense).............................       (54)         50            (490)
Income tax benefit (expense).......................       (30)        (28)            178
Minority interests.................................        92          --              --
                                                        -----         ---            ----
  Earnings (loss) before cumulative effect of
    accounting change..............................       (86)         21            (348)
Cumulative effect of accounting change.............        --          --            (238)
                                                        -----         ---            ----
  Net earnings (loss)..............................     $ (86)         21            (586)
                                                        =====         ===            ====


- ------------------------

(1) LMI's financial position and results of operations for the five months ended
    May 31, 2004 include UnitedGlobalCom, Inc., which was consolidated beginning
    January 1, 2004.

    Following the Spin Off, LMI and Liberty operate independently, and neither
has any stock ownership, beneficial or otherwise, in the other. In connection
with the Spin Off, LMI and Liberty entered into certain agreements in order to
govern certain of the ongoing relationships between Liberty and LMI after the
Spin Off and to provide for an orderly transition. These agreements include a
Reorganization Agreement, a Facilities and Services Agreement, a Tax Sharing
Agreement and a Short-Term Credit Facility.

    The Reorganization Agreement provides for, among other things, the principal
corporate transactions required to effect the Spin Off and cross indemnities.
Pursuant to the Facilities and Services Agreement, Liberty provides LMI with
office space and certain general and administrative services including legal,
tax, accounting, treasury, engineering and investor relations support. LMI
reimburses Liberty for direct, out-of-pocket expenses incurred by Liberty in
providing these services and for LMI's allocable portion of facilities costs and
costs associated with any shared services or personnel.

    Under the Tax Sharing Agreement, Liberty generally is responsible for U.S.
federal, state and local and foreign income taxes owing with respect to
consolidated returns which include both Liberty and LMI. LMI is responsible for
all other taxes with respect to returns which include LMI, but do not include
Liberty whether accruing before, on or after the Spin Off. The Tax Sharing
Agreement requires that LMI will not take, or fail to take, any action where
such action, or failure to act, would be inconsistent with or prohibit the Spin
Off from qualifying as a tax-free transaction. Moreover, LMI has indemnified
Liberty for any loss resulting from such action or failure to act, if such
action or failure to act precludes the Spin Off from qualifying as a tax-free
transaction.

                                     II-53

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    Pursuant to the Short-Term Credit Facility, Liberty agreed to make loans to
LMI from time to time up to an aggregate principal amount of $383 million. In
addition, certain subsidiaries of LMI had notes payable to Liberty in the
aggregate amount of $117 million at the date of the Spin Off. During the third
quarter of 2004, LMI completed a rights offering, and used a portion of the cash
proceeds to repay all principal and accrued interest due under the notes payable
and Short-Term Credit Facility. Subsequent to this repayment, the Short-Term
Credit Facility was terminated.

    DMX MUSIC

    During the fourth quarter of 2004, the executive committee of the board of
directors of Liberty approved a plan to dispose of Liberty's approximate 56%
ownership interest in Maxide Acquisition, Inc. (d/b/a DMX Music, "DMX"). DMX is
principally engaged in programming, distributing and marketing digital and
analog music services to homes and businesses and was included in Liberty's
Networks Group operating segment. On February 14, 2005, DMX commenced
proceedings under Chapter 11 of the United States Bankruptcy Code. As a result
of marketing efforts conducted prior to the bankruptcy filing, DMX has entered
into an arrangement, subject to the approval by the Bankruptcy Court, to sell
substantially all of its operating assets to an independent third party. Other
prospective buyers will have an opportunity to submit offers to purchase all or
a portion of those assets by a date to be determined by the Bankruptcy Court.
After competitive bids, if any, have been submitted, Liberty expects that the
Bankruptcy Court will make a determination as to the appropriate buyer, and the
operating assets of DMX will be sold. In connection with its decision to dispose
of its ownership interest, Liberty recognized a $23 million impairment loss to
write down the carrying value of the net assets of DMX to their estimated fair
value based upon the aforementioned arrangement to sell the assets. Such loss
has been included in loss from discontinued operations in the accompanying
consolidated financial statements.

    The consolidated financial statements and accompanying notes of Liberty have
been revised to reflect LMI and DMX as discontinued operations. Accordingly, the
assets and liabilities, revenue, costs and expenses, and cash flows of LMI and
DMX have been excluded from the respective captions in the accompanying
consolidated balance sheets, statements of operations, statements of
comprehensive earnings (loss) and statements of cash flows and have been
reported separately in such consolidated financial statements.

                                     II-54

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

(6) INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES AND OTHER COST INVESTMENTS

    Investments in AFS Securities, which are recorded at their respective fair
market values, and other cost investments are summarized as follows:



                                                                 DECEMBER 31,
                                                             ---------------------
                                                               2004        2003
                                                             ---------   ---------
                                                              AMOUNTS IN MILLIONS
                                                                   
News Corp.(1)..............................................   $ 9,667      7,633
IAC/InterActiveCorp ("IAC")................................     3,824      4,697
Time Warner Inc. ("Time Warner")(2)........................     3,330      3,080
Sprint Corporation ("Sprint")..............................     2,342      1,134
Motorola(3)................................................     1,273      1,068
Viacom, Inc. ("Viacom")....................................       552        674
Other AFS equity securities(4).............................       471        382
Other AFS debt securities(1)(5)............................       304        985
Other cost investments and related receivables.............        87        178
                                                              -------     ------
                                                               21,850     19,831
  Less short-term investments..............................        (3)      (265)
                                                              -------     ------
                                                              $21,847     19,566
                                                              =======     ======


- ------------------------

(1) Certain of Liberty's News Corp. ADSs and other AFS debt securities were
    contributed to LMI in connection with the Spin Off. See note 5.

(2) Includes $176 million of shares pledged as collateral for share borrowing
    arrangements at December 31, 2004.

(3) Includes $654 million and $533 million of shares pledged as collateral for
    share borrowing arrangements at December 31, 2004 and 2003, respectively.

(4) Includes $77 million of shares pledged as collateral for share borrowing
    arrangements at December 31, 2004.

(5) At December 31, 2004, other AFS debt securities include $276 million of
    investments in third-party marketable debt securities held by Liberty
    parent. At December 31, 2003, such investments aggregated $560 million.

    NEWS CORP.

    Effective October 14, 2003, pursuant to a put/call arrangement with News
Corp., Liberty acquired $500 million of American Depository Shares ("ADSs") for
News Corp. preferred limited voting shares at $21.50 per ADR. In addition during
2003, Liberty sold certain of its News Corp. non-voting ADSs in the open market
and purchased voting News Corp. ADSs in the open market. Liberty recognized a
pre-tax gain of $236 million on the sale of its non-voting ADSs. In early 2004,
Liberty purchased additional voting ADSs and sold additional non-voting ADSs in
the open market and recorded a pre-tax gain of $134 million. On a net basis,
Liberty effectively exchanged 21.2 million non-voting ADSs and $693 million in
cash for 48 million voting ADSs, taking into account proceeds from sales of, and
unwinding of collars on, non-voting News Corp. ADSs.

                                     II-55

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    In the fourth quarter of 2004, News Corp. reincorporated as a U.S.
corporation and effected a reverse stock split by exchanging one share of newly
issued voting stock ("NWS") or non-voting stock ("NWSA") for every two
outstanding ADRs. In November 2004, Liberty entered into total return equity
swaps with a financial institution with respect to 92 million shares of NWS.
Pursuant to the terms of the swap, the financial institution acquired the
92 million shares of NWS for Liberty's benefit for a weighted average strike
price of $17.48 (the "Strike Price"). The swaps also provided for (1) the
obligation of the financial institution to pay Liberty an amount equal to the
number of shares times any increase in the per-share price of NWS above the
Strike Price and (2) the obligation of Liberty to pay the institution any
decrease in the per-share price of NWS below the Strike Price. In
December 2004, Liberty elected to terminate the swaps. In connection with such
termination, Liberty delivered 86.9 million shares of NWSA with a fair market
value of $1,608 million in exchange for the 92 million shares of NWS with a fair
market value of $1,749 million. Accordingly, Liberty recognized a pre-tax gain
on the swap transaction of $141 million, which is included in realized and
unrealized gains on financial instruments and a pre-tax gain on the exchange of
NWSA for NWS of $710 million, which is included in gains on dispositions.
Subsequent to the completion of this transaction, Liberty has an approximate 17%
economic interest and an approximate 18% voting interest in News Corp.

    VIVENDI UNIVERSAL ("VIVENDI") AND IAC/INTERACTIVECORP

    Prior to May 7, 2002, Liberty held various interests in IAC that were
accounted for using the equity method. IAC owned and operated businesses in
cable programming, television production, electronic retailing, ticketing
operations and Internet services.

    On May 7, 2002, Liberty, IAC, and Vivendi entered into a series of
transactions which effectively resulted in Liberty exchanging 25 million shares
of IAC, its indirect interests in certain of IAC's cable programming businesses
and its 30% interest in multiThematiques S.A. for 37.4 million Vivendi ordinary
shares, which at the date of the transaction had an aggregate fair value of
$1,013 million. Liberty recognized a loss of $817 million based on the
difference between the fair value of the Vivendi shares received and the
carrying value of the assets relinquished, including enterprise-level goodwill
of $514 million which had been allocated to the reporting unit holding the IAC
interests.

    During the year ended December 31, 2003 and pursuant to contractual
pre-emptive rights, Liberty acquired an aggregate 48.7 million shares of IAC for
cash consideration of $1,166 million. At December 31, 2004, Liberty owns
approximately 20% of IAC common stock representing an approximate 47% voting
interest. However, due to certain governance arrangements which limit its
ability to exert significant influence over IAC, Liberty has accounted for this
investment as an AFS Security. Liberty's approximate 3% ownership interest in
Vivendi was also accounted for as an AFS Security following the May 7, 2002
transaction. During the fourth quarter of 2003, Liberty sold all of its shares
of Vivendi common stock in the open market for aggregate cash proceeds of
$838 million and recognized a $262 million gain (before tax expense of
$102 million).

    NONTEMPORARY DECLINES IN FAIR VALUE OF INVESTMENTS

    During the years ended December 31, 2004, 2003 and 2002, Liberty determined
that certain of its AFS Securities and cost investments experienced nontemporary
declines in value. The primary factors considered by Liberty in determining the
timing of the recognition for the majority of these impairments was the length
of time the investments traded below Liberty's cost bases and the lack of
near-term prospects for recovery in the stock prices. As a result, the carrying
amounts of such

                                     II-56

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

investments were adjusted to their respective fair values based primarily on
quoted market prices at the balance sheet date. These adjustments are reflected
as nontemporary declines in fair value of investments in the consolidated
statements of operations. Nontemporary declines in value recorded in 2002
related primarily to Liberty's investments in Time Warner Inc., News Corporation
and Sprint Corporation. Nontemporary declines in value in 2004 and 2003 were not
significant.

    UNREALIZED HOLDINGS GAINS AND LOSSES

    Unrealized holding gains and losses related to investments in AFS Securities
are summarized below.



                                             DECEMBER 31, 2004         DECEMBER 31, 2003
                                          -----------------------   -----------------------
                                            EQUITY        DEBT        EQUITY        DEBT
                                          SECURITIES   SECURITIES   SECURITIES   SECURITIES
                                          ----------   ----------   ----------   ----------
                                                         AMOUNTS IN MILLIONS
                                                                     
Gross unrealized holding gains..........    $7,292         19          5,779             1
Gross unrealized holding losses.........    $  (15)        --             --            --


    Management estimates that the fair market value of all of its other cost
investments approximated $151 million and $405 million at December 31, 2004 and
2003, respectively. Management calculates market values of its other cost
investments using a variety of approaches including multiple of cash flow,
discounted cash flow model, per subscriber value, or a value of comparable
public or private businesses. No independent appraisals were conducted for those
cost investment assets.

                                     II-57

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

(7) DERIVATIVE INSTRUMENTS

    The Company's derivative instruments are summarized as follows:



                                                                 DECEMBER 31,
                                                              -------------------
TYPE OF DERIVATIVE                                              2004       2003
- ------------------                                            --------   --------
                                                                    AMOUNTS
                                                                  IN MILLIONS
                                                                   
ASSETS
  Equity collars............................................  $ 2,016     3,358
  Put spread collars........................................      291       331
  Other.....................................................      121       101
                                                              -------     -----
    Total...................................................    2,428     3,790
  Less current portion......................................     (827)     (543)
                                                              -------     -----
                                                              $ 1,601     3,247
                                                              =======     =====
LIABILITIES
  Exchangeable debenture call option obligations............  $ 1,102       990
  Put options...............................................      445       772
  Equity collars............................................      398       293
  Borrowed shares...........................................      907       533
  Other.....................................................      139        22
                                                              -------     -----
    Total...................................................    2,991     2,610
  Less current portion......................................   (1,179)     (854)
                                                              -------     -----
                                                              $ 1,812     1,756
                                                              =======     =====


    EQUITY COLLARS, NARROW-BAND COLLARS, PUT SPREAD COLLARS AND PUT OPTIONS

    The Company has entered into equity collars, narrow-band collars, put spread
collars, written put and call options and other financial instruments to manage
market risk associated with its investments in certain marketable securities.
These instruments are recorded at fair value based on option pricing models.
Equity collars provide the Company with a put option that gives the Company the
right to require the counterparty to purchase a specified number of shares of
the underlying security at a specified price (the "Company Put Price") at a
specified date in the future. Equity collars also provide the counterparty with
a call option that gives the counterparty the right to purchase the same
securities at a specified price at a specified date in the future. The put
option and the call option generally have equal fair values at the time of
origination resulting in no cash receipts or payments. Narrow-band collars are
equity collars in which the put and call prices are set so that the call option
has a relatively higher fair value than the put option at the time of
origination. In these cases the Company receives cash equal to the difference
between such fair values.

    Put spread collars provide the Company and the counterparty with put and
call options similar to equity collars. In addition, put spread collars provide
the counterparty with a put option that gives it the right to require the
Company to purchase the underlying securities at a price that is lower than the
Company Put Price. The inclusion of the secondary put option allows the Company
to secure a higher call option price while maintaining net zero cost to enter
into the collar. However, the inclusion of the

                                     II-58

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

secondary put exposes the Company to market risk if the underlying security
trades below the put spread price.

    BORROWED SHARES

    In connection with certain of its derivative instruments, Liberty
periodically borrows shares of the underlying securities from a counterparty and
delivers these borrowed shares in settlement of maturing derivative positions.
In these transactions, a similar number of shares that are owned by Liberty have
been posted as collateral with the counterparty. These share borrowing
arrangements can be terminated at any time at Liberty's option by delivering
shares to the counterparty. The counterparty can terminate these arrangements
upon the occurrence of certain events which limit the trading volume of the
underlying security. The liability under these share borrowing arrangements is
marked to market each reporting period with changes in value recorded in
unrealized gains or losses in the statement of operations. The shares posted as
collateral under these arrangements continue to be treated as AFS securities and
are marked to market each reporting period with changes in value recorded as
unrealized gains or losses in other comprehensive earnings.

    EXCHANGEABLE DEBENTURE CALL OPTION OBLIGATIONS

    Liberty has issued senior exchangeable debentures which are exchangeable for
the value of a specified number of shares of Sprint common stock, Motorola
common stock, Viacom Class B common stock or Time Warner common stock, as
applicable. (See note 9 for a more complete description of the exchangeable
debentures.)

    Under Statement 133, the call option feature of the exchangeable debentures
is reported separately from the long-term debt portion in the consolidated
balance sheets at fair value. Changes in the fair value of the call option
obligations are recognized as unrealized gains (losses) on derivative
instruments in Liberty's consolidated statements of operations.

    REALIZED AND UNREALIZED GAINS ON DERIVATIVE INSTRUMENTS

    Realized and unrealized gains (losses) on derivative instruments during
the years ended December 31, 2004, 2003 and 2002 are comprised of the following:



                                                          YEARS ENDED DECEMBER 31,
                                                       ------------------------------
                                                         2004       2003       2002
                                                       --------   --------   --------
                                                            AMOUNTS IN MILLIONS
                                                                    
Change in fair value of exchangeable debenture call
  option feature.....................................  $  (129)     (158)        784
Change in the fair value of equity collars...........     (941)     (483)      4,032
Change in the fair value of borrowed shares..........     (227)     (121)         --
Change in the fair value of put options..............        2       108        (445)
Change in the fair value of put spread collars.......        8        21          71
Change in fair value of hedged AFS Securities........       --        --      (2,378)
Change in fair value of other derivatives(1).........        3       (29)         75
                                                       -------      ----      ------
  Total realized and unrealized gains (losses),
    net..............................................  $(1,284)     (662)      2,139
                                                       =======      ====      ======


- ------------------------

(1) Comprised primarily of forward foreign exchange contracts and interest rate
    swap agreements.

                                     II-59

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

(8) INVESTMENTS IN AFFILIATES ACCOUNTED FOR USING THE EQUITY METHOD

    Liberty has various investments accounted for using the equity method. The
following table includes Liberty's carrying amount and percentage ownership of
the more significant investments in affiliates at December 31, 2004 and the
carrying amount at December 31, 2003:



                                                   DECEMBER 31,        DECEMBER 31,
                                                       2004                2003
                                               ---------------------   -------------
                                               PERCENTAGE   CARRYING     CARRYING
                                               OWNERSHIP     AMOUNT       AMOUNT
                                               ----------   --------   -------------
                                                    DOLLAR AMOUNTS IN MILLIONS
                                                              
Discovery....................................     50%        $2,946        2,864
Court TV.....................................     50%           277          260
GSN..........................................     50%           251          240
Other........................................   various         260          249
                                                             ------        -----
                                                             $3,734        3,613
                                                             ======        =====


    The following table reflects Liberty's share of earnings (losses) of
affiliates including nontemporary declines in value:



                                                                     YEARS ENDED
                                                                     DECEMBER 31,
                                                            ------------------------------
                                                              2004       2003       2002
                                                            --------   --------   --------
                                                                 AMOUNTS IN MILLIONS
                                                                         
Discovery.................................................    $84         38         (32)
Court TV..................................................     17         (1)         (2)
GSN.......................................................     (1)        --          (6)
QVC*......................................................     --        107         154
Other.....................................................     (3)       (99)       (203)
                                                              ---        ---        ----
                                                              $97         45         (89)
                                                              ===        ===        ====


- ------------------------

*   A consolidated subsidiary since September 2003.

    DISCOVERY

    Discovery is a global media and entertainment company, that provides
original and purchased video programming in the United States and over 160 other
countries.

                                     II-60

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    Summarized financial information for Discovery is as follows:

    CONSOLIDATED BALANCE SHEETS



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2004       2003
                                                              --------   --------
                                                                    AMOUNTS
                                                                  IN MILLIONS
                                                                   
Current assets..............................................   $  835       858
Property and equipment......................................      380       360
Programming rights..........................................    1,027       882
Intangible assets...........................................      445       467
Other assets................................................      549       627
                                                               ------     -----
  Total assets..............................................   $3,236     3,194
                                                               ======     =====
Current liabilities.........................................   $  885     1,539
Long term debt..............................................    2,498     1,834
Other liabilities...........................................      161       213
Mandatorily redeemable equity of subsidiaries...............      320       410
Stockholders' deficit.......................................     (628)     (802)
                                                               ------     -----
  Total liabilities and equity..............................   $3,236     3,194
                                                               ======     =====


    CONSOLIDATED STATEMENTS OF OPERATIONS



                                                           YEARS ENDED DECEMBER 31,
                                                        ------------------------------
                                                          2004       2003       2002
                                                        --------   --------   --------
                                                             AMOUNTS IN MILLIONS
                                                                     
Revenue...............................................   $2,365     1,995      1,717
Operating expenses....................................     (846)     (752)      (700)
Selling, general and administrative...................     (856)     (735)      (638)
Stock compensation....................................      (72)      (74)       (97)
Depreciation and amortization.........................     (129)     (120)      (113)
Gain on sale of patent................................       22        --         --
                                                         ------     -----      -----
  Operating income....................................      484       314        169
Interest expense......................................     (167)     (159)      (163)
Other expense.........................................       (7)      (17)       (64)
Income tax benefit (expense)..........................     (142)      (75)        10
                                                         ------     -----      -----
  Net earnings (loss).................................   $  168        63        (48)
                                                         ======     =====      =====


    OTHER

    In April 2002, Liberty sold its 40% interest in Telemundo Communications
Group for cash proceeds of $679 million, and recognized a gain of $344 million
(before related tax expense of $134 million) based upon the difference between
the cash proceeds and Liberty's basis in Telemundo, including allocated goodwill
of $25 million.

                                     II-61

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    During the years ended December 31, 2003 and 2002, Liberty recorded
nontemporary declines in fair value aggregating $71 million and $76 million,
respectively, related to certain of its other equity method investments. Such
amounts are included in share of losses of affiliates.

(9) LONG-TERM DEBT

    Debt is summarized as follows:



                                                               OUTSTANDING      CARRYING VALUE
                                                                PRINCIPAL        DECEMBER 31,
                                                              DECEMBER 31,    -------------------
                                                                  2004          2004       2003
                                                              -------------   --------   --------
                                                                      AMOUNTS IN MILLIONS
                                                                                
Parent company debt:
  Senior notes and debentures
    3.5% Senior Notes due 2006..............................     $   514          513     1,185
    Floating Rate Senior Notes due 2006.....................       2,463        2,463     2,463
    7.875% Senior Notes due 2009............................         716          711       744
    7.75% Senior Notes due 2009.............................         234          235       239
    5.7% Senior Notes due 2013..............................         802          800       997
    8.5% Senior Debentures due 2029.........................         500          495       495
    8.25% Senior Debentures due 2030........................         959          951       992
  Senior exchangeable debentures
    4% Senior Exchangeable Debentures due 2029..............         869          249       246
    3.75% Senior Exchangeable Debentures due 2030...........         810          228       226
    3.5% Senior Exchangeable Debentures due 2031............         600          231       229
    3.25% Senior Exchangeable Debentures due 2031...........         559          118       127
    0.75% Senior Exchangeable Debentures due 2023...........       1,750        1,473     1,398
                                                                 -------       ------     -----
                                                                  10,776        8,467     9,341
Subsidiary debt.............................................         109          109        91
                                                                 -------       ------     -----
  Total debt................................................     $10,885        8,576     9,432
                                                                 =======
  Less current maturities...................................                      (10)      (15)
                                                                               ------     -----
  Total long-term debt......................................                   $8,566     9,417
                                                                               ======     =====


    SENIOR NOTES AND DEBENTURES

    The Floating Rate Notes accrue interest at 3 month LIBOR plus a margin. At
December 31, 2004 the borrowing rate was 3.99%.

    Interest on the Senior Notes and Senior Debentures is payable semi-annually
based on the date of issuance.

    The Senior Notes and Senior Debentures are stated net of an aggregate
unamortized discount of $20 million and $24 million at December 31, 2004 and
2003, respectively, which is being amortized to interest expense in the
accompanying consolidated statements of operations.

                                     II-62

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    SENIOR EXCHANGEABLE DEBENTURES

    In November 1999, Liberty issued $869 million of 4% Senior Exchangeable
Debentures due 2029. Each $1,000 debenture is exchangeable at the holder's
option for the value of 11.4743 shares of Sprint common stock. Liberty may, at
its election, pay the exchange value in cash, Sprint common stock or a
combination thereof. Liberty, at its option, may redeem the debentures, in whole
or in part, for cash generally equal to the face amount of the debentures plus
accrued interest.

    In February and March 2000, Liberty issued an aggregate of $810 million of
3.75% Senior Exchangeable Debentures due 2030. Each $1,000 debenture is
exchangeable at the holder's option for the value of 8.3882 shares of Sprint
common stock. Liberty may, at its election, pay the exchange value in cash,
Sprint common stock or a combination thereof. Liberty, at its option, may redeem
the debentures, in whole or in part, for cash equal to the face amount of the
debentures plus accrued interest.

    In January 2001, Liberty issued $600 million of 3.5% Senior Exchangeable
Debentures due 2031. Each $1,000 debenture is exchangeable at the holder's
option for the value of 36.8189 shares of Motorola common stock and 4.0654
shares of Freescale Semiconductor, Inc. ("Freescale"), which Motorola spun off
to its shareholders in December 2004. Such exchange value is payable, at
Liberty's option, in cash, Motorola and Freescale stock or a combination
thereof. On or after January 15, 2006, Liberty, at its option, may redeem the
debentures, in whole or in part, for cash generally equal to the face amount of
the debentures plus accrued interest.

    In March 2001, Liberty issued $817.7 million of 3.25% Senior Exchangeable
Debentures due 2031. Each $1,000 debenture is exchangeable at the holder's
option for the value of 18.5666 shares of Viacom Class B common stock. Such
exchange value is payable at Liberty's option in cash, Viacom stock or a
combination thereof. On or after March 15, 2006, Liberty, at its option, may
redeem the debentures, in whole or in part, for cash equal to the face amount of
the debentures plus accrued interest.

    In March and April 2003, Liberty issued an aggregate principal amount of
$1,750 million of 0.75% Senior Exchangeable Debentures due 2023. Each $1,000
debenture is exchangeable at the holder's option for the value of 57.4079 shares
of Time Warner common stock. Liberty may, at its election, pay the exchange
value in cash, Time Warner common stock, shares of Liberty Series A common stock
or a combination thereof. On or after April 5, 2008, Liberty, at its option, may
redeem the debentures, in whole or in part, for shares of Time Warner common
stock, cash or any combination thereof equal to the face amount of the
debentures plus accrued interest. On March 30, 2008, March 30, 2013 or
March 30, 2018, each holder may cause Liberty to purchase its exchangeable
debentures, and Liberty, at its election, may pay the purchase price in shares
of Time Warner common stock, cash, Liberty Series A common stock, or any
combination thereof.

    Interest on the Company's exchangeable debentures is payable semi-annually
based on the date of issuance. At maturity, all of the Company's exchangeable
debentures are payable in cash.

    In accordance with Statement 133, the call option feature of the
exchangeable debentures is reported at fair value and separately from the
long-term debt in the consolidated balance sheet. The reported amount of the
long-term debt portion of the exchangeable debentures is calculated as the
difference between the face amount of the debentures and the fair value of the
call option feature on the date of issuance. The long-term debt is accreted to
its face amount over the expected term of the debenture using the effective
interest method. Accordingly, at December 31, 2004, the difference

                                     II-63

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

between the principal amount and the carrying value of the long-term debt
portion is the unamortized fair value of the call option feature that was
recorded at the date of issuance of the respective debentures. Accretion related
to all of the Company's exchangeable debentures aggregated $83 million,
$61 million and $7 million during the years ended December 31, 2004, 2003 and
2002, respectively, and is included in interest expense in the accompanying
consolidated statements of operations.

    SUBSIDIARY DEBT

    Subsidiary debt at December 31, 2004 is comprised of capitalized satellite
transponder lease obligations.

    In December 2004, Starz Entertainment cancelled its bank credit facility.

    FIVE YEAR MATURITIES

    The U.S. dollar equivalent of the annual maturities of Liberty's debt for
each of the next five years is as follows (amounts in millions):

                                                           
2005........................................................   $   10
2006........................................................   $2,988
2007........................................................   $   12
2008........................................................   $1,762
2009........................................................   $  962



    FAIR VALUE OF DEBT

    Liberty estimates the fair value of its debt based on the quoted market
prices for the same or similar issues or on the current rate offered to Liberty
for debt of the same remaining maturities. The fair value of Liberty's publicly
traded debt at December 31, 2004 is as follows (amounts in millions):

                                                           
Fixed rate senior notes.....................................   $2,373
Floating rate senior notes..................................   $2,492
Senior debentures...........................................   $1,628
Senior exchangeable debentures, including call option
  obligation................................................   $4,376



    Liberty believes that the carrying amount of its subsidiary debt
approximated fair value at December 31, 2004.

                                     II-64

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

(10) INCOME TAXES

    Income tax benefit (expense) consists of:



                                                                  YEARS ENDED
                                                                  DECEMBER 31,
                                                         ------------------------------
                                                           2004       2003       2002
                                                         --------   --------   --------
                                                              AMOUNTS IN MILLIONS
                                                                      
Current:
  Federal..............................................   $(175)        (4)        (4)
  State and local......................................     (62)       (30)        (1)
  Foreign..............................................    (118)       (41)        (2)
                                                          -----       ----      -----
                                                           (355)       (75)        (7)
                                                          -----       ----      -----
Deferred:
  Federal..............................................     137       (231)     1,288
  State and local......................................      51        (47)       231
  Foreign..............................................       9         (1)        --
                                                          -----       ----      -----
                                                            197       (279)     1,519
                                                          -----       ----      -----
Income tax benefit (expense)...........................   $(158)      (354)     1,512
                                                          =====       ====      =====


    Income tax benefit (expense) differs from the amounts computed by applying
the U.S. federal income tax rate of 35% as a result of the following:



                                                                  YEARS ENDED
                                                                  DECEMBER 31,
                                                         ------------------------------
                                                           2004       2003       2002
                                                         --------   --------   --------
                                                              AMOUNTS IN MILLIONS
                                                                      
Computed expected tax benefit..........................   $(112)       305      1,617
Impairment charges and amortization of goodwill not
  deductible for income tax purposes...................      --       (477)       (62)
State and local income taxes, net of federal income
  taxes................................................     (11)       (47)       153
Foreign taxes..........................................     (50)       (40)        (6)
Recognition of tax basis in equity of DMX..............      38         --         --
Change in valuation allowance affecting tax expense....     (10)       (65)       (13)
Adjustments to dividend received deduction.............      --        (21)        16
Disposition of nondeductible goodwill in sales
  transactions.........................................      --         --       (185)
Other, net.............................................     (13)        (9)        (8)
                                                          -----       ----      -----
  Income tax benefit (expense).........................   $(158)      (354)     1,512
                                                          =====       ====      =====


                                     II-65

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:



                                                                 DECEMBER 31,
                                                             ---------------------
                                                               2004        2003
                                                             ---------   ---------
                                                              AMOUNTS IN MILLIONS
                                                                   
Deferred tax assets:
  Net operating and capital loss carryforwards.............   $ 1,169        803
  Accrued stock compensation...............................       127         95
  Other future deductible amounts..........................       198        135
                                                              -------     ------
    Deferred tax assets....................................     1,494      1,033
  Valuation allowance......................................      (407)      (386)
                                                              -------     ------
    Net deferred tax assets................................     1,087        647
                                                              -------     ------
Deferred tax liabilities:
  Investments..............................................     8,384      7,735
  Intangible assets........................................     2,453      2,587
  Discount on exchangeable debentures......................       863        849
  Other....................................................       243        176
                                                              -------     ------
    Deferred tax liabilities...............................    11,943     11,347
                                                              -------     ------
Net deferred tax liabilities...............................   $10,856     10,700
                                                              =======     ======


    The Company's valuation allowance increased $21 million in 2004, including a
$10 million charge to tax expense and an $11 million valuation allowance
recorded in connection with acquisitions.

    At December 31, 2004, Liberty had net operating and capital loss
carryforwards for income tax purposes aggregating approximately $3,162 million
which, if not utilized to reduce taxable income in future periods, will expire
as follows: 2006: $3 million; 2007: $87 million; 2008: $13 million; 2009:
$1,011 million; and beyond 2009: $2,048 million. Of the foregoing net operating
and capital loss carryforward amount, approximately $1,149 million is subject to
certain limitations and may not be currently utilized. The remaining
$2,013 million is currently available to be utilized to offset future taxable
income of Liberty's consolidated tax group.

    During the period from March 9, 1999 to August 10, 2001, Liberty was
included in the consolidated federal income tax return of AT&T and was a party
to a tax sharing agreement with AT&T (the "AT&T Tax Sharing Agreement"). Under
the AT&T Tax Sharing Agreement, Liberty received a cash payment from AT&T in
periods when Liberty generated taxable losses and such taxable losses were
utilized by AT&T to reduce the consolidated income tax liability. This
utilization of taxable losses was accounted for by Liberty as a current federal
intercompany income tax benefit. To the extent such losses were not utilized by
AT&T, such amounts were available to reduce federal taxable income generated by
Liberty in future periods, similar to a net operating loss carryforward, and
were accounted for as a deferred federal income tax benefit. During the period
from March 10, 1999 to December 31, 2002, Liberty received cash payments from
AT&T aggregating $555 million as payment for Liberty's taxable losses that AT&T
utilized to reduce its income tax liability. In the fourth quarter of 2004, AT&T
requested a refund from Liberty of $70 million, plus accrued interest, relating
to losses that it generated in 2002 and 2003 and were able to carry back to
offset taxable income previously offset by Liberty's losses. In the event AT&T
generates capital losses in 2004 and is able to carry back such

                                     II-66

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

losses to offset taxable income previously offset by Liberty's losses, Liberty
may be required to refund as much as an additional $229 million (excluding
accrued interest) to AT&T. Liberty is currently unable to estimate how much, if
any, it will ultimately refund to AT&T, but does not believe that any such
refund, if made, would be material to its financial position.

(11) STOCKHOLDERS' EQUITY

    PREFERRED STOCK

    Liberty's preferred stock is issuable, from time to time, with such
designations, preferences and relative participating, optional or other rights,
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in a resolution or resolutions providing for the issue of such
preferred stock adopted by Liberty's Board of Directors. As of December 31,
2004, no shares of preferred stock were issued.

    COMMON STOCK

    The Series A common stock has one vote per share, and the Series B common
stock has ten votes per share. Each share of the Series B common stock is
exchangeable at the option of the holder for one share of Series A common stock.

    As of December 31, 2004, there were 56 million shares of Liberty Series A
common stock and 28 million shares of Liberty Series B common stock reserved for
issuance under exercise privileges of outstanding stock options and warrants.

    PURCHASES OF COMMON STOCK

    During the year ended December 31, 2004, the Company acquired approximately
96.0 million shares of its Series B common stock from the estate and family of
the late founder of Liberty's former parent in exchange for approximately
105.4 million shares of Liberty Series A common stock. Ten million of the
acquired Series B shares have been accounted for as treasury stock in the
accompanying consolidated balance sheet, and the remaining Series B shares have
been retired.

    On July 28, 2004, Liberty completed a transaction with Comcast pursuant to
which Liberty repurchased 120.3 million shares of its Series A common stock
(valued at $1,017 million) held by Comcast in exchange for 100% of the stock of
Encore ICCP, Inc. ("Encore ICCP"), a wholly owned subsidiary of Liberty. At the
time of the exchange, Encore ICCP held Liberty's 10% ownership interest in E!
Entertainment Television, Liberty's 100% ownership interest in International
Channel Networks, all of Liberty's rights, benefits and obligations under a TCI
Music contribution agreement, and $547 million in cash. The transaction also
resolved all litigation pending between Comcast and Liberty regarding the TCI
Music contribution agreement, to which Comcast succeeded as part of its
acquisition of AT&T Broadband in November of 2002. In connection with this
transaction, Liberty recognized a pre-tax gain on disposition of assets of
$387 million.

    During 2004, Liberty entered into zero-strike call spreads ("Z-Call") with
respect to six million shares of its Series A common stock. The Z-Call is
comprised of a call option purchased by Liberty from the counterparty with a
zero strike price and a similar call option purchased by the counterparty from
Liberty with a strike price equal to the market price of the Series A common
stock on the date of execution. Upon expiration of the Z-Call, Liberty can
purchase the subject shares of Series A common stock from the counterparty for
no additional cost, and the counterparty can purchase the same shares

                                     II-67

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

from Liberty at the current market price, or the parties can net cash settle.
Liberty accounts for the Z-Calls pursuant to Statement of Financial Accounting
Standards No. 150, "ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH
CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY" ("Statement 150"). The total net
payment by Liberty for the Z-Calls outstanding at December 31, 2004 was
$63 million and is included in short term derivative assets in the accompanying
consolidated balance sheet. Changes in the fair value of the Z-Calls are
included in realized and unrealized gains (losses) on financial instruments in
the accompanying consolidated statement of operations.

    During 2004, Liberty also sold put options with respect to shares of its
Series A common stock for cash proceeds of $3 million. All of these put options
expired unexercised prior to December 31, 2004. Liberty accounted for these put
options pursuant to Statement 150. Accordingly, the put options were recorded at
fair value, and changes in the fair value of the put options are included in
realized and unrealized gains (losses) on financial instruments in the
accompanying consolidated statement of operations.

    During the years ended December 31, 2003 and 2002, the Company purchased
42.3 million and 25.7 million shares of its common stock for aggregate cash
consideration of $437 million and $281 million, respectively. These purchases
have been accounted for as retirements of common stock and have been reflected
as a reduction of stockholders' equity in the accompanying consolidated balance
sheet.

    During 2002, Liberty sold put options on 7.0 million shares of its Series A
common stock, 4.0 million of which were outstanding at December 31, 2002.
Liberty sold another 9.3 million put options in the first quarter of 2003. All
of these options expired unexercised prior to December 31, 2003. The Company
accounted for these put options pursuant to EITF 00-19, "ACCOUNTING FOR
DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO, AND POTENTIALLY SETTLED IN, A
COMPANY'S OWN STOCK" and recorded a net increase to additional paid-in-capital
of $37 million during the year ended December 31, 2003.

(12) TRANSACTIONS WITH OFFICERS AND DIRECTORS

    CHAIRMAN'S EMPLOYMENT AGREEMENT

    In connection with the AT&T Merger, an employment agreement between the
Company's Chairman and TCI was assigned to the Company.

    The Chairman's employment agreement provides for, among other things,
deferral of a portion (not in excess of 40%) of the monthly compensation payable
to him for all employment years commencing on or after January 1, 1993. The
deferred amounts will be payable in monthly installments over a 20-year period
commencing on the termination of the Chairman's employment, together with
interest thereon at the rate of 8% per annum compounded annually from the date
of deferral to the date of payment. The aggregate liability under this
arrangement at December 31, 2004 is $1.8 million, and is included in other
liabilities in the accompanying consolidated balance sheet.

    The Chairman's employment agreement also provides that in the event of
termination of his employment with Liberty, he will be entitled to receive 240
consecutive monthly payments equal to $15,000 increased at the rate of 12% per
annum compounded annually from January 1, 1988 to the date payment commences
($91,956 per month as of December 31, 2004). Such payments would commence on the
first day of the month succeeding the termination of employment. In the event of
the Chairman's death, his beneficiaries would be entitled to receive the
foregoing monthly payments. The

                                     II-68

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

aggregate liability under this arrangement at December 31, 2004 is
$22.1 million, and is included in other liabilities in the accompanying
consolidated balance sheet.

    The Company's Chairman deferred a portion of his monthly compensation under
his previous employment agreement with TCI. The Company assumed the obligation
to pay that deferred compensation in connection with the AT&T Merger. The
deferred obligation (together with interest at the rate of 13% per annum
compounded annually), which aggregated $12.3 million at December 31, 2004 and is
included in other liabilities in the accompanying consolidated balance sheets,
is payable on a monthly basis, following the occurrence of specified events,
under the terms of the previous employment agreement. The rate at which interest
accrues on the deferred obligation was established in 1983 pursuant to the
previous employment agreement.

    OTHER

    Effective November 28, 2003, Liberty acquired all the outstanding stock of
TP Investment, Inc. ("TPI"), a corporation wholly owned by TP-JCM, LLC, a
limited liability company in which the sole member is the Company's Chairman. In
exchange for the stock of TPI, TP-JCM received 5,281,739 shares of the Company's
Series B common stock, valued in the agreement at $11.50 per share. As
prescribed by the Agreement and Plan of Merger pursuant to which the acquisition
was effected, that per share value equals 110% of the average of the closing
sale prices of the Company's Series A common stock for the ten trading days
ended November 28, 2003. TPI owns 10,602 shares of Series B Preferred Stock of
Liberty TP Management, Inc. ("Liberty TP Management"), a subsidiary of the
Company. Those shares of Series B Preferred Stock represent 12% of the voting
power of Liberty TP Management. TPI also owns a 5% membership interest
(representing a 50% voting interest) in Liberty TP LLC, a limited liability
company which owns approximately 20.6% of the common equity and 27.2% of the
voting power of Liberty TP Management. As a result of the acquisition, the
Company beneficially owns all the equity and voting interests in Liberty TP
Management. Liberty TP Management owns our interest in True Position and certain
equity interests in Sprint Corporation, IDT Investments, Inc. and priceline.com.

    In connection with the acquisition of TPI, the Company entered into a
registration rights agreement. That agreement provides for the registration by
the Company under applicable federal and state securities laws, at the holder's
request, of the sale of shares of the Company's Series A common stock issuable
upon conversion of shares of the Series B common stock that were issued to
TP-JCM.

    The shares of Liberty Series B common stock issued to TP-JCM are subject to
the Company's rights to purchase such shares pursuant to a call agreement
entered into in February 1998 by the Chairman and his spouse. Pursuant to the
call agreement, Liberty has the right to acquire all of the Liberty Series B
common stock held by the Chairman and his spouse in certain circumstances. The
price of acquiring such shares is generally limited to the market price of the
Liberty Series A common stock, plus a 10% premium.

(13) STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

    LIBERTY

    Pursuant to the Liberty Media Corporation 2000 Incentive Plan (the "Liberty
Incentive Plan"), the Company has granted to certain of its employees stock
options, stock appreciation rights ("SARs") and stock options with tandem SARs
(collectively, "Awards") to purchase shares of Liberty Series A and

                                     II-69

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

Series B common stock. The Liberty Incentive Plan provides for awards to be made
in respect of a maximum of 160 million shares of common stock of Liberty.

    In connection with the Company's rights offering, which expired on
December 2, 2002, and pursuant to the Liberty Incentive Plan antidilution
provisions, the number of shares and the applicable exercise prices of all
Liberty options granted pursuant to the Liberty Incentive Plan were adjusted as
of October 31, 2002, the record date for the rights offering. As a result of the
foregoing modifications, all of the Company's options granted prior to
October 31, 2002 are accounted for as variable plan awards.

    During the year ended December 31, 2003, Liberty awarded 4,601,000 free
standing SARs to its officers and employees with an exercise price of $11.09 and
1,500,000 free standing SARs to its officers and employees with an exercise
price of $14.33. Such SARs have a 10-year term, vest as to 20% on each of the
first five anniversaries of the respective grant date, and had a weighted
average grant date fair value of $5.57 per share.

    During the year ended December 31, 2004, Liberty awarded 4,011,450 free
standing SARs to its officers and employees. Such SARs have a 10-year term, an
exercise price of $8.45, vest as to 20% on each of the first five anniversaries
of the respective grant date, and had a weighted average grant date fair value
of $4.36 per share.

    On December 17, 2002, shareholders of the Company approved the Liberty Media
Corporation 2002 Nonemployee Director Incentive Plan (the "NDIP"). Under the
NDIP, the Liberty Board of Directors (the "Liberty Board") has the full power
and authority to grant eligible nonemployee directors stock options, SARs, stock
options with tandem SARs, and restricted stock. Effective September 9, 2003, the
Liberty Board granted each nonemployee director of Liberty 11,000 free standing
SARs at an exercise price of $11.85. These options expire 10 years from the date
of grant, vest on the first anniversary of the grant date and had a grant date
fair value of $5.93 per share.

    Effective June 1, 2004, the Liberty Board granted each nonemployee director
of Liberty 11,000 free standing SARs at an exercise price of $11.00. The options
expire 10 years from the date of grant, vest on the first anniversary of the
grant date and had a grant date fair value of $5.84 per share.

    The estimated fair values of the options noted above are based on the
Black-Scholes model and are stated in current annualized dollars on a present
value basis. The key assumptions used in the model for purposes of these
calculations generally include the following: (a) a discount rate equal to the
10-year Treasury rate on the date of grant; (b) a 32% volatility factor;
(c) the 10-year option term; (d) the closing price of the respective common
stock on the date of grant; and (e) an expected dividend rate of zero.

    In connection with the Spin Off and pursuant to the anti-dilution provisions
of the Liberty Incentive Plan, the Liberty incentive plan committee determined
to make adjustments to outstanding Liberty Awards. As of the Record Date, each
outstanding Award held by (1) employees of LMI, (2) employees of Liberty in
departments of Liberty that were expected to provide services to LMI pursuant to
the Facilities and Services Agreement and (3) directors of Liberty were divided
into (A) an option to purchase shares of LMI common stock equal to 0.05 times
the number of LMC Awards held by the option holder on the Record Date and
(B) an Award to purchase shares of Liberty common stock equal to the same number
of shares of Liberty common stock for which the outstanding Award was
exercisable. The aggregate exercise price of each pre-Spin Off Award was
allocated between the new Liberty Award and the LMI Award. All other Awards were
adjusted to increase the number of

                                     II-70

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

shares of Liberty common stock for which the Award was exercisable and to
decrease the exercise price to reflect the dilutive effect of the distribution
of LMI common stock in the Spin Off.

    Pursuant to the Reorganization Agreement Liberty is responsible for
settlement of all Liberty Awards whether held by Liberty employees or LMI
employees, and LMI is responsible for settlement of all LMI Awards whether held
by Liberty employees or LMI employees. Liberty will continue to record
compensation for all Liberty and LMI Awards held by Liberty employees. The
compensation for LMI Awards will be reflected as an adjustment to additional
paid-in capital in Liberty's statement of stockholders' equity.

    The following table presents the number and weighted average exercise price
("WAEP") of certain options, SARs and options with tandem SARs to purchase
Liberty Series A and Series B common stock granted to certain officers,
employees and directors of the Company.



                                                              LIBERTY                LIBERTY
                                                             SERIES A               SERIES B
                                                              COMMON                 COMMON
                                                               STOCK       WAEP       STOCK       WAEP
                                                             ---------   --------   ---------   --------
                                                                   NUMBERS OF OPTIONS IN THOUSANDS
                                                                                    
Outstanding at January 1, 2002.............................   47,659      $11.69     27,462      $15.35
  Granted..................................................      525      $12.38         --
  Exercised................................................     (488)     $ 3.51         --
  Canceled.................................................     (995)     $25.70         --
  Options issued in mergers................................      744      $34.55         --
  Adjustments pursuant to antidilution provisions..........    1,216                    703
                                                              ------                 ------
Outstanding at December 31, 2002...........................   48,661      $ 9.60     28,165      $14.96
  Granted..................................................    6,233      $11.88         --
  Exercised................................................     (323)     $ 4.68         --
  Canceled.................................................     (619)     $17.22         --
  Options issued in mergers................................    1,142      $78.53         --
                                                              ------                 ------
Outstanding at December 31, 2003...........................   55,094      $11.23     28,165      $14.96
  Granted..................................................    4,078      $ 8.54         --
  Exercised................................................   (2,060)     $ 2.13         --
  Canceled.................................................   (5,457)     $13.32         --
  Adjustments related to Spin Off..........................    4,321                     --
                                                              ------                 ------
Outstanding at December 31, 2004...........................   55,976      $ 9.15     28,165      $12.94
                                                              ======                 ======
Exercisable at December 31, 2002...........................   30,402      $ 6.78      8,450      $14.96
                                                              ======                 ======
Exercisable at December 31, 2003...........................   34,529      $ 9.12     13,378      $14.96
                                                              ======                 ======
Exercisable at December 31, 2004...........................   37,558      $ 8.18     18,307      $12.94
                                                              ======                 ======
Vesting period.............................................    5 yrs                  5 yrs


                                     II-71

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    The following table provides additional information about the Company's
outstanding options to purchase Liberty Series A common stock at December 31,
2004.



                                                                         WEIGHTED       NO. OF
                                           RANGE OF        WAEP OF       AVERAGE      EXERCISABLE     WAEP OF
                                           EXERCISE      OUTSTANDING    REMAINING       OPTIONS     EXERCISABLE
NO. OF OUTSTANDING OPTIONS (000'S)          PRICES         OPTIONS         LIFE         (000'S)       OPTIONS
- ----------------------------------      --------------   -----------   ------------   -----------   -----------
                                                                                  
18,927 ...............................  $ 0.88-$  3.39      $ 1.64       0.8 years      18,927        $ 1.64
 6,433 ...............................  $ 5.60-$  9.19      $ 8.23       7.3 years         913        $ 6.32
29,158 ...............................  $10.04-$ 14.14      $11.93       6.6 years      16,524        $12.26
 1,458 ...............................  $19.56-$251.69      $54.91       5.3 years       1,194        $57.04
- ------                                                                                  ------
55,976                                                                                  37,558
======                                                                                  ======


    QVC

    QVC has a qualified and nonqualified combination stock option/stock
appreciation rights plan (collectively, the "Tandem Plan") for employees,
officers, directors and other persons designated by the Stock Option Committee
of QVC's board of directors. Under the Tandem Plan, the option price is
generally equal to the fair market value, as determined by an independent
appraisal, of a share of the underlying common stock of QVC at the date of the
grant. The fair value of a share of QVC common stock as of the latest valuation
date is $2,491. If the eligible participant elects the SAR feature of the Tandem
Plan, the participant receives 75% of the excess of the fair market value of a
share of QVC common stock over the exercise price of the option to which it is
attached at the exercise date. The holders of a majority of the outstanding
options have stated an intention not to exercise the SAR feature of the Tandem
Plan. Because the exercise of the option component is more likely than the
exercise of the SAR feature, compensation expense is measured based on the stock
option component. As a result, QVC is applying fixed plan accounting in
accordance with APB Opinion No. 25. Under the Tandem Plan, option/SAR terms are
ten years from the date of grant, with options/SARs generally becoming
exercisable over four years from the date of grant. At December 31, 2004, there
were a total of 168,139 options outstanding, 44,627 of which were vested at a
weighted average exercise price of $1,142 and 123,512 of which were unvested at
a weighted average exercise price of $1,970. During the year ended December 31,
2004, QVC received cash proceeds from the exercise of options aggregating
$39 million. In 2004, QVC also repurchased shares of common stock issued upon
exercise of stock options in prior years. Cash payments aggregated $168 million
for these repurchases.

    As of December 31, 2004, Liberty had granted to certain officers and
employees of QVC a total of 9,847,391 restricted shares of Liberty Series A
common stock. Such shares generally vest as to 33% on each of January 1, 2005,
2006 and 2007.

    STARZ ENTERTAINMENT

    Starz Entertainment has outstanding Phantom Stock Appreciation Rights
("PSARS") held by certain of its officers and employees (including its former
chief executive officer). PSARS granted under the plan generally vest over a
five year period. Compensation under the PSARS is computed based upon the
percentage of PSARS that are vested and a formula derived from the estimated
fair value of the net assets of Starz Entertainment. All amounts earned under
the plan are payable in cash, Liberty common stock or a combination thereof. At
December 31, 2004 the amount accrued for Starz Entertainment PSARs was
$122 million.

                                     II-72

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    Effective December 27, 2002, the former chief executive officer of Starz
Entertainment elected to exercise 54% of his outstanding PSARS. In July 2003,
Starz Entertainment satisfied the amount due the officer with a cash payment of
$287 million.

    OTHER

    Certain of the Company's other subsidiaries have stock based compensation
plans under which employees and non-employees are granted options or similar
stock based awards. Awards made under these plans vest and become exercisable
over various terms. The awards and compensation recorded, if any, under these
plans is not significant to Liberty.

(14) EMPLOYEE BENEFIT PLANS

    Liberty is the sponsor of the Liberty Media 401(k) Savings Plan (the
"Liberty 401(k) Plan"), which provides its employees and the employees of
certain of its subsidiaries an opportunity for ownership in the Company and
creates a retirement fund. The Liberty 401(k) Plan provides for employees to
make contributions to a trust for investment in Liberty common stock, as well as
several mutual funds. The Company and its subsidiaries make matching
contributions to the Liberty 401(k) Plan based on a percentage of the amount
contributed by employees. In addition, certain of the Company's subsidiaries
have similar employee benefit plans. Employer cash contributions to all plans
aggregated $29 million, $18 million and $13 million for the years ended
December 31, 2004, 2003 and 2002, respectively.

(15) OTHER COMPREHENSIVE EARNINGS (LOSS)

    Accumulated other comprehensive earnings (loss) included in Liberty's
consolidated balance sheets and consolidated statements of stockholders' equity
reflect the aggregate of foreign currency translation adjustments and unrealized
holding gains and losses on AFS Securities. The change in the components of
accumulated other comprehensive earnings (loss), net of taxes, is summarized as
follows:



                                                                           ACCUMULATED
                                            FOREIGN       UNREALIZED          OTHER
                                           CURRENCY        HOLDING        COMPREHENSIVE
                                          TRANSLATION   GAINS (LOSSES)   EARNINGS (LOSS),
                                          ADJUSTMENTS   ON SECURITIES      NET OF TAXES
                                          -----------   --------------   ----------------
                                                        AMOUNTS IN MILLIONS
                                                                
Balance at January 1, 2002..............     $(396)          1,370              974
Other comprehensive loss................        77            (562)            (485)
                                             -----           -----            -----
Balance at December 31, 2002............      (319)            808              489
Other comprehensive earnings............        42           2,715            2,757
                                             -----           -----            -----
Balance at December 31, 2003............     $(277)          3,523            3,246
Other comprehensive earnings............        30           1,001            1,031
Contribution to LMI.....................        --             (51)             (51)
Other activity..........................         9              (9)              --
                                             -----           -----            -----
Balance at December 31, 2004............     $(238)          4,464            4,226
                                             =====           =====            =====


                                     II-73

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    Included in Liberty's accumulated other comprehensive earnings (loss) at
December 31, 2004 is $123 million, net of income taxes, of foreign currency
translation losses related to Cablevision, S.A. ("Cablevision"), a former equity
method investment of Liberty, and $186 million, net of income taxes, of foreign
currency translation losses related to Telewest Communications plc ("Telewest"),
another former equity method investment of Liberty. Subsequent to December 31,
2004, Liberty disposed of its interests in Cablevision and Telewest.
Accordingly, in the first quarter of 2005, Liberty will recognize in its
statement of operations approximately $510 million of foreign currency
translation losses (before income tax benefits) related to Cablevision and
Telewest that were previously included in accumulated other comprehensive
earnings (loss).

    The components of other comprehensive earnings (loss) are reflected in
Liberty's consolidated statements of comprehensive earnings (loss) net of taxes.
The following table summarizes the tax effects related to each component of
other comprehensive earnings (loss).



                                                                  TAX
                                                  BEFORE-TAX   (EXPENSE)   NET-OF-TAX
                                                    AMOUNT      BENEFIT      AMOUNT
                                                  ----------   ---------   ----------
                                                          AMOUNTS IN MILLIONS
                                                                  
YEAR ENDED DECEMBER 31, 2004:
Foreign currency translation adjustments........    $    49        (19)          30
Unrealized holding losses on securities arising
  during period.................................      2,441       (952)       1,489
Reclassification adjustment for losses realized
  in net loss...................................       (800)       312         (488)
                                                    -------     ------       ------
Other comprehensive earnings....................    $ 1,690       (659)       1,031
                                                    =======     ======       ======
YEAR ENDED DECEMBER 31, 2003:
Foreign currency translation adjustments........    $    69        (27)          42
Unrealized holding gains on securities arising
  during period.................................      5,480     (2,137)       3,343
Reclassification adjustment for gains realized
  in net loss...................................     (1,030)       402         (628)
                                                    -------     ------       ------
Other comprehensive earnings....................    $ 4,519     (1,762)       2,757
                                                    =======     ======       ======
YEAR ENDED DECEMBER 31, 2002:
Foreign currency translation adjustments........    $   126        (49)          77
Unrealized holding losses on securities arising
  during period.................................     (6,820)     2,660       (4,160)
Reclassification adjustment for losses realized
  in net loss...................................      5,898     (2,300)       3,598
                                                    -------     ------       ------
Other comprehensive loss........................    $  (796)       311         (485)
                                                    =======     ======       ======


(16) TRANSACTIONS WITH RELATED PARTIES

    Subsidiaries of Liberty provide services to various equity affiliates of
Liberty, including Discovery. Total revenue recognized by Liberty subsidiaries
for such services aggregated $41 million and $13 million for the years ended
December 31, 2004 and 2003, respectively.

                                     II-74

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    In addition, Starz Entertainment pays Revolution Studios ("Revolution"), an
equity affiliate, fees for the rights to exhibit films produced by Revolution.
Payments aggregated $99 million, $91 million and $49 million in 2004, 2003 and
2002, respectively.

(17) COMMITMENTS AND CONTINGENCIES

    FILM RIGHTS

    Starz Entertainment, a wholly-owned subsidiary of Liberty, provides premium
video programming distributed by cable operators, direct-to-home satellite
providers and other distributors throughout the United States. Starz
Entertainment has entered into agreements with a number of motion picture
producers which obligate Starz Entertainment to pay fees ("Programming Fees")
for the rights to exhibit certain films that are released by these producers.
The unpaid balance of Programming Fees for films that were available for
exhibition by Starz Entertainment at December 31, 2004 is reflected as a
liability in the accompanying consolidated balance sheet. The balance due as of
December 31, 2004 is payable as follows: $200 million in 2005 and $16 million in
2006.

    Starz Entertainment has also contracted to pay Programming Fees for films
that have been released theatrically, but are not available for exhibition by
Starz Entertainment until some future date. These amounts have not been accrued
at December 31, 2004. Starz Entertainment's estimate of amounts payable under
these agreements is as follows: $538 million in 2005; $256 million in 2006;
$125 million in 2007; $108 million in 2008; $98 million in 2009; and
$134 million thereafter.

    In addition, Starz Entertainment is also obligated to pay Programming Fees
for all qualifying films that are released theatrically in the United States by
studios owned by The Walt Disney Company ("Disney") through 2009, all qualifying
films that are released theatrically in the United States by studios owned by
Sony Pictures Entertainment ("Sony") from 2005 through 2010 and all qualifying
films released theatrically in the United States by Revolution through 2006.
Films are generally available to Starz Entertainment for exhibition
10 - 12 months after their theatrical release. The Programming Fees to be paid
by Starz Entertainment are based on the quantity and the domestic theatrical
exhibition receipts of qualifying films. As these films have not yet been
released in theatres, Starz Entertainment is unable to estimate the amounts to
be paid under these output agreements. However, such amounts are expected to be
significant.

    In addition to the foregoing contractual film obligations, each of Disney
and Sony has the right to extend its contract for an additional three years. If
Sony elects to extend its contract, Starz Entertainment would be required to pay
Sony a total of $190 million in four annual installments of $47.5 million. Sony
is required to exercise this option by December 31, 2007. If made, Starz
Entertainment's payments to Sony would be amortized ratably as programming
expense over the extension period beginning in 2011. An extension of this
agreement would also result in the payment by Starz Entertainment of Programming
Fees for qualifying films released by Sony during the extension period. If
Disney elects to extend its contract, Starz Entertainment is not obligated to
pay any amounts in excess of its Programming Fees for qualifying films released
by Disney during the extension period.

    GUARANTEES

    Liberty guarantees Starz Entertainment's obligations under the Disney and
Sony output agreements. At December 31, 2004, Liberty's guarantees for
obligations for films released by such date aggregated $763 million. While the
guarantee amount for films not yet released is not determinable,

                                     II-75

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

such amount is expected to be significant. As noted above Starz Entertainment
has recognized the liability for a portion of its obligations under the output
agreements. As this represents a commitment of Starz Entertainment, a
consolidated subsidiary of Liberty, Liberty has not recorded a separate
liability for its guarantees of these obligations.

    At December 31, 2004, Liberty has guaranteed Y4.7 billion ($46 million) of
the bank debt of Jupiter Telecommunications Co., Ltd. ("J-COM"), a former equity
affiliate that provides broadband services in Japan. Liberty's guarantees expire
as the underlying debt matures and is repaid. The debt maturity dates range from
2005 to 2018. Liberty's investment in J-COM was attributed to LMI in the Spin
Off. In connection with the Spin Off, LMI has agreed to indemnify Liberty for
any amounts Liberty is required to fund under this guarantee.

    In connection with agreements for the sale of certain assets, Liberty
typically retains liabilities that relate to events occurring prior to its sale,
such as tax, environmental, litigation and employment matters. Liberty generally
indemnifies the purchaser in the event that a third party asserts a claim
against the purchaser that relates to a liability retained by Liberty. These
types of indemnification guarantees typically extend for a number of years.
Liberty is unable to estimate the maximum potential liability for these types of
indemnification guarantees as the sale agreements typically do not specify a
maximum amount and the amounts are dependent upon the outcome of future
contingent events, the nature and likelihood of which cannot be determined at
this time. Historically, Liberty has not made any significant indemnification
payments under such agreements and no amount has been accrued in the
accompanying consolidated financial statements with respect to these
indemnification guarantees.

    OPERATING LEASES

    Liberty leases business offices, has entered into pole rental and satellite
transponder lease agreements and uses certain equipment under lease
arrangements. Rental expense under such arrangements amounted to $84 million,
$58 million and $50 million for the years ended December 31, 2004, 2003 and
2002, respectively.

    A summary of future minimum lease payments under noncancelable operating
leases as of December 31, 2004 follows (amounts in millions):



YEARS ENDING DECEMBER 31:
- -------------------------
                                                           
2005........................................................    $62
2006........................................................    $49
2007........................................................    $39
2008........................................................    $32
2009........................................................    $26
Thereafter..................................................    $69


    It is expected that in the normal course of business, leases that expire
generally will be renewed or replaced by leases on other properties; thus, it is
anticipated that future lease commitments will not be less than the amount shown
for 2004.

    LITIGATION

    Liberty has contingent liabilities related to legal and tax proceedings and
other matters arising in the ordinary course of business. Although it is
reasonably possible Liberty may incur losses upon

                                     II-76

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

conclusion of such matters, an estimate of any loss or range of loss cannot be
made. In the opinion of management, it is expected that amounts, if any, which
may be required to satisfy such contingencies will not be material in relation
to the accompanying consolidated financial statements.

(18) INFORMATION ABOUT LIBERTY'S OPERATING SEGMENTS

    Liberty is a holding company, which through its ownership of interests in
subsidiaries and other companies, is primarily engaged in the electronic
retailing, media, communications and entertainment industries. Each of these
businesses is separately managed. Liberty has organized its businesses into
three Groups based upon each businesses' services or products: Interactive
Group, Networks Group and Corporate and Other (which includes its Tech/Ventures
assets). Liberty's chief operating decision maker and management team review the
combined results of operations of each of these Groups (including consolidated
subsidiaries and equity method affiliates), as well as the results of operations
of each individual business in each Group.

    Liberty identifies its reportable segments as (A) those consolidated
subsidiaries that (1) represent 10% or more of its consolidated revenue,
earnings before income taxes or total assets or (2) are significant to an
evaluation of the performance of a Group; and (B) those equity method affiliates
(1) whose share of earnings represent 10% or more of Liberty's pre-tax earnings
or (2) are significant to an evaluation of the performance of a Group. The
segment presentation for prior periods has been conformed to the current period
segment presentation. Liberty evaluates performance and makes decisions about
allocating resources to its Groups and operating segments based on financial
measures such as revenue, operating cash flow, gross margin, average sales price
per unit, number of units shipped and revenue or sales per customer equivalent.
In addition, Liberty reviews non-financial measures such as average prime time
rating, prime time audience delivery, subscriber growth and penetration, as
appropriate.

    Liberty defines operating cash flow as revenue less cost of sales, operating
expenses, and selling, general and administrative expenses (excluding stock
compensation). Liberty believes this is an important indicator of the
operational strength and performance of its businesses, including each
business's ability to service debt and fund capital expenditures. In addition,
this measure allows management to view operating results and perform analytical
comparisons and benchmarking between businesses and identify strategies to
improve performance. This measure of performance excludes depreciation and
amortization, stock compensation, litigation settlements and restructuring and
impairment charges that are included in the measurement of operating income
pursuant to GAAP. Accordingly, operating cash flow should be considered in
addition to, but not as a substitute for, operating income, net income, cash
flow provided by operating activities and other measures of financial
performance prepared in accordance with GAAP. Liberty generally accounts for
intersegment sales and transfers as if the sales or transfers were to third
parties, that is, at current prices.

    For the year ended December 31, 2004, Liberty has identified the following
consolidated subsidiaries and equity method affiliates as its reportable
segments:

    INTERACTIVE GROUP

    - QVC--consolidated subsidiary that markets and sells a wide variety of
      consumer products in the United States and several foreign countries,
      primarily by means of televised shopping programs on the QVC networks and
      via the Internet through its domestic and international websites.

                                     II-77

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    - Ascent Media Group ("Ascent Media")--consolidated subsidiary that provides
      sound, video and ancillary post-production and distribution services to
      the motion picture and television industries in the United States, Europe
      and Asia.

    NETWORKS GROUP

    - Starz Entertainment--consolidated subsidiary that provides premium
      programming distributed by cable operators, direct-to-home satellite
      providers and other distributors throughout the United States.

    - Discovery--50% owned equity method affiliate that provides original and
      purchased cable television programming in the United States and over 160
      other countries.

    - Court TV--50% owned equity method affiliate that operates a basic cable
      network that provides informative and entertaining programming based on
      the American legal system.

    - GSN--50% owned equity method affiliate that operates a basic cable network
      dedicated to game-related programming and interactive game playing.

    Liberty's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
segment requires different technologies, distribution channels and marketing
strategies. The accounting policies of the segments that are also consolidated
subsidiaries are the same as those described in the summary of significant
policies.

    The amounts presented in the table below represent 100% of each business'
revenue and operating cash flow. These amounts are combined on an unconsolidated
basis and are then adjusted to remove the effects of the equity method
investments to arrive at the consolidated balances for each group. This
presentation is designed to reflect the manner in which management reviews the
operating performance of individual businesses within each group regardless of
whether the investment is accounted for as a consolidated subsidiary or an
equity investment. It should be noted, however, that this presentation is not in
accordance with GAAP since the results of equity method investments are required
to be reported on a net basis.

    Further, Liberty could not, among other things, cause any noncontrolled
affiliate to distribute to Liberty its proportionate share of the revenue or
operating cash flow of such affiliate.

                                     II-78

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

PERFORMANCE MEASURES



                                                                     YEARS ENDED DECEMBER 31,
                                                ------------------------------------------------------------------
                                                        2004                   2003                   2002
                                                --------------------   --------------------   --------------------
                                                           OPERATING              OPERATING              OPERATING
                                                             CASH                   CASH                   CASH
                                                REVENUE      FLOW      REVENUE      FLOW      REVENUE      FLOW
                                                --------   ---------   --------   ---------   --------   ---------
                                                                       AMOUNTS IN MILLIONS
                                                                                       
INTERACTIVE GROUP
QVC...........................................  $ 5,687      1,230       4,889      1,013       4,362       861
Ascent Media..................................      631         98         508         75         538        87
Other consolidated subsidiaries...............      309         47         297         31         256        22
                                                -------      -----      ------      -----      ------      ----
  Combined Interactive Group..................    6,627      1,375       5,694      1,119       5,156       970
Eliminate equity method affiliates............       --         --      (2,916)      (579)     (4,362)     (861)
                                                -------      -----      ------      -----      ------      ----
  Consolidated Interactive Group..............    6,627      1,375       2,778        540         794       109
                                                -------      -----      ------      -----      ------      ----
NETWORKS GROUP
Starz Entertainment...........................      963        239         906        368         945       371
Discovery.....................................    2,365        663       1,995        508       1,717       379
Court TV......................................      227         52         186         43         148        (1)
GSN...........................................       88         (2)         76          1          53       (11)
Other consolidated subsidiaries...............       21         (3)         27         --          24        --
                                                -------      -----      ------      -----      ------      ----
  Combined Networks Group.....................    3,664        949       3,190        920       2,887       738
Eliminate equity method affiliates............   (2,680)      (713)     (2,257)      (552)     (1,918)     (367)
                                                -------      -----      ------      -----      ------      ----
  Consolidated Networks Group.................      984        236         933        368         969       371
                                                -------      -----      ------      -----      ------      ----
Corporate and Other...........................       71        (74)         27       (108)         41       (77)
                                                -------      -----      ------      -----      ------      ----
Consolidated Liberty..........................  $ 7,682      1,537       3,738        800       1,804       403
                                                =======      =====      ======      =====      ======      ====


                                     II-79

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

BALANCE SHEET INFORMATION



                                                        DECEMBER 31,
                                       -----------------------------------------------
                                                2004                     2003
                                       ----------------------   ----------------------
                                                  INVESTMENTS              INVESTMENTS
                                        TOTAL         IN         TOTAL         IN
                                        ASSETS    AFFILIATES     ASSETS    AFFILIATES
                                       --------   -----------   --------   -----------
                                                     AMOUNTS IN MILLIONS
                                                               
INTERACTIVE GROUP
QVC..................................  $14,314          78       13,824          77
Ascent Media.........................      946           4          853           4
Other consolidated subsidiaries......      552          --          587          --
                                       -------       -----       ------       -----
  Consolidated Interactive Group.....   15,812          82       15,264          81
                                       -------       -----       ------       -----
NETWORKS GROUP
Starz Entertainment..................    2,945          52        2,852          50
Discovery............................    3,236          74        3,194          61
Court TV.............................      275          --          285          --
GSN..................................      108          --          101          --
Other consolidated subsidiaries......        9          --           21          --
                                       -------       -----       ------       -----
  Combined Networks Group............    6,573         126        6,453         111
Eliminate equity method affiliates...   (3,619)        (74)      (3,580)        (61)
                                       -------       -----       ------       -----
  Consolidated Networks Group........    2,954          52        2,873          50
                                       -------       -----       ------       -----
Corporate and Other..................   31,264       3,600       32,345       3,482
                                       -------       -----       ------       -----
Discontinued operations..............      151          --        3,743          --
                                       -------       -----       ------       -----
Consolidated Liberty.................  $50,181       3,734       54,225       3,613
                                       =======       =====       ======       =====


                                     II-80

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

    The following table provides a reconciliation of segment operating cash flow
to loss from continuing operations before income taxes and minority interest:



                                                         YEARS ENDED DECEMBER 31,
                                                      ------------------------------
                                                        2004       2003       2002
                                                      --------   --------   --------
                                                           AMOUNTS IN MILLIONS
                                                                   
Consolidated segment operating cash flow............  $ 1,537        800        403
Stock compensation..................................     (101)        88         46
Litigation settlement...............................       42         --         --
Depreciation and amortization.......................     (736)      (465)      (342)
Impairment of long-lived assets.....................       --     (1,362)      (187)
Interest expense....................................     (615)      (529)      (410)
Share of earnings (losses) of affiliates............       97         45        (89)
Realized and unrealized gains (losses) on derivative
  instruments, net..................................   (1,284)      (662)     2,139
Gains (losses) on dispositions, net.................    1,406      1,125       (541)
Nontemporary declines in fair value of
  investments.......................................     (129)       (22)    (5,806)
Other, net..........................................      107        109        184
                                                      -------     ------     ------
Earnings (loss) from continuing operations before
  income taxes and minority interest................  $   324       (873)    (4,603)
                                                      =======     ======     ======


REVENUE BY GEOGRAPHIC AREA

    Revenue by geographic area based on the location of customers is as follows:



                                                           YEARS ENDED DECEMBER 31,
                                                        ------------------------------
                                                          2004       2003       2002
                                                        --------   --------   --------
                                                             AMOUNTS IN MILLIONS
                                                                     
United States.........................................   $5,884     3,133      1,656
Foreign countries.....................................    1,798       605        148
                                                         ------     -----      -----
  Consolidated Liberty................................   $7,682     3,738      1,804
                                                         ======     =====      =====


LONG-LIVED ASSETS BY GEOGRAPHIC AREA



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2004       2003
                                                              --------   --------
                                                                    AMOUNTS
                                                                  IN MILLIONS
                                                                   
United States...............................................   $  933       979
Foreign countries...........................................      459       398
                                                               ------     -----
  Consolidated Liberty......................................   $1,392     1,377
                                                               ======     =====


                                     II-81

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 2004, 2003 AND 2002

(19) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)



                                                1ST        2ND        3RD        4TH
                                              QUARTER    QUARTER    QUARTER    QUARTER
                                              --------   --------   --------   --------
                                                AMOUNTS IN MILLIONS, EXCEPT PER SHARE
                                                               AMOUNTS
                                                                   
2004:
  Revenue...................................   $1,752     1,801      1,784       2,345
                                               ======     =====      =====      ======
  Operating income (loss), as reported......   $  174
    Reclassification for litigation
      settlement............................       42
                                               ------
  Operating income (loss), as adjusted......   $  216       184        156         186
                                               ======     =====      =====      ======
  Earnings (loss) from continuing
    operations..............................   $   81      (311)       374          17
                                               ======     =====      =====      ======
  Net earnings (loss).......................   $  (10)     (314)       372          (2)
                                               ======     =====      =====      ======
  Basic and diluted earnings (loss) from
    continuing operations per common
    share...................................   $  .03      (.11)       .13         .01
                                               ======     =====      =====      ======
  Basic and diluted net earnings (loss) per
    common share............................   $   --      (.11)       .13          --
                                               ======     =====      =====      ======
2003:
  Revenue...................................   $  438       429        833       2,038
                                               ======     =====      =====      ======
  Operating income (loss)...................   $   12       (42)       152      (1,061)
                                               ======     =====      =====      ======
  Earnings (loss) from continuing
    operations..............................   $  131      (472)        37        (921)
                                               ======     =====      =====      ======
  Net earnings (loss).......................   $  132      (464)        41        (931)
                                               ======     =====      =====      ======
  Basic and diluted earnings (loss) from
    continuing operations per common
    shares..................................   $  .05      (.17)       .01        (.32)
                                               ======     =====      =====      ======
  Basic and diluted net earnings (loss) per
    common share............................   $  .05      (.17)       .01        (.32)
                                               ======     =====      =====      ======


(20) SUBSEQUENT EVENT

    Liberty's Board of Directors has approved a resolution authorizing the
spin-off of a newly formed subsidiary ("Liberty Spinco"). Liberty Spinco's
assets will be comprised of Liberty's 100% ownership interest in Ascent Media
and Liberty's 50% ownership interest in Discovery. The spin off, which will be
effected as a tax-free distribution of Liberty Spinco's shares to Liberty's
shareholders, is expected to occur in the second or third quarter of 2005
subject to, among other things, the receipt of a favorable tax opinion and
regulatory and other third party approvals. Upon completion of this transaction,
Liberty Spinco will be a separate publicly traded company. This transaction is
expected to be accounted for at historical cost due to the pro rata nature of
the distribution.

                                     II-82

                                   PART III.

    The following required information is incorporated by reference to our
definitive proxy statement for our 2005 Annual Meeting of Shareholders presently
scheduled to be held in June 2005:

    ITEM 10.  Directors and Executive Officers of the Registrant

    ITEM 11.  Executive Compensation

    ITEM 12.  Security Ownership of Certain Beneficial Owners and Management

    ITEM 13.  Certain Relationships and Related Transactions

    ITEM 14.  Principal Accounting Fees and Services

    We will file our definitive proxy statement for our 2005 Annual Meeting of
shareholders with the Securities and Exchange Commission on or before April 30,
2005.

                                     III-1

                                    PART IV.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) (1)  FINANCIAL STATEMENTS

Included in Part II of this Report:



                                                              PAGE NO.
                                                              ---------
                                                           
Liberty Media Corporation:
  Report of Independent Registered Public Accounting Firm...    II-33
  Consolidated Balance Sheets, December 31, 2004 and 2003...    II-34
  Consolidated Statements of Operations, Years ended            II-36
    December 31, 2004, 2003 and 2002........................
  Consolidated Statements of Comprehensive Earnings (Loss),     II-37
    Years ended December 31, 2004, 2003 and 2002............
  Consolidated Statements of Stockholders' Equity, Years        II-38
    ended December 31, 2004, 2003 and 2002..................
  Consolidated Statements of Cash Flows, Years Ended            II-39
    December 31, 2004, 2003 and 2002........................
  Notes to Consolidated Financial Statements, December 31,      II-40
    2004, 2003 and 2002.....................................


(a) (2)  FINANCIAL STATEMENT SCHEDULES

Included in Part IV of this Report:

    (i) All schedules have been omitted because they are not applicable, not
        material or the required information is set forth in the financial
        statements or notes thereto.

    (ii) Separate financial statements for Discovery Communications, Inc.:

                                                           
        Report of Independent Registered Public Accounting Firm.....    IV-5
        Consolidated Blance Sheets, December 31, 2004 and 2003......    IV-6
        Consolidated Statements of Operations, Years ended              IV-7
          December 31, 2004, 2003 and 2002..........................
        Consolidated Statements of Cash Flows, Years ended              IV-8
          December 31, 2004, 2003 and 2002..........................
        Consolidated Statements of Changes in Stockholders' Deficit,    IV-9
          Years ended December 31, 2004, 2003 and 2002..............
        Notes to Consolidated Financial Statements..................   IV-10

        

(a) (3)  EXHIBITS

    Listed below are the exhibits which are filed as a part of this Report
(according to the number assigned to them in Item 601 of Regulation S-K):

                     
3--Articles of Incorporation and Bylaws:

   3.1                  Restated Certificate of Incorporation of Liberty, dated
                          August 9, 2001 (incorporated by reference to Exhibit 3.2
                          to the Registration Statement on Form S-1 of Liberty Media
                          Corporation (File No. 333-55998) as filed on February 21,
                          2001 (the "Split Off S-1 Registration Statement")).

   3.2                  Bylaws of Liberty, as adopted August 9, 2001 (incorporated
                          by reference to Exhibit 3.4 of the Split Off S-1
                          Registration Statement).

4--Instruments Defining the Rights of Securities Holders, including Indentures:

   4.1                  Specimen certificate for shares of Series A common stock,
                          par value $.01 per share, of the Registrant (incorporated
                          by reference to Exhibit 4.1 to the Split Off S-1
                          Registration Statement).



                                      IV-1

                     
   4.2                  Specimen certificate for shares of Series B common stock,
                          par value $.01 per share, of the Registrant (incorporated
                          by reference to Exhibit 4.2 to the Split Off S-l
                          Registration Statement).

   4.3                  Indenture, dated as of July 7, 1999, between the Registrant
                          and The Bank of New York (incorporated by reference to
                          Exhibit 4.1 to the Registration Statement on Form S-4 of
                          Liberty Media Corporation (File No. 333-86491) as filed on
                          September 3, 1999.

   4.4                  Liberty undertakes to furnish the Securities and Exchange
                          Commission, upon request, a copy of all instruments with
                          respect to long-term debt not filed herewith.

10--Material Contracts:

  10.1                  Inter-Group Agreement dated as of March 9, 1999, between
                          AT&T Corp. and Liberty Media Corporation, Liberty Media
                          Group LLC and each Covered Entity listed on the signature
                          pages thereof (incorporated by reference to Exhibit 10.2
                          to the Registration Statement on Form S-4 of Liberty Media
                          Corporation (File No. 333-86491) as filed on September 3,
                          1999, the "Liberty S-4 Registration Statement").

  10.2                  Ninth Supplement to Inter-Group Agreement dated as of
                          June 14, 2001, between and among AT&T Corp., on the one
                          hand, and Liberty Media Corporation, Liberty Media Group
                          LLC, AGI LLC, Liberty SP, Inc., LMC Interactive, Inc. and
                          Liberty AGI, Inc., on the other hand (incorporated by
                          reference to Exhibit 10.25 to the Registration Statement
                          on Form S-1 of Liberty Media Corporation (File
                          No. 333-66034) as filed on July 27, 2001).

  10.3                  Intercompany Agreement dated as of March 9, 1999, between
                          Liberty and AT&T Corp. (incorporated by reference to
                          Exhibit 10.3 to the Liberty S-4 Registration Statement).

  10.4                  Tax Sharing Agreement dated as of March 9, 1999, by and
                          among AT&T Corp., Liberty Media Corporation,
                          Tele-Communications, Inc., Liberty Ventures Group LLC,
                          Liberty Media Group LLC, TCI Starz, Inc., TCI CT
                          Holdings, Inc. and each Covered Entity listed on the
                          signature pages thereof (incorporated by reference to
                          Exhibit 10.4 to the Liberty S-4 Registration Statement).

  10.5                  First Amendment to Tax Sharing Agreement dated as of
                          May 28, 1999, by and among AT&T Corp., Liberty Media
                          Corporation, Tele-Communications, Inc., Liberty Ventures
                          Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI
                          CT Holdings, Inc. and each Covered Entity listed on the
                          signature pages thereof (incorporated by reference to
                          Exhibit 10.5 to the Liberty S-4 Registration Statement).

  10.6                  Second Amendment to Tax Sharing Agreement dated as of
                          September 24, 1999, by and among AT&T Corp., Liberty Media
                          Corporation, Tele-Communications, Inc., Liberty Ventures
                          Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI
                          CT Holdings, Inc. and each Covered Entity listed on the
                          signature pages thereof (incorporated by reference to
                          Exhibit 10.6 to the Registration Statement on Form S-1 of
                          Liberty Media Corporation (File No. 333-93917) as filed on
                          December 30, 1999 (the "Liberty S-1 Registration
                          Statement)).

  10.7                  Third Amendment to Tax Sharing Agreement dated as of
                          October 20, 1999, by and among AT&T Corp., Liberty Media
                          Corporation, Tele-Communications, Inc., Liberty Ventures
                          Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI
                          CT Holdings, Inc. and each Covered Entity listed on the
                          signature pages thereof (incorporated by reference to
                          Exhibit 10.7 to the Liberty S-l Registration Statement).



                                      IV-2

                     
  10.8                  Fourth Amendment to Tax Sharing Agreement dated as of
                          October 28, 1999, by and among AT&T Corp., Liberty Media
                          Corporation, Tele-Communications, Inc., Liberty Ventures
                          Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI
                          CT Holdings, Inc. and each Covered Entity listed on the
                          signature pages thereof (incorporated by reference to
                          Exhibit 10.8 to the Liberty S-l Registration Statement).

  10.9                  Fifth Amendment to Tax Sharing Agreement dated as of
                          December 6, 1999, by and among AT&T Corp., Liberty Media
                          Corporation, Tele-Communications, Inc., Liberty Ventures
                          Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI
                          CT Holdings, Inc. and each Covered Entity listed on the
                          signature pages thereof (incorporated by reference to
                          Exhibit 10.9 to the Liberty S-l Registration Statement).

  10.10                 Sixth Amendment to Tax Sharing Agreement dated as of
                          December 10, 1999, by and among AT&T Corp., Liberty Media
                          Corporation, Tele-Communications, Inc., Liberty Ventures
                          Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI
                          CT Holdings, Inc. and each Covered Entity listed on the
                          signature pages thereof (incorporated by reference to
                          Exhibit 10.10 to the Liberty S-l Registration Statement).

  10.11                 Seventh Amendment to Tax Sharing Agreement dated as of
                          December 30, 1999, by and among AT&T Corp., Liberty Media
                          Corporation, Tele-Communications, Inc., Liberty Ventures
                          Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI
                          CT Holdings, Inc. and each Covered Entity listed on the
                          signature pages thereof (incorporated by reference to
                          Exhibit 10.11 to the Liberty S-l Registration Statement).

  10.12                 Eighth Amendment to Tax Sharing Agreement dated as of
                          July 25, 2000, by and among AT&T Corp., Liberty Media
                          Corporation, AT&T Broadband LLC, Liberty Ventures Group
                          LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT
                          Holdings, Inc. and each Covered Entity listed on the
                          signature pages thereof (incorporated by reference to
                          Exhibit 10.12 to the Split Off Registration Statement).

  10.13                 Instrument dated January 14, 2000, adding The Associated
                          Group, Inc. as a party to the Tax Sharing Agreement dated
                          as of March 9, 1999, as amended, among The Associated
                          Group, Inc., AT&T Corp., Liberty Media Corporation,
                          Tele-Communications, Inc., Liberty Ventures Group LLC,
                          Liberty Media Group LLC, TCI Starz, Inc., TCI CT
                          Holdings, Inc. and each Covered Entity listed on the
                          signature pages thereof (incorporated by reference to
                          Exhibit 10.12 to the Liberty S-1 Registration Statement).

  10.14                 Restated and Amended Employment Agreement dated November 1,
                          1992, between Tele-Communications, Inc. and John C. Malone
                          (assumed by Liberty as of March 9, 1999), and the
                          amendment thereto dated June 30, 1999 and effective as of
                          March 9, 1999, between Liberty and John C. Malone
                          (incorporated by reference to Exhibit 10.6 to the Liberty
                          S-4 Registration Statement).

  10.15                 Second Amendment to Employment Agreement dated November 1,
                          1992 between TCI and John C. Malone (assumed by Liberty as
                          of March 9, 1999), as amended effective March 9, 1999,
                          (incorporated by reference to Exhibit 10.15 to Liberty's
                          Annual Report on Form 10-K for the year ended
                          December 31, 2003, Commission File No. 0-20421).

  10.16                 Liberty Media Corporation 2000 Incentive Plan (As Amended
                          and Restated Effective April 19, 2004), filed herewith.

  10.17                 Form of Non-Qualified Stock Option Agreement under the
                          Liberty Media Corporation 2000 Incentive Plan (As Amended
                          and Restated Effective April 19, 2004), filed herewith.

  10.18                 Form of Stock Appreciation Rights Agreement under the
                          Liberty Media Corporation 2000 Incentive Plan (As Amended
                          and Restated Effective April 19, 2004), filed herewith.



                                      IV-3

                     
  10.19                 Form of Restricted Stock Award Agreement under the Liberty
                          Media Corporation 2000 Incentive Plan (As Amended and
                          Restated Effective April 19, 2004), filed herewith.

  10.20                 Liberty Media Corporation 2002 Non-employee Director
                          Incentive Plan (incorporated by reference to
                          Exhibit 10.17 to Liberty's Annual Report on Form 10-K/A
                          for the year ended December 31, 2002, Commission File
                          No. 0-20421).

  10.21                 Form of Stock Appreciation Rights Agreement under the
                          Liberty Media Corporation 2002 Non-Employee Director
                          Incentive Plan, filed herewith.

  10.22                 Letter Agreement, dated as of May 8, 2003, between
                          Robert R. Bennett and Liberty regarding Mr. Bennett's
                          personal use of Liberty's aircraft, (incorporated by
                          reference to Exhibit 10.19 to Liberty's Annual Report on
                          Form 10-K for the year ended December 31, 2003,
                          Commission File No. 0-20421).

  10.23                 Deferred Compensation Agreement, dated as of January 1,
                          2004, between Liberty and Robert R. Bennett, filed
                          herewith.

  10.24                 Deferred Compensation Agreement, dated as of October 15,
                          2004, between Liberty and Robert R. Bennett, filed
                          herewith.

  10.25                 Amended and Restated Stock Purchase Agreement, dated as of
                          June 30, 2003, by and among Liberty, Comcast, Comcast
                          QVC, Inc. and QVC, Inc. (incorporated by reference to
                          Exhibit 99.1 to the Company's Current Report on Form 8-K
                          filed on September 18, 2003, Commission File
                          No. 0-20421).

21--Subsidiaries of Liberty Media Corporation, filed herewith.

23.1                    Consent of KPMG LLP, filed herewith.

23.2                    Consent of PricewaterhouseCoopers LLP, filed herewith.

31.1                    Rule 13a-14(a)/15d-14(a) Certification, filed herewith.

31.2                    Rule 13a-14(a)/15d-14(a) Certification, filed herewith.

31.3                    Rule 13a-14(a)/15d-14(a) Certification, filed herewith.

32--Section 1350 Certification, filed herewith.



                                      IV-4

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Discovery Communications, Inc.:

    In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' deficit, and
of cash flows present fairly, in all material respects, the financial position
of Discovery Communications, Inc. and its subsidiaries at December 31, 2004 and
2003, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2004 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
McLean, Virginia
February 22, 2005

                                      IV-5

                         DISCOVERY COMMUNICATIONS, INC.

                          CONSOLIDATED BALANCE SHEETS



                                                                     DECEMBER 31,
                                                              ---------------------------
                                                                 2004             2003
                                                              ----------       ----------
                                                              IN THOUSANDS, EXCEPT SHARE
                                                                         DATA
                                                                         
ASSETS
Current assets
  Cash and cash equivalents.................................  $   24,282       $   34,075
  Accounts receivable, less allowances of $24,375 and
    $40,213.................................................     527,659          466,747
  Inventories...............................................      32,567           37,004
  Deferred income taxes.....................................     144,606          232,693
  Programming rights, net...................................      50,578           46,364
  Other current assets......................................      55,758           41,500
                                                              ----------       ----------
Total current assets........................................     835,450          858,383
                                                              ----------       ----------
  Property and equipment, net...............................     380,290          360,411
  Programming rights, net, less current portion.............   1,027,379          881,735
  Deferred launch incentives................................     314,601          373,579
  Goodwill..................................................     257,460          253,308
  Intangibles, net..........................................     187,761          213,660
  Investments in and advances to unconsolidated
    affiliates..............................................      74,450           60,765
  Deferred income taxes.....................................     114,673          146,768
  Other assets..............................................      43,622           45,602
                                                              ----------       ----------
TOTAL ASSETS................................................  $3,235,686       $3,194,211
                                                              ==========       ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
  Accounts payable and accrued liabilities..................  $  338,182       $  356,320
  Launch incentives payable.................................      33,509           62,841
  Programming rights payable................................      94,969           73,340
  Current portion of long-term incentive plan liabilities...     261,627          427,755
  Current portion of long-term debt.........................       9,736          517,750
  Income taxes payable......................................      21,123           10,564
  Other current liabilities.................................     126,207           90,228
                                                              ----------       ----------
Total current liabilities...................................     885,353        1,538,798
                                                              ----------       ----------
Long-term debt, less current portion........................   2,498,287        1,833,942
Derivative financial instruments, less current portion......      46,541           88,781
Launch incentives payable, less current portion.............      34,328           45,422
Long-term incentive plan liabilities, less current
  portion...................................................      60,735           63,844
Programming rights payable, less current portion............       8,027            3,668
Other liabilities...........................................      10,774           11,269
                                                              ----------       ----------
Total liabilities...........................................   3,544,045        3,585,724
                                                              ----------       ----------
Mandatorily redeemable interests in subsidiaries............     319,567          410,252
                                                              ----------       ----------
Commitments and contingencies
                                                              ----------       ----------
STOCKHOLDERS' DEFICIT
  Class A common stock; $.01 par value; 100,000 shares
    authorized; 51,119 shares issued, less 719 and 504
    shares of treasury stock................................           1                1
  Class B common stock; $.01 par value; 60,000 shares
    authorized; 50,615 shares issued and held in treasury
    stock at December 31, 2004 and 2003.....................          --               --
Additional paid-in capital..................................      21,093           21,093
Accumulated deficit.........................................    (672,931)        (840,953)
Accumulated other comprehensive income......................      23,911           18,094
                                                              ----------       ----------
Total stockholders' deficit.................................    (627,926)        (801,765)
                                                              ----------       ----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT.................  $3,235,686       $3,194,211
                                                              ==========       ==========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      IV-6

                         DISCOVERY COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                  YEAR ENDED DECEMBER 31,
                                                            -----------------------------------
                                                               2004         2003        2002
                                                            ----------   ----------   ---------
                                                                       IN THOUSANDS
                                                                             
OPERATING REVENUE
Advertising...............................................  $1,133,807   $1,010,585   $ 829,936
Subscriber fees...........................................     976,362      747,927     646,500
Other.....................................................     255,177      236,535     240,339
                                                            ----------   ----------   ---------
Total operating revenue...................................   2,365,346    1,995,047   1,716,775
                                                            ----------   ----------   ---------
Cost of revenue...........................................     846,316      751,578     699,737
Selling, general & administrative.........................     856,340      735,017     638,405
Expenses arising from long-term incentive plans...........      71,515       74,119      96,865
Depreciation & amortization...............................     129,011      120,172     112,841
Gain on sale of patents...................................     (22,007)          --          --
                                                            ----------   ----------   ---------
Total operating expenses..................................   1,881,175    1,680,886   1,547,848
                                                            ----------   ----------   ---------
INCOME FROM OPERATIONS....................................     484,171      314,161     168,927
                                                            ----------   ----------   ---------
OTHER INCOME (EXPENSE)
Interest, net.............................................    (167,420)    (159,409)   (163,315)
Unrealized gains (losses) from derivative instruments,
  net.....................................................      45,540       21,405     (11,607)
Minority interests in consolidated subsidiaries...........     (54,940)     (35,965)    (45,977)
Equity in earnings (losses) of unconsolidated
  affiliates..............................................         171       (4,477)     (2,716)
Other.....................................................       2,299        2,307      (3,425)
                                                            ----------   ----------   ---------
Total other expense, net..................................    (174,350)    (176,139)   (227,040)
                                                            ----------   ----------   ---------
INCOME (LOSS) BEFORE INCOME TAXES.........................     309,821      138,022     (58,113)
                                                            ----------   ----------   ---------
Income tax expense (benefit)..............................     141,799       74,785     (10,057)
                                                            ----------   ----------   ---------
NET INCOME (LOSS).........................................  $  168,022   $   63,237   $ (48,056)
                                                            ==========   ==========   =========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      IV-7

                         DISCOVERY COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                   YEAR ENDED DECEMBER 31,
                                                              ----------------------------------
                                                                 2004         2003        2002
                                                              -----------   ---------   --------
                                                                         IN THOUSANDS
                                                                               
OPERATING ACTIVITIES
Net income (loss)...........................................  $   168,022   $  63,237   $(48,056)
Adjustments to reconcile net income (loss) to cash provided
  by operations
  Depreciation and amortization.............................      129,011     120,172    112,841
  Amortization of deferred launch incentives and
    representation rights...................................      107,757     131,980    132,495
  Provision for losses on accounts receivable, net..........          959      11,413     20,787
  Expenses arising from long-term incentive plans...........       71,515      74,119     96,865
  Equity in (earnings) losses of unconsolidated
    affiliates..............................................         (171)      4,477      2,716
  Deferred income taxes.....................................      105,522      42,280    (37,801)
  Unrealized (gains) losses on derivative financial
    instruments, net........................................      (45,540)    (21,405)    11,607
  Non cash minority interest charges........................       54,940      35,965     45,977
  Gain on sale of patents...................................      (22,007)         --         --
  Other non-cash charges....................................        8,300       5,584     14,325
  CHANGES IN ASSETS AND LIABILITIES, NET OF BUSINESS
    COMBINATIONS
    Accounts receivable.....................................      (60,841)    (52,753)   (46,553)
    Inventories.............................................        4,555      22,978    (30,504)
    Other assets............................................      (14,706)    (10,212)    (8,435)
    Programming rights, net of payables.....................     (122,433)   (139,387)   (86,103)
    Accounts payable and accrued liabilities................       55,734      27,646     79,565
    Representation rights...................................         (479)    (11,250)   (10,750)
    Deferred launch incentives..............................      (74,696)    (99,630)   (72,963)
    Long-term incentive plan liabilities....................     (240,752)    (51,023)   (37,003)
                                                              -----------   ---------   --------
Cash provided by operations.................................      124,690     154,191    139,010
                                                              -----------   ---------   --------
INVESTING ACTIVITIES
Acquisition of property and equipment.......................      (88,100)   (109,956)  (138,777)
Business combinations, net of cash acquired.................      (17,218)    (46,541)        --
Investments in and advances to unconsolidated affiliates....      (14,884)    (11,754)   (27,389)
Contributions from minority shareholders....................        3,146      21,652     12,478
Issuance (redemption) of interests in subsidiaries..........     (148,880)         --     92,874
Proceeds from sale of patents, net..........................       22,007          --         --
                                                              -----------   ---------   --------
Cash used by investing activities...........................     (243,929)   (146,599)   (60,814)
                                                              -----------   ---------   --------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt....................    1,848,000          --    391,924
Principal payments of long-term debt........................   (1,699,215)    (12,638)  (330,165)
Deferred financing fees.....................................       (8,499)        (56)    (1,358)
Increase in note receivable from stockholder................           --      (5,238)   (10,246)
Collection of note receivable from stockholder..............           --      23,600         --
Repurchase of Class A common stock..........................           --     (55,334)        --
Repurchase of Class B common stock..........................           --          --   (109,000)
Other financing.............................................      (30,840)     42,325    (23,415)
                                                              -----------   ---------   --------
Cash provided (used) by financing activities................      109,446      (7,341)   (82,260)
                                                              -----------   ---------   --------
CHANGE IN CASH AND CASH EQUIVALENTS.........................       (9,793)        251     (4,064)
Cash and cash equivalents, beginning of year................       34,075      33,824     37,888
CASH AND CASH EQUIVALENTS, END OF YEAR......................  $    24,282   $  34,075   $ 33,824
                                                              ===========   =========   ========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      IV-8

                         DISCOVERY COMMUNICATIONS, INC.

          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT



                                             CLASS A          CLASS B    ADDITIONAL
                                      ---------------------   --------    PAID-IN     ACCUMULATED
                                       AT PAR    REDEEMABLE    AT PAR     CAPITAL       DEFICIT
                                      --------   ----------   --------   ----------   -----------
                                                             IN THOUSANDS
                                                                       
BALANCE, DECEMBER 31, 2001..........     $1       $52,791      $    1     $121,092     $(852,707)
Comprehensive loss
  Net loss..........................                                                     (48,056)
  Foreign currency translation, net
    of tax of $2.7 million..........
  Realized loss on investments, net
    of tax of $0.2 million..........
Total comprehensive loss............
Increase in loan to stockholder.....              (10,246)
Compensation from redeemable
  Class A common stock..............                2,324
Accretion of redeemable Class A
  common stock......................                5,827                                 (5,827)
Repurchase of Class B common stock
  treasury shares...................                               (1)     (99,999)       (9,000)
                                         --       -------      ------     --------     ---------
BALANCE, DECEMBER 31, 2002..........     $1       $50,696      $   --     $ 21,093     $(915,590)
                                         --       -------      ------     --------     ---------
Comprehensive income
  Net income........................                                                      63,237
  Foreign currency translation, net
    of tax of $5.7 million..........
  Unrealized gain on investments,
    net of tax of $2.4 million......
Total comprehensive income..........
Decrease in loan to stockholder.....               18,362
Reduction of compensation from
  redeemable Class A common stock...               (2,324)
Decretion of redeemable Class A
  common stock......................              (11,400)                                11,400
Repurchase of Class A common stock
  treasury shares...................              (55,334)
                                         --       -------      ------     --------     ---------
BALANCE, DECEMBER 31, 2003..........     $1       $    --      $   --     $ 21,093     $(840,953)
                                         --       -------      ------     --------     ---------
Comprehensive income
  Net income........................                                                     168,022
  Foreign currency translation, net
    of tax of $5.2 million..........
  Unrealized loss on investments,
    net of tax of $1.7 million......
Total comprehensive income..........
                                         --       -------      ------     --------     ---------
BALANCE, DECEMBER 31, 2004..........     $1       $    --      $   --     $ 21,093     $(672,931)
                                         --       -------      ------     --------     ---------


                                          OTHER COMPREHENSIVE
                                             INCOME (LOSS)
                                      ----------------------------
                                        FOREIGN       UNREALIZED
                                       CURRENCY     GAIN (LOSS) ON
                                      TRANSLATION    INVESTMENTS       TOTAL
                                      -----------   --------------   ---------
                                                    IN THOUSANDS
                                                            
BALANCE, DECEMBER 31, 2001..........    $(2,272)        $ (334)      $(681,428)
Comprehensive loss
  Net loss..........................
  Foreign currency translation, net
    of tax of $2.7 million..........      6,568
  Realized loss on investments, net
    of tax of $0.2 million..........                       334
Total comprehensive loss............                                   (41,154)
Increase in loan to stockholder.....                                   (10,246)
Compensation from redeemable
  Class A common stock..............                                     2,324
Accretion of redeemable Class A
  common stock......................                                        --
Repurchase of Class B common stock
  treasury shares...................                                  (109,000)
                                        -------         ------       ---------
BALANCE, DECEMBER 31, 2002..........    $ 4,296         $   --       $(839,504)
                                        -------         ------       ---------
Comprehensive income
  Net income........................
  Foreign currency translation, net
    of tax of $5.7 million..........     10,027
  Unrealized gain on investments,
    net of tax of $2.4 million......                     3,771
Total comprehensive income..........                                    77,035
Decrease in loan to stockholder.....                                    18,362
Reduction of compensation from
  redeemable Class A common stock...                                    (2,324)
Decretion of redeemable Class A
  common stock......................                                        --
Repurchase of Class A common stock
  treasury shares...................                                   (55,334)
                                        -------         ------       ---------
BALANCE, DECEMBER 31, 2003..........    $14,323         $3,771       $(801,765)
                                        -------         ------       ---------
Comprehensive income
  Net income........................
  Foreign currency translation, net
    of tax of $5.2 million..........      8,409
  Unrealized loss on investments,
    net of tax of $1.7 million......                    (2,592)
Total comprehensive income..........                                   173,839
                                        -------         ------       ---------
BALANCE, DECEMBER 31, 2004..........    $22,732         $1,179       $(627,926)
                                        -------         ------       ---------


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      IV-9

                         DISCOVERY COMMUNICATIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  DESCRIPTION OF BUSINESS

    Discovery Communications, Inc. (the "Company") is a privately held,
diversified worldwide entertainment company whose operations are organized into
four business units: U.S. Networks, International Networks, Commerce and
Education. U.S. Networks operates cable and satellite television networks in the
United States, including Discovery Channel, TLC, Animal Planet, The Travel
Channel and Discovery Health Channel. International Networks operates cable and
satellite television networks worldwide, including regional variants of
Discovery Channel, Animal Planet, People & Arts, Travel & Adventure, and
Discovery Health Channel. Commerce operates 115 Discovery Channel retail stores
as well as direct-to-consumer sales in the United States, and manages licensing
for the Company. Education provides products and services to educational
institutions.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    PRINCIPLES OF CONSOLIDATION

    The consolidated financial statements include the accounts of the Company
and its wholly-owned and controlled subsidiaries. The equity method of
accounting is used for unconsolidated affiliates in which the Company's
ownership interests range from 20% to 50% and the Company exercises significant
influence over operating and financial policies. All significant intercompany
transactions and balances among the consolidated entities have been eliminated.

    USE OF ESTIMATES

    The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results may differ from those estimates and could have a
material impact on the consolidated financial statements.

    The Company has issued redeemable interests in a number of its consolidated
subsidiaries for which the redemption events are outside of the Company's
control. Estimating the redemption values of these interests requires making
assumptions regarding fair value, future performance, comparing to similar
transactions, and complex contract interpretation.

    Other significant estimates include the recoverability of programming
rights, the amortization period and method of programming rights, valuation and
recoverability of intangible assets and other long-lived assets, the fair value
of derivative financial instruments, and the adequacy of reserves associated
with accounts receivable and retail inventory.

    RECENT ACCOUNTING PRONOUNCEMENTS

    In December 2003 the Financial Accounting Standards Board (FASB) issued
CONSOLIDATION OF VARIABLE INTEREST ENTITIES: AN INTERPRETATION OF FASB NO. 51
(FIN 46R), which was effective as of March 31, 2004. Variable interest entities
(VIEs) are primarily entities that lack sufficient equity to finance their
activities without additional financial support from other parties or whose
equity holders possess governance rights that are not proportionate with their
equity holdings. All VIEs with which the Company is involved must be evaluated
to determine the primary beneficiary of the risks and rewards of the VIE. The
primary beneficiary is required to consolidate the VIE for financial reporting
purposes.

                                     IV-10

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    The Company has minority interests in certain entities as discussed in
Note 9. In connection with the adoption of FIN 46R, the Company's preliminary
assessment is that certain of its immaterial unconsolidated international joint
ventures may be VIEs in which the Company is the primary beneficiary. Pursuant
to the transition provisions of FIN 46R, the Company will begin consolidating
such ventures commencing 2005, however the impact on the consolidated financial
statements is not expected to be material. See Note 9 for summarized balance
sheets, statements of operations and cash flows of all equity method
investments.

    FASB Statement No. 150 FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH
LIABILITIES AND EQUITY, (FAS 150) establishes standards for classifying and
measuring as liabilities certain financial instruments that embody obligations
of the issuer and have traditionally been characterized as equity. The Financial
Accounting Standards Board delayed the FAS 150 effective date for nonpublic
companies with respect to instruments that are mandatorily redeemable on fixed
dates for amounts that are either fixed or determined by reference to an index
to January 1, 2005. If the Company were a public registrant, mandatorily
redeemable minority interests in the amount of $142.9 million would be
classified as current liabilities.

    REVENUE RECOGNITION

    The Company derives revenues from five primary sources: (1) advertising
revenue for commercial spots aired on the Company's networks, (2) subscriber
revenue from cable system operators (affiliates), (3) retail sales of consumer
product inventory, (4) licensing of the Company's programming and other
intellectual property, and (5) product and service sales to educational
institutions.

    Advertising revenue is recorded net of agency commissions and audience
deficiency liabilities in the period when the advertising spots are broadcast.
Subscriber revenue is recognized in the period the service is provided, net of
launch incentives and other vendor consideration. Retail revenues are recognized
either at the point-of-sale or upon product shipment. Program licensing revenues
are recognized when the programming is available to broadcast and upon
satisfaction of other revenue recognition conditions. Trademarks and other
non-programming licensing are generally recognized ratably over the term of the
agreement. Product and service sales to educational institutions are generally
recognized ratably over the term of the agreement or as the product is
delivered.

    ADVERTISING COSTS

    The Company expenses advertising costs as incurred. The Company incurred
advertising costs of $170.3 million, $140.2 million and $111.9 million in 2004,
2003 and 2002.

    CASH AND CASH EQUIVALENTS

    Highly liquid investments with original maturities of ninety days or less
are recorded as cash equivalents. The Company had $4.3 million and $3.9 million
in restricted cash included in other assets as of December 31, 2004 and 2003 due
to foreign currency restrictions.

    DERIVATIVE FINANCIAL INSTRUMENTS

    Derivative financial instruments are recorded on the balance sheet at fair
value. The Company did not apply hedge accounting during 2004, 2003 and 2002,
and therefore changes in the fair values of derivative financial instruments are
recorded in the statements of operations.

                                     IV-11

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    INVENTORIES

    Inventories are carried at the lower of cost or market and include inventory
acquisition costs. Cost is determined using the weighted average cost method.

    PROGRAMMING RIGHTS

    Costs incurred in the direct production or licensing of programming rights
are capitalized and stated at the lower of unamortized cost, fair value, or net
realizable value. The Company evaluates the net realizable value of programming
by considering the fair value and net realizable values of the underlying
produced and licensed programs, respectively. The costs of produced programming
are capitalized and amortized based on the expected realization of revenues,
resulting in an accelerated basis over four years for developed networks
(Discovery Channel, TLC, Animal Planet, and The Travel Channel) in the United
States, a straight-line basis over three to five years for developing networks
in the United States, and a straight-line basis over three years for all
International networks.

    The cost of licensed programming is capitalized and amortized over the term
of the license period based on the expected realization of revenues, resulting
in an accelerated basis for developed networks in the United States, and a
straight-line basis for all International networks and developing networks in
the United States.

    PROPERTY AND EQUIPMENT

    Property and equipment are stated at cost less accumulated depreciation.
Depreciation is recognized on a straight-line basis over the estimated useful
lives of three to seven years for equipment, furniture and fixtures, five to
forty years for building structure and construction, and six to fifteen years
for satellite transponders. Leasehold improvements are amortized on a
straight-line basis over the lesser of their estimated useful lives or the terms
of the related leases. Equipment under capital lease represents the present
value of the minimum lease payments at the inception of the lease, net of
accumulated depreciation.

    CAPITALIZED SOFTWARE COSTS

    Capitalization of software development costs occurs during the application
development stage. Costs incurred during the pre and post implementation stages
are expensed as incurred. Capitalized software is amortized on a straight-line
basis over its estimated useful lives of one to five years. Unamortized computer
software costs totaled $55.2 million and $49.6 million at December 31, 2004 and
2003.

    RECOVERABILITY OF LONG-LIVED ASSETS, GOODWILL, AND INTANGIBLE ASSETS

    The Company periodically reviews the carrying value of its acquired
intangible assets, including goodwill, and its other long-lived assets,
including deferred launch incentives, to determine whether an impairment may
exist. Goodwill impairment is determined by comparing the fair value of the
reporting unit to its carrying value. If the fair value of the reporting unit is
less than its carrying value, an impairment loss is recorded to the extent that
the fair value of the goodwill within the reporting unit is less than its
carrying value. Intangible assets and other long-lived assets are grouped for
purposes of evaluating recoverability at the lowest level for which independent
cash flows are identifiable. If the carrying amount of an intangible asset,
long-lived asset, or asset grouping exceeds its fair value, an impairment loss
is recognized. Fair values for reporting units, goodwill and other intangible
assets are

                                     IV-12

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

determined based on discounted cash flows, market multiples, or comparable
assets as appropriate. Generally, the Company's reporting units and asset groups
consist of the individual cable networks or other operating units.

    The determination of recoverability of goodwill and other intangible and
long lived assets requires significant judgment and estimates regarding future
cash flows, fair values, and the appropriate grouping of assets. Such estimates
are subject to change and could result in impairment losses being recognized in
the future. If different reporting units, asset groupings, or different
valuation methodologies had been used, the impairment test results could have
differed.

    DEFERRED LAUNCH INCENTIVES

    Consideration issued to cable affiliates in connection with the execution of
long-term network distribution agreements is deferred and amortized on a
straight-line basis as a reduction to revenue over the terms of the agreements.
Obligations for fixed launch incentives are recorded at the inception of the
agreement. Obligations for performance-based arrangements are recorded when
performance thresholds have been achieved. Following the extension or renewal of
an original launch agreement, remaining deferred consideration is amortized over
the new period. Amortization of deferred launch incentives and interest on
unpaid deferred launch incentives was $98.4 million, $122.7 million and
$122.8 million in 2004, 2003 and 2002.

    FOREIGN CURRENCY TRANSLATION

    The Company's foreign subsidiaries' assets and liabilities are translated at
exchange rates in effect at the balance sheet date, while results of operations
are translated at average exchange rates for the respective periods. The
resulting translation adjustments are included as a separate component of
stockholders' equity in accumulated other comprehensive income. The effect of
exchange rate changes on cash balances held in foreign currencies impacting the
Consolidated Statements of Cash Flows totals $2.5 million, $1.2 million, and
$0.2 million in 2004, 2003 and 2002.

    LONG-TERM COMPENSATION PROGRAMS

    The Company grants unit awards under its long-term incentive plans. These
unit awards, which vest over a period of years, are granted to employees and
increase or decrease in value based on a specified formula of certain business
metrics of the Company. The Company accounts for these units similar to stock
appreciation rights and applies the guidance in FASB Interpretation Number 28,
"Accounting for Stock Issued to Employees." The Company adjusts compensation
expense for the changes in the accrued value of these awards over the vesting
period.

    MANDATORILY REDEEMABLE INTERESTS IN SUBSIDIARIES

    Mandatorily redeemable interests in subsidiaries are initially recorded at
fair value and accreted or decreted to the estimated redemption value ratably
over the period to the redemption date, as appropriate. The Company records
accretion and decretion on these instruments in minority interest expense.

                                     IV-13

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    TREASURY STOCK

    Treasury stock is accounted for using the cost method. The repurchased
shares are held in treasury and are presented as if retired. Treasury stock
activity for the three years ended December 31, 2004 is presented in the
Consolidated Statements of Stockholders' Deficit.

    INCOME TAXES

    Income taxes are recorded using the asset and liability method of accounting
for income taxes. Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. A valuation
allowance is provided for deferred tax assets if it is more likely than not such
assets will not be realized.

    RECLASSIFICATIONS

    Certain prior period financial statement amounts have been reclassified to
conform to the 2004 presentation.

    During 2004, the Company reclassified book overdrafts at December 31, 2003
and 2002. These reclassifications increased cash and current liabilities by
$42.9 million and $0.6 million at December 31, 2003 and 2002. Additionally, the
Company reclassified approximately $15.5 million and $6.0 million in restricted
cash and other assets previously reported as cash at December 31, 2003 and 2002.
As a result of these reclassifications, cash flows from operating activities
decreased $9.5 million and $1.9 million for the years ended December 31, 2003
and 2002, and cash flows from financing activities increased $42.3 million and
decreased $23.4 million for the same year ends.

3.  SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS



YEAR ENDED DECEMBER 31,                              2004       2003       2002
- -----------------------                            --------   --------   --------
                                                            IN THOUSANDS
                                                                
Cash paid for acquisitions:
  Fair value of assets acquired..................  $21,414    $50,509    $    --
  Net liabilities assumed........................   (4,196)    (3,968)        --
    Cash paid for acquisitions, net of cash
      acquired...................................   17,218     46,541         --
Cash paid for interest, net of capitalized
  interest.......................................  166,584    162,904    154,288
Cash paid for income taxes.......................   28,999     32,395     25,537
                                                   =======    =======    =======


4.  BUSINESS COMBINATIONS

    During 2004, the Company completed two acquisitions in its Education
division, in which the Company acquired customer lists valued at $14.6 million,
covenants not to compete valued at $0.6 million and trademarks valued at
$0.1 million, which are being amortized over their useful lives, of three years
for the customer lists and covenants not to compete.

    During 2003, the Company completed two acquisitions, one in its Education
division and one in its International Networks division. In connection with
these acquisitions, the Company acquired customer lists valued at
$27.7 million, which are being amortized over their useful lives of
three years. The Company also acquired deferred launch incentives valued at
$16.7 million. Of these, $13.2 million are

                                     IV-14

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

being amortized over the five-year term of the agreements, and $3.5 million
relate to a penalty for non-renewal in 2008. If no renewal is effectuated in
2008, the acquiree will refund the Company. If renewed, the Company will
amortize this amount over the renewal period.

    Purchase price in excess of the fair value of the assets and liabilities
acquired of $1.1 million and $6.0 million was recorded to goodwill in 2004 and
2003.

5.  PROGRAMMING RIGHTS



PROGRAMMING RIGHTS, DECEMBER 31,                          2004         2003
- --------------------------------                       ----------   ----------
                                                            IN THOUSANDS
                                                              
Produced programming rights
  Completed..........................................  $1,099,483   $  892,867
  In process.........................................     100,086       77,062
Co-produced programming rights
  Completed..........................................     698,758      626,934
  In process.........................................      38,575       44,464
Licensed programming rights
  Acquired...........................................     189,662      243,541
  Prepaid............................................       4,232        7,719
                                                       ----------   ----------
Programming rights, at cost..........................   2,130,796    1,892,587
Accumulated amortization.............................  (1,052,839)    (964,488)
                                                       ----------   ----------
Programming rights, net..............................   1,077,957      928,099
Current portion, licensed programming rights.........     (50,578)     (46,364)
                                                       ----------   ----------
Non-current portion..................................  $1,027,379   $  881,735
                                                       ==========   ==========


    Amortization of programming rights was $494.2 million, $413.9 million and
$365.4 million in 2004, 2003 and 2002, and is recorded as a cost of revenue.

    The Company estimates that 91.1% of unamortized costs of programming rights
at December 31, 2004 will be amortized within the next three years. The Company
expects to amortize $377.0 million of unamortized programming rights, not
including in-process and prepaid productions, during the next twelve months.

6.  PROPERTY AND EQUIPMENT



PROPERTY AND EQUIPMENT, DECEMBER 31,                      2004        2003
- ------------------------------------                    ---------   ---------
                                                            IN THOUSANDS
                                                              
Equipment and software................................  $ 344,525   $ 346,438
Land..................................................     28,781      27,575
Buildings.............................................    136,088     137,190
Furniture, fixtures, leasehold improvements and other
  assets..............................................    160,418     160,744
Assets in progress....................................     60,806      29,582
                                                        ---------   ---------
Property and equipment, at cost.......................    730,618     701,529
Accumulated depreciation and amortization.............   (350,328)   (341,118)
                                                        ---------   ---------
Property and equipment, net...........................  $ 380,290   $ 360,411
                                                        =========   =========


                                     IV-15

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    The cost and accumulated depreciation of satellite transponders under
capital leases were $23.5 million and $4.1 million at December 31, 2004, and
$64.3 million and $45.4 million at December 31, 2003. Depreciation and
amortization of property and equipment, including equipment under capital lease,
was $85.4 million, $86.4 million and $96.3 million in 2004, 2003 and 2002.

    Through December 31, 2004, total capitalized costs associated with facility
construction projects include land costs of $2.3 million, and building and
leasehold improvement costs of $43.8 million. The Company expects these
facilities to be completed in 2005.

    The Company completed construction of its worldwide headquarters facility in
Silver Spring, Maryland, in the first quarter of 2003. The final facility is
comprised of land costs of $26.5 million, building structure and construction
costs of $121.4 million, and interest costs of $14.7 million.

7.  SALE OF LONG-LIVED ASSETS

    In 2004, the Company recorded a net gain of $22.0 million on the sale of
certain of the Company's television technology patents. The transaction closed
August 19, 2004 and the gain represents the sale price less costs to sell. The
Company expensed all of the costs to develop this technology in prior years.

8.  GOODWILL AND INTANGIBLE ASSETS



GOODWILL AND INTANGIBLE ASSETS, DECEMBER 31,                2004       2003
- --------------------------------------------              --------   --------
                                                             IN THOUSANDS
                                                               
Goodwill................................................  $257,460   $253,308
Trademarks..............................................    13,383     13,230
Customer relationships and lists, net of amortization of
  $86,406 and $64,393...................................    64,109     72,153
Non-compete and other, net of amortization of $43,021
  and $33,229...........................................    33,068     42,343
Representation rights, net of amortization of $60,528
  and $51,198...........................................    77,201     85,934
                                                          --------   --------
Goodwill and intangible assets, net.....................  $445,221   $466,968
                                                          ========   ========


    Goodwill and trademarks are not amortized. Customer relationships and lists
are amortized on a straight-line basis over estimated useful lives of three to
seven years. Non-compete assets are amortized on a straight-line basis over the
contractual term of five to seven years. Other intangibles are amortized on a
straight-line basis over estimated useful lives of ten years. Representation
rights are amortized on a straight-line basis over the contractual term of
fifteen years.

    During 2004 and 2003 the Company reduced its estimate of certain
pre-acquisition contingencies associated with certain subscriber contractual
arrangements acquired as part of the acquisition of The Health Network. These
revisions resulted in a reduction of goodwill of $8.0 million and $26.7 million
at December 31, 2004 and 2003.

    The $4.2 million net increase in goodwill results from 1) a $8.0 million
reduction related to an adjustment for pre-acquisition contingent liabilities
(discussed above), 2) a $9.5 million adjustment to increase goodwill for
recognition of certain deferred tax liabilities, 3) a $1.1 million addition
related to current year acquisitions and 4) a $1.6 million increase for foreign
currency translation effect.

                                     IV-16

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    The Company has the exclusive rights to represent BBC America ("BBCA"), a
cable network, in sales, marketing, distribution and other operational
activities through 2013. As a part of this agreement, the Company will receive a
percentage of revenues earned and collected by BBCA during the representation
term. The cost of acquiring the representation rights is being amortized on a
straight-line basis over the fifteen-year term of the agreement, and is reported
as a reduction of revenue.

    Amortization of intangible assets amounted to $41.8 million, $33.8 million
and $17.8 million in 2004, 2003 and 2002.

    The Company estimates that unamortized costs of intangible assets at
December 31, 2004 will be amortized over the next five years as follows:
$44.1 million in 2005, $41.1 million in 2006, $28.6 million in 2007,
$20.1 million in 2008, and $9.8 million in 2009.

9.  INVESTMENTS IN AFFILIATED COMPANIES

    JOINT VENTURES WITH THE BRITISH BROADCASTING CORPORATION ("BBC")

    The Company and the BBC have formed cable and satellite television network
joint ventures, a venture to produce and acquire factual based programming ("JV
Programs" or "JVP") and a venture to provide debt funding to the cable and
satellite television network joint ventures and JV Programs venture ("JV
Network"). In addition to its own funding requirements, the Company has assumed
the BBC funding requirements for each of these ventures. As a result, the
Company has preferential cash distribution agreements with these ventures. The
ventures had no distributable cash in 2004 and distributed $1.7 million in
accordance with the agreements in 2004 and 2003.

    Because the BBC does not have risk of loss, no losses were allocated to
minority interest for consolidated joint ventures with the BBC. The Company
recognizes both its own and the BBC's share of losses in equity method ventures
with the BBC.

    VARIABLE INTEREST ENTITIES

    The Company is a partner in several joint ventures accounted for under the
equity method in which it has a variable interest.

    JV Programs produces and acquires factual based programming that it then
sells to the Company for use on many of the Company's joint venture and
wholly-owned networks. The Company's funding to JVP was $14.4 million,
$5.4 million and $3.4 million during 2004, 2003 and 2002. The Company acquired
and licensed $44.1 million, $43.9 million and $35.9 million of programming from
JVP for its networks during 2004, 2003 and 2002. At December 31, 2004, the
Company's maximum exposure to loss as a result of its involvement with JVP is
the $55.1 million book value of its investment in JVP and future operating
losses of JVP that the Company is obligated to fund. JVP has no third party
debt. If JVP were to be consolidated under FIN 46R, the Company expects the net
impact to the consolidated financial statements to be insignificant.
Substantially all of JVP's activities are with the Company and those are already
reflected in the financial statements.

    The Company is a partner in other international joint venture cable and
satellite television networks in which the Company has a variable interest. The
Company's funding to these joint ventures totaled $3.3 million, $7.5 million and
$9.9 million during 2004, 2003 and 2002. At December 31, 2004, the Company's
maximum exposure to loss as a result of its involvement with these joint
ventures is the

                                     IV-17

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$19.3 million book value of its investments in these joint ventures and future
operating losses of these joint ventures that the Company is obligated to fund.
These joint ventures have no third party debt.

    The following table outlines the Company's joint ventures and the method of
accounting during 2004, 2003 and 2002:



                                                               ACCOUNTING
AFFILIATES:                                                      METHOD
- -----------                                                   ------------
                                                           
JOINT VENTURES WITH THE BBC:
JV Network..................................................  Consolidated
JV Programs.................................................     Equity
Animal Planet United States (see Note 11)...................  Consolidated
Animal Planet Europe........................................  Consolidated
Animal Planet Latin America.................................  Consolidated
People & Arts Latin America.................................  Consolidated
Animal Planet Asia..........................................  Consolidated
Animal Planet Japan.........................................     Equity
Animal Planet Canada........................................     Equity

OTHER VENTURES:
Discovery Times Channel (see Note 11).......................  Consolidated
FitTV (f.k.a. The Health Network) (see Note 11).............  Consolidated
Discovery Canada............................................     Equity
Discovery Japan.............................................     Equity
Discovery Health Canada.....................................     Equity
Discovery Kids Canada.......................................     Equity
Discovery Civilization Canada...............................     Equity
Meteor Studios..............................................     Equity


    Combined financial information of the Company's unconsolidated ventures
(amounts do not reflect any eliminations of activity with the Company):



OPERATING RESULTS, YEAR ENDED DECEMBER 31,        2004       2003       2002
- ------------------------------------------      --------   --------   --------
                                                         IN THOUSANDS
                                                             
Revenue.......................................  $163,630   $145,786   $106,598
Income from operations........................    26,201     13,278      4,806
Net income (loss).............................     8,688      1,155     (1,060)
                                                --------   --------   --------




BALANCE SHEETS, DECEMBER 31,                                  2004       2003
- ----------------------------                                --------   --------
                                                               IN THOUSANDS
                                                                 
Current assets............................................  $68,554    $65,046
Total assets..............................................  136,703    117,772
Current liabilities.......................................   21,817     17,880
Total liabilities.........................................   46,683     42,382
Total shareholders' equity or partners' capital...........   90,020     75,390
                                                            -------    -------


                                     IV-18

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. LONG-TERM DEBT



LONG-TERM DEBT, DECEMBER 31,                                     2004         2003
- ----------------------------                                  ----------   ----------
                                                                   IN THOUSANDS
                                                                     
$1,250.0 Term Loan, due quarterly from 2007 to 2009.........  $1,250,000   $       --
$1,250.0 Revolving Loan, due June 2009......................     238,000           --
$2,036.5 Term Loan and Revolving Loans, paid 2004...........          --    1,334,000
7.81% Senior Notes, semi annual interest, due March 2006....     300,000      300,000
8.06% Senior Notes, semi annual interest, due March 2008....     180,000      180,000
8.37% Senior Notes, semi annual interest, due March 2011....     220,000      220,000
7.45% Senior Notes, semi annual interest, due
  September 2009............................................      55,000       55,000
8.13% Senior Notes, semi annual interest, due
  September 2012............................................     235,000      235,000
Obligations under capital leases............................      25,125       19,631
Other notes payable.........................................       4,898        8,061
                                                              ----------   ----------
Total long-term debt........................................   2,508,023    2,351,692
Current portion.............................................      (9,736)    (517,750)
                                                              ----------   ----------
Non-current portion.........................................  $2,498,287   $1,833,942
                                                              ==========   ==========


    In June 2004, the Company successfully refinanced the Term Loan and the
Revolving Loans, maturing in 2004 and 2005, with a new Term Loan and Revolving
Facility. The Company capitalized $8.5 million in deferred financing costs as
part of the new term and revolving loan facility and expensed $6.3 million in
capitalized costs associated with the previous term loan and revolving loans.

    All Term and Revolving Loans are unsecured. Interest, which is payable
quarterly, is based on the London Interbank Offered Rate ("LIBOR") or prime rate
plus a margin based on the Company's leverage ratios. The weighted average
interest rate on these facilities was 3.7% and 2.5% at December 31, 2004 and
2003, and the interest rate averaged 2.9% and 2.7% during 2004 and 2003. The
cost of the Revolving Loans includes a fee (ranging from 0.125% to 0.375%) based
on the Company's leverage ratios. The Company uses derivative instruments to
modify its exposure to interest rate fluctuations on its debt.

    The Term Loans, Revolving Loans, and Senior Notes contain covenants that
require the Company to meet certain financial ratios and place restrictions on
the payment of dividends, sale of assets, additional borrowings, mergers, and
purchases of capital stock, assets, and investments. The Company was in
compliance with all debt covenants at December 31, 2004.

    Future principal payments under the current debt arrangements, excluding
obligations under capital leases and other notes payable, are as follows: no
payments in 2005, $300 million in 2006, $234 million in 2007, $961 million in
2008, $527 million in 2009 and $456 million from 2011 to 2012. Future minimum
payments under capital leases are as follows: $5.1 million in 2005,
$5.5 million in 2006, $5.7 million in 2007, $3.8 million in 2008, $3.8 million
in 2009 and $8.4 million thereafter.

                                     IV-19

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. MANDATORILY REDEEMABLE INTERESTS IN SUBSIDIARIES



MANDATORILY REDEEMABLE INTERESTS IN SUBSIDIARIES, DECEMBER 31,     2004       2003
- --------------------------------------------------------------   --------   --------
                                                                    IN THOUSANDS
                                                                      
Discovery Times............................................      $125,763   $123,896
FitTV (f.k.a. The Health Network)..........................        92,874     94,000
Discovery Health Channel...................................            --    143,736
Animal Planet LLC..........................................        50,000         --
Animal Planet LP...........................................        48,730     48,620
People & Arts Latin America and Animal Planet Channel Group...      2,200         --
                                                                 --------   --------
Mandatorily redeemable interests in subsidiaries...........      $319,567   $410,252
                                                                 ========   ========


    DISCOVERY TIMES

    In April 2002, the Company sold a 50% interest in Discovery Times Channel to
the New York Times ("NYT") for $100 million. Due to NYT redemption rights, this
transaction resulted in no gain or loss to the Company. While the Company
consolidates the financial results of Discovery Times, no losses of Discovery
Times have been allocated to minority interest due to the NYT's redemption
feature, and the Company has recorded the interest held by NYT as mandatorily
redeemable interest in a subsidiary.

    NYT has the right, in April 2005, and again in April 2006, to put its
interest back to the Company for a value determined by a specified formula, with
a floor of $80 million and a ceiling of $125 million in April 2005, and a floor
of $80 million and a ceiling of $135 million in April 2006. The Company accretes
or decretes the mandatorily redeemable interest in a subsidiary to its estimated
redemption value through the redemption date. The Company updates its estimate
of the redemption value each period and based on its most recent calculations,
the Company will decrete to an amount representing the estimated value of
$101.1 million. The Company recorded decretion of $1.3 million in 2004 and
accretion of $7.0 million and $6.5 million to minority interest expense in 2003
and 2002.

    After 2006, the NYT has certain other protective rights that, if triggered
and not cured, could require the Company to repurchase the NYT interest for a
value determined by a specified formula.

    FITTV (F.K.A. THE HEALTH NETWORK)

    Fox Entertainment Group (FEG) had the right, from December 2003 to
February 2004, to put its FitTV interests back to the Company. In
December 2003, FEG notified the Company of its intention to put its interest in
FitTV back to the Company. The Company estimates that it will acquire this
interest for approximately $92.9 million in 2005. The Company recorded decretion
of $1.1 million in 2004 and recorded accretion of $8.5 million and
$11.1 million in 2003 and 2002 to minority interest expense.

    DISCOVERY HEALTH CHANNEL (DHC)

    During the second quarter of 2004, Comcast put its DHC interests back to the
Company for $148.9 million. The Company recorded accretion of $5.1 million,
$20.4 million and $28.3 million to minority interest expense in 2004, 2003 and
2002.

                                     IV-20

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    ANIMAL PLANET LLC

    Beginning March 2003, the BBC has the right to put its Animal Planet LLC
("APUS") interests back to the Company. In April 2004, the BBC notified the
Company of its intention to put its interest in APUS back to the Company. The
Company estimates a range of possible outcomes to acquire this interest. Given
the uncertainty associated with the determination of the final redemption value
of this interest (which will be based on the terms outlined in the agreement),
the Company has recorded accretion of $50.0 million in 2004 to minority interest
expense. At December 31, 2003, the Company determined there was no redemption
value associated with this right.

    ANIMAL PLANET LP

    One of the Company's stockholders holds 44,000 senior preferred partnership
units of Animal Planet LP ("APLP") that have a redemption value of
$44.0 million and carry a rate of return ranging from 8.75% to 13%. Payments are
made quarterly and totaled $4.6 million, $5.8 million and $4.4 million during
2004, 2003 and 2002. APLP's senior preferred partnership units may be called by
APLP during the period January 2007 through December 2011 for $44.0 million, and
may be put to the Company by the holder beginning in January 2012 for
$44.0 million. At December 31, 2004, and 2003, the Company has recorded this
security at the redemption value of $44.0 million plus accrued returns of
$4.7 million and $4.6 million. Preferred returns are recorded as a component of
interest expense and aggregated $4.7 million in 2004, 2003 and 2002.

    PEOPLE & ARTS LATIN AMERICA AND ANIMAL PLANET CHANNEL GROUP

    The BBC has the right, upon a failure of the People & Arts Latin America or
the Animal Planet Channel Group (comprised of Animal Planet Europe, Animal
Planet Asia, and Animal Planet Latin America) to achieve certain financial
performance benchmarks as of December 2005, and every three years thereafter, to
put its interests back to the Company for a value determined by a specified
formula. The Company accretes or decretes the mandatorily redeemable equity in a
subsidiary to its estimated redemption value through the 2005 redemption date.
The redemption value is based on a contractual formula utilizing projected
results of each network within the channel group. At December 31, 2004, the
Company has estimated a redemption value of $15.3 million. At December 31, 2003,
the Company determined there was no redemption value associated with this right.
Accretion to the redemption value has been recorded as a component of minority
interest expense of $2.2 million in 2004.

12. STOCKHOLDERS' DEFICIT

    In September 2001, the Company sold 50,615 shares of Class B Non-voting
Common Stock to its existing shareholders for $100.0 million. In
September 2002, the Company repurchased these shares for $109.0 million. The
appreciation of the shares represented a fair transition value as was confirmed
in consultation with an investment bank.

    STOCKHOLDER PUT RIGHT

    In June 2003, the Company's founder, John Hendricks, put 215 outstanding
shares of Class A Common Stock to the Company in exchange for $55.3 million.
Concurrent with this transaction, outstanding loans, secured by Mr. Hendricks'
shares and vested compensation units, of $23.6 million to Mr. Hendricks were
repaid to the Company with interest. Prior to this purchase, the value of these

                                     IV-21

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

shares had been recorded as redeemable common stock and changes in value had
been recorded to stockholders' deficit.

    The Company received a third party valuation to record the transactions. The
valuation reflected a lower value for the Company than had been previously
estimated and, as a result, the Company decreased the carrying value of the
stock by $13.7 million and reduced compensation expense recorded in prior years
associated with the loans by $2.3 million in connection with the settlement.

13. COMMITMENTS AND CONTINGENCIES

    The Company leases certain satellite transponders, facilities and equipment
under operating leases that expire through 2019. The Company is obligated to
license programming under agreements that expire through 2012.



FUTURE MINIMUM PAYMENTS, YEAR ENDING
DECEMBER 31,                           LEASES    PROGRAMMING    OTHER       TOTAL
- ------------------------------------  --------   -----------   --------   ----------
                                                       IN THOUSANDS
                                                              
2005..............................    $ 80,088    $201,857     $ 66,170   $  348,115
2006..............................      67,689      64,857       52,908      185,454
2007..............................      62,298      55,155       54,550      172,003
2008..............................      57,336      55,893       46,570      159,799
2009..............................      31,596      57,010       16,907      105,513
Thereafter........................     178,748     100,898        4,080      283,726
                                      --------    --------     --------   ----------
Total.............................    $477,755    $535,670     $241,185   $1,254,610
                                      ========    ========     ========   ==========


    Expenses recorded in connection with operating leases, including rent
expense, were $127.8 million, $128.7 million and $131.7 million for the years
ended December 31, 2004, 2003 and 2002.

    In connection with the long-term distribution agreements for certain of its
European cable networks, the Company is committed to pay a satellite system
operator 25% to 49% of the increase in value of these networks, if any, at the
termination of the contract on December 31, 2006. The value of the networks at
the termination date, and the Company's liability thereon, are materially
impacted by the terms of future renewed or extended distribution agreements with
the satellite system operator. The Commitment was designed as an incentive to
enter into a renewed or extended agreement. However, the Company is currently
unable to predict the terms and conditions of any renewal or extension of the
distribution agreements. The Company has recorded a liability associated with
this arrangement based on the estimated value of the networks at the termination
of the agreement if no renewal is in place and adjusts such liability each
period for changes in value. However, if the current distribution agreement is
renewed or extended before the expiration of the existing agreement, amounts to
be paid in 2007 to this system operator could be significantly higher than
amounts currently accrued. The Company will record the effect of a renewed or
extended distribution agreement when such terms are in place.

    The Company is solely responsible for providing financial, operational and
administrative support to the JV Programs, JV Network, Animal Planet United
States, Animal Planet Latin America, People & Arts Latin America, Animal Planet
Asia, and Animal Planet Europe ventures and has committed to do so through at
least fiscal 2005.

                                     IV-22

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    The Company is involved in litigation incidental to the conduct of its
business. In addition, the Company is involved in negotiations with
organizations holding the rights to music used in the Company's programming. The
Company believes the reserves related to these music rights are adequate and
does not expect the outcome of such litigation and negotiations to have a
material adverse effect on the Company's results of operations, cash flows, or
financial position.

14. EMPLOYEE SAVINGS PLANS

    The Company maintains two separate employee savings plans, a defined
contribution savings plan for its employees and a Supplemental Deferred
Compensation Plan (together, the "Savings Plans") for certain management
employees.

    The Company matches participant contributions at a rate of 75% up to a
maximum of 6% of the participant's annual compensation. The Company
contributions to the Savings Plans were $6.8 million, $5.5 million and
$5.7 million during 2004, 2003 and 2002.

15. LONG-TERM COMPENSATION PROGRAMS

    The Company recorded expense of $71.5 million, $76.5 million, and
$94.6 million in connection with these plans during 2004, 2003, and 2002.

    LONG-TERM INCENTIVE PLANS

    The Company maintains unit-based, long-term incentive plans for its
employees who meet certain eligibility criteria. Units are awarded to eligible
employees upon their one-year anniversary of hire and vest at a rate of 25% per
year thereafter. Upon exercise, participants receive the increase in value of
the units from the unit value at the date of issuance. The Company has
authorized the issuance of up to 33.1 million units under these plans.

    From the period April 1 to May 31, certain eligible participants have the
option to exercise any portion of their vested units. All other employees may
redeem some or all of their units during a window of time five years subsequent
to the date of the award. The Company pays amounts for the exercise of units on
September 30 of the year of exercise. However, the Company may defer, with
interest, payment of up to 75% of any benefit for a period not longer than
September 30 of the year subsequent to exercise.

    Upon voluntary termination of employment the Company distributes 75% of
vested and exercisable benefits to certain senior executives. These employees
are required to comply with post-employment obligations to receive payment of
withheld benefits upon the one-year anniversary of employment termination. All
other participants receive their full vested benefit upon voluntary termination.

    The 25% vested and exercisable employee benefits that would be withheld upon
employee termination in the amount of $60.7 million, have been classified as
long-term liability in the accompanying balance sheet. All other vested employee
unit incentive compensation liabilities are classified as current liabilities in
the accompanying balance sheet. Although classified as current liabilities, the
Company's actual cash disbursements under the plans were $45.9 million,
$27.9 million and $36.9 million during 2004, 2003 and 2002.

                                     IV-23

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    All awards must be redeemed and applicable benefits paid by the Company on
the tenth anniversary of each award. During 2004, the Company paid $8.5 million
in awards, which had reached their tenth anniversary date.

    Unit appreciation is recorded as compensation expense over the vesting
periods. Compensation expense was $68.8 million, $101.7 million and
$61.7 million in 2004, 2003 and 2002. The accrued value of units based on the
Company's vesting schedule was $322.4 million and $299.5 million at
December 31, 2004 and 2003.

    The unaccrued value of awarded units was $15.4 million and $4.5 million at
December 31, 2004 and 2003.

    During 2004, 2003 and 2002, the Company granted 8.7 million, 4.1 million and
2.3 million units with weighted average exercise prices of $34.22, $29.02, and
$25.74. Units redeemed or cancelled during 2004, 2003, and 2002 totaled
2.3 million, 2.1 million, and 3.5 million with weighted average exercise prices
of $13.49, $14.18, and $13.66. For the years ended December 31, 2004, 2003, and
2002, units outstanding totaled 25.6 million, 19.1 million, and 17.2 million
with weighted average exercise prices of $24.10, $18.18, and $15.12, and units
exercisable totaled 17.5 million, 16.5 million, and 13.9 million with weighted
average exercise prices of $19.76, $16.65, and $13.18. At the beginning of
fiscal year 2002, outstanding units totaled 18.4 million with a weighted average
exercise price of $13.52.

    As of December 31, 2004, outstanding units had several ranges of exercise
prices. The Company has 1.6 million units outstanding and exercisable at
exercise prices ranging from $3.33 to $8.14 with a weighted average contractual
life remaining of 1 year and a weighted average exercise price of $6.47. The
Company has 9.5 million units outstanding and exercisable at exercise prices
ranging from $10.96 to $22.18 with a weighted average contractual life remaining
of 4.2 years and a weighted average exercise price of $15.30. The Company has
14.5 million units outstanding at exercise prices ranging from $25.02 to $37.35
with a weighted average contractual life remaining of 8.5 years and weighted
average exercise price of $31.95. Of these, 6.4 million units, with a weighted
average exercise price of $29.78, are exercisable.

    The value of units at the end of the year was $37.35, $34.06, and $28.60 for
2004, 2003, and 2002. The value of the units is determined based on changes in
the Company's value as estimated by an external investment banking firm. The
average assumptions used in the valuation model include adjusted projected
operating cash flows segregated by business group. The valuation also includes a
business group specific discount rate and terminal value based on business risk.

    UNIT APPRECIATION AND INCENTIVE AGREEMENT

    As part of his long-term incentive plan with the Company, the Company's
founder, John Hendricks, had a 10-year incentive agreement with the Company that
granted him a cash award equal to 1.6% of the difference between the Company's
value at December 31, 1993 and December 31, 2003 for his services as Chairman
and Chief Executive Officer during the period. This cash award was paid out to
Mr. Hendricks in two installments, one in December 2003 and one in
February 2004. The final determination of value was based on an appraisal from
an investment banking firm using a consistent valuation methodology both at the
beginning and the end of the 10-year term. The portion of the cash award that
was paid out in February 2004 has been included as a current liability at
December 31, 2003. The estimated change in value of this incentive has been
recorded as a component of compensation expense during the term of the
agreement.

                                     IV-24

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. INCOME TAXES



INCOME TAX EXPENSE (BENEFIT), YEAR ENDED DECEMBER 31,     2004       2003       2002
- -----------------------------------------------------   --------   --------   --------
                                                                 IN THOUSANDS
                                                                     
Current
  Federal.........................................      $   (231)  $ 2,813    $     --
  State...........................................         3,952     6,722       6,156
  Foreign.........................................        32,556    22,970      21,588
                                                        --------   -------    --------
Total current income tax provision................        36,277    32,505      27,744
                                                        --------   -------    --------
Deferred
  Federal.........................................        95,761    33,963     (25,189)
  State...........................................         7,723     5,175     (12,134)
                                                        --------   -------    --------
Total deferred income tax expense (benefit).......       103,484    39,138     (37,323)
                                                        --------   -------    --------
Change in valuation allowance.....................         2,038     3,142        (478)
                                                        --------   -------    --------
Total income tax expense (benefit)................      $141,799   $74,785    $(10,057)
                                                        ========   =======    ========




                                                                   2004                     2003
                                                          ----------------------   ----------------------
DEFERRED INCOME TAX ASSETS AND LIABILITIES DECEMBER 31,   CURRENT    NON-CURRENT   CURRENT    NON-CURRENT
- -------------------------------------------------------   --------   -----------   --------   -----------
                                                                           IN THOUSANDS
                                                                                  
Assets
  Loss carryforwards.................................     $  1,148     $ 20,090    $ 21,077     $ 18,460
  Compensation.......................................      102,595       22,745     169,003       24,216
  Accrued expenses...................................       26,474           --      30,857           --
  Reserves and allowances............................        8,720       10,132       9,568       10,214
  Tax credits........................................        4,330           --       3,118           --
  Derivative financial instruments...................           --       16,979          --       34,186
  Investments........................................           --       69,729          --       84,306
  Intangibles........................................           --       31,627          --       23,756
  Other..............................................        3,066        8,342         441        2,480
                                                          --------     --------    --------     --------
                                                           146,333      179,644     234,064      197,618
  Valuation allowance................................           --      (19,554)         --      (17,516)
                                                          --------     --------    --------     --------
Total deferred income tax assets.....................      146,333      160,090     234,064      180,102
                                                          --------     --------    --------     --------
Liabilities
  Accelerated depreciation...........................           --      (20,908)         --      (18,263)
  Intangibles........................................           --           --          --         (788)
  Foreign currency translation.......................           --      (13,687)         --       (7,193)
  Unrealized gains on investments....................           --         (720)         --       (2,343)
  Other..............................................       (1,727)     (10,102)     (1,371)      (4,747)
                                                          --------     --------    --------     --------
Total deferred income tax liabilities................       (1,727)     (45,417)     (1,371)     (33,334)
                                                          --------     --------    --------     --------
Deferred income tax assets, net......................     $144,606     $114,673    $232,693     $146,768
                                                          ========     ========    ========     ========


                                     IV-25

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



RECONCILIATION OF EFFECTIVE TAX RATE, YEAR ENDED DECEMBER 31,     2004        2003        2002
- -------------------------------------------------------------   --------    --------    --------
                                                                               
Federal statutory rate...................................         35.0%       35.0%       35.0%
Increase (decrease) in tax rate arising from:
  State income taxes, net of Federal benefit.............          2.4         7.9         6.7
  Foreign withholding taxes, net of Federal benefit......          6.4        12.2       (24.1)
  Other..................................................          2.0        (0.9)       (0.3)
                                                                  ----        ----       -----
Effective income tax rate................................         45.8%       54.2%       17.3%
                                                                  ====        ====       =====


    The Company has Federal operating loss carryforwards of $3.3 million
expiring in 2021 and state operating loss carryforwards of $526.9 million in
various state jurisdictions available to offset future taxable income that
expire in various amounts through 2024. The Company also has $4.3 million of
alternative minimum tax credits that do not have an expiration date.

    Deferred tax assets are reduced by a valuation allowance relating to the
state tax benefits attributable to net operating losses in certain jurisdictions
where realizability is not more likely than not.

    Deferred taxes of $3.8 million have been provided for the excess book basis
in the shares of certain foreign subsidiaries, because these are not permanent
in nature as defined by Accounting Principles Board Opinion 23, ACCOUNTING FOR
INCOME TAXES--SPECIAL AREAS.

17. FINANCIAL INSTRUMENTS

    DERIVATIVE FINANCIAL INSTRUMENTS

    The Company uses derivative financial instruments to modify its exposure to
market risks from changes in interest rates and foreign exchange rates. The
Company does not hold or enter into financial instruments for speculative
trading purposes.

    The Company's interest expense is exposed to movements in short-term
interest rates. Derivative instruments, including both fixed to variable and
variable to fixed interest rate instruments, are used to modify this exposure.
These instrument contracts include a combination of swaps, caps, collars, and
other structured instruments to modify interest rate exposure. At December 31,
2004, the variable to fixed interest rate instruments have a notional principal
amount of $800 million and have a weighted average interest rate of 5.93%. At
December 31, 2004, the fixed to variable interest rate agreements have a
notional principal amount of $240 million and have a weighted average interest
rate of 6.46%. At December 31, 2004, an unexercised interest rate swap put right
held by a bank had a notional amount of $25 million and a written rate of 5.4%.
As a result of unrealized mark to market adjustments, the Company recognized
$44.1 million, $21.6 million and $(13.4) million in gains and losses on these
instruments during 2004, 2003 and 2002.

    The foreign exchange instruments used are spot, forward, and option
contracts. Additionally, the Company enters into non-designated forward
contracts to hedge non-dollar denominated cash flows and foreign currency
balances. At December 31, 2004, the notional amount of foreign exchange
derivative contracts was $92.8 million. As a result of unrealized mark to market
adjustments, the Company recognized $(0.4) million, $(0.1) million and
$1.8 million in losses and gains on these instruments during 2004, 2003 and
2002.

    The Company's derivative financial instruments are recorded at fair value as
a component of long-term liabilities and other current liabilities in the
consolidated balance sheets.

                                     IV-26

                         DISCOVERY COMMUNICATIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    FAIR VALUE OF FINANCIAL INSTRUMENTS

    The fair values of cash and cash equivalents, receivables, and accounts
payable approximate their carrying values. Investments are carried at fair value
and fluctuations in fair value are recorded through other comprehensive income.
Losses on investments that are other than temporary declines in value are
recorded in the statement of operations.

    The carrying amount of the Company's borrowings was $2,478 million and the
fair value was $2,586 million at December 31, 2004. The carrying amount of the
Company's borrowings was $2,324 million and the fair value was $2,440 million at
December 31, 2003.

    The carrying amount of all derivative instruments represents their fair
value. The net fair value of the Company's short and long-term derivative
instruments is $(44.8) million at December 31, 2004; 8.9%, 6.5% and 84.6% of
these derivative instrument contracts will expire in 2005, 2006, and thereafter.
The fair value of the Company's derivative instruments totaled $(90.3) million
at December 31, 2003.

    The fair value of derivative contracts was estimated by obtaining interest
rate and volatility market data from brokers. As of December 31, 2004, an
estimated 100 basis point parallel shift in the interest rate yield curve would
change the fair value of the Company's portfolio by approximately
$11.4 million.

    CREDIT CONCENTRATIONS

    The Company continually monitors its positions with, and the credit quality
of, the financial institutions that are counterparties to its financial
instruments and does not anticipate nonperformance by the counterparties. In
addition, the Company limits the amount of investment credit exposure with any
one institution.

    The Company's trade receivables and investments do not represent a
significant concentration of credit risk at December 31, 2004 due to the wide
variety of customers and markets in which the Company operates and their
dispersion across many geographic areas.

18. RELATED PARTY TRANSACTIONS

    The Company identifies related parties as investors and their consolidated
businesses, equity investment companies, and executive management. The most
significant transactions with related parties result from companies that
distribute cable networks, produce programming, or provide media uplink
services. Gross revenue earned from related parties was $71.8 million,
$209.2 million and $205.1 million in 2004, 2003 and 2002. Accounts receivable
from these entities were $10.9 million and $33.3 million at December 31, 2004
and 2003. Purchases from related parties totaled $133.2 million,
$164.7 million, and $144.7 million in 2004, 2003, 2002; of these $91.0 million,
$101.1 million and $99.9 million relate to capitalized assets, principally
programming. Amounts payable to these parties totaled $4.3 million and
$52.6 million at December 31, 2004 and 2003.

                                     IV-27

                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                     
                                                       LIBERTY MEDIA CORPORATION

Dated: March 15, 2005                                  By  /s/ CHARLES Y. TANABE
                                                           ------------------------------------------
                                                           Charles Y. Tanabe
                                                           SENIOR VICE PRESIDENT AND
                                                           GENERAL COUNSEL



    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.



                  SIGNATURE                                    TITLE                       DATE
                  ---------                                    -----                       ----
                                                                                
             /s/ JOHN C. MALONE
    ------------------------------------       Chairman of the Board, and Director    March 15, 2005
               John C. Malone

            /s/ ROBERT R. BENNETT
    ------------------------------------       Director, President and Chief          March 15, 2005
              Robert R. Bennett                  Executive Officer

             /s/ DONNE F. FISHER
    ------------------------------------       Director                               March 15, 2005
               Donne F. Fisher

              /s/ PAUL A. GOULD
    ------------------------------------       Director                               March 15, 2005
                Paul A. Gould

             /s/ DAVID E. RAPLEY
    ------------------------------------       Director                               March 15, 2005
               David E. Rapley

            /s/ M. LAVOY ROBISON
    ------------------------------------       Director                               March 15, 2005
              M. LaVoy Robison

            /s/ LARRY E. ROMRELL
    ------------------------------------       Director                               March 15, 2005
              Larry E. Romrell

           /s/ DAVID J.A. FLOWERS
    ------------------------------------       Senior Vice President and Treasurer    March 15, 2005
             David J.A. Flowers                  (Principal Financial Officer)

          /s/ CHRISTOPHER W. SHEAN
    ------------------------------------       Senior Vice President and Controller   March 15, 2005
            Christopher W. Shean                 (Principal Accounting Officer)


                                     IV-28


                               EXHIBIT INDEX

   Listed below are the exhibits which are filed as a part of this Report
(according to the number assigned to them in Item 601 of Regulation S-K):

3--Articles of Incorporation and Bylaws:

   3.1   Restated Certificate of Incorporation of Liberty, dated August 9,
2001 (incorporated by reference to Exhibit 3.2 to the Registration Statement
on Form S-1 of Liberty Media Corporation (File No. 333-55998) as filed on
February 21, 2001 (the "Split Off S-1 Registration Statement")).

   3.2   Bylaws of Liberty, as adopted August 9, 2001 (incorporated by
reference to Exhibit 3.4 of the Split Off S-1 Registration Statement).

4--Instruments Defining the Rights of Securities Holders, including Indentures:

   4.1   Specimen certificate for shares of Series A common stock, par value
$.01 per share, of the Registrant (incorporated by reference to Exhibit 4.1
to the Split Off S-1 Registration Statement).

   4.2   Specimen certificate for shares of Series B common stock, par value
$.01 per share, of the Registrant (incorporated by reference to Exhibit 4.2
to the Split Off S-l Registration Statement).

   4.3   Indenture, dated as of July 7, 1999, between the Registrant and The
Bank of New York (incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 of Liberty Media Corporation (File No.
333-86491) as filed on September 3, 1999.

   4.4   Liberty undertakes to furnish the Securities and Exchange
Commission, upon request, a copy of all instruments with respect to long-term
debt not filed herewith.

10--Material Contracts:

   10.1   Inter-Group Agreement dated as of March 9, 1999, between AT&T Corp.
and Liberty Media Corporation, Liberty Media Group LLC and each Covered
Entity listed on the signature pages thereof (incorporated by reference to
Exhibit 10.2 to the Registration Statement on Form S-4 of Liberty Media
Corporation (File No. 333-86491) as filed on September 3, 1999, the "Liberty
S-4 Registration Statement").

   10.2   Ninth Supplement to Inter-Group Agreement dated as of June 14,
2001, between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC, AGI LLC, Liberty SP, Inc., LMC
Interactive, Inc. and Liberty AGI, Inc., on the other hand (incorporated by
reference to Exhibit 10.25 to the Registration Statement on Form S-1 of
Liberty Media Corporation (File No. 333-66034) as filed on July 27, 2001).

   10.3   Intercompany Agreement dated as of March 9, 1999, between Liberty
and AT&T Corp. (incorporated by reference to Exhibit 10.3 to the Liberty S-4
Registration Statement).

   10.4   Tax Sharing Agreement dated as of March 9, 1999, by and among AT&T
Corp., Liberty Media Corporation, Tele-Communications, Inc., Liberty Ventures
Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc.
and each Covered Entity listed on the signature pages thereof (incorporated
by reference to Exhibit 10.4 to the Liberty S-4 Registration Statement).

   10.5   First Amendment to Tax Sharing Agreement dated as of May 28, 1999,
by and among AT&T Corp., Liberty Media Corporation, Tele-Communications,
Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc.,
TCI CT Holdings, Inc. and each Covered Entity listed on the signature pages
thereof (incorporated by reference to Exhibit 10.5 to the Liberty S-4
Registration Statement).



   10.6   Second Amendment to Tax Sharing Agreement dated as of September
24, 1999, by and among AT&T Corp., Liberty Media Corporation,
Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity listed on
the signature pages thereof (incorporated by reference to Exhibit 10.6 to the
Registration Statement on Form S-1 of Liberty Media Corporation (File No.
333-93917) as filed on December 30, 1999 (the "Liberty S-1 Registration
Statement")).

   10.7   Third Amendment to Tax Sharing Agreement dated as of October
20, 1999, by and among AT&T Corp., Liberty Media Corporation,
Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity listed on
the signature pages thereof (incorporated by reference to Exhibit 10.7 to the
Liberty S-l Registration Statement).

   10.8   Fourth Amendment to Tax Sharing Agreement dated as of October
28, 1999, by and among AT&T Corp., Liberty Media Corporation,
Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity listed on
the signature pages thereof (incorporated by reference to Exhibit 10.8 to the
Liberty S-l Registration Statement).

   10.9   Fifth Amendment to Tax Sharing Agreement dated as of December
6, 1999, by and among AT&T Corp., Liberty Media Corporation,
Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity listed on
the signature pages thereof (incorporated by reference to Exhibit 10.9 to the
Liberty S-l Registration Statement).

   10.10   Sixth Amendment to Tax Sharing Agreement dated as of December
10, 1999, by and among AT&T Corp., Liberty Media Corporation,
Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity listed on
the signature pages thereof (incorporated by reference to Exhibit 10.10 to
the Liberty S-l Registration Statement).

   10.11   Seventh Amendment to Tax Sharing Agreement dated as of
December 30, 1999, by and among AT&T Corp., Liberty Media Corporation,
Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity listed on
the signature pages thereof (incorporated by reference to Exhibit 10.11 to
the Liberty S-l Registration Statement).

   10.12   Eighth Amendment to Tax Sharing Agreement dated as of July 25,
2000, by and among AT&T Corp., Liberty Media Corporation, AT&T Broadband LLC,
Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT
Holdings, Inc. and each Covered Entity listed on the signature pages thereof
(incorporated by reference to Exhibit 10.12 to the Split Off Registration
Statement).

   10.13   Instrument dated January 14, 2000, adding The Associated
Group, Inc. as a party to the Tax Sharing Agreement dated as of March 9,
1999, as amended, among The Associated Group, Inc., AT&T Corp., Liberty Media
Corporation, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered
Entity listed on the signature pages thereof (incorporated by reference to
Exhibit 10.12 to the Liberty S-1 Registration Statement).

   10.14   Restated and Amended Employment Agreement dated November 1,
1992, between Tele-Communications, Inc. and John C. Malone (assumed by
Liberty as of March 9, 1999), and the amendment thereto dated June 30, 1999
and effective as of March 9, 1999, between Liberty and John C. Malone
(incorporated by reference to Exhibit 10.6 to the Liberty S-4 Registration
Statement).



   10.15   Second Amendment to Employment Agreement dated November 1,
1992 between TCI and John C. Malone (assumed by Liberty as of March 9, 1999),
as amended effective March 9, 1999, (incorporated by reference to Exhibit
10.15 to Liberty's Annual Report on Form 10-K for the year ended December 31,
2003, Commission File No. 0-20421).

   10.16   Liberty Media Corporation 2000 Incentive Plan (As Amended and
Restated Effective April 19, 2004), filed herewith.

   10.17   Form of Non-Qualified Stock Option Agreement under the Liberty
Media Corporation 2000 Incentive Plan (As Amended and Restated Effective
April 19, 2004), filed herewith.

   10.18   Form of Stock Appreciation Rights Agreement under the Liberty
Media Corporation 2000 Incentive Plan (As Amended and Restated Effective
April 19, 2004), filed herewith.

   10.19   Form of Restricted Stock Award Agreement under the Liberty
Media Corporation 2000 Incentive Plan (As Amended and Restated Effective
April 19, 2004), filed herewith.

   10.20   Liberty Media Corporation 2002 Non-employee Director Incentive
Plan (incorporated by reference to Exhibit 10.17 to Liberty's Annual Report
on Form 10-K/A for the year ended December 31, 2002, Commission File No.
0-20421).

   10.21   Form of Stock Appreciation Rights Agreement under the Liberty
Media Corporation 2002 Non-Employee Director Incentive Plan, filed herewith.

   10.22   Letter Agreement, dated as of May 8, 2003, between Robert R.
Bennett and Liberty regarding Mr. Bennett's personal use of Liberty's
aircraft, (incorporated by reference to Exhibit 10.19 to Liberty's Annual
Report on Form 10-K for the year ended December 31, 2003, Commission File No.
0-20421).

   10.23   Deferred Compensation Agreement, dated as of January 1, 2004,
between Liberty and Robert R. Bennett, filed herewith.

   10.24   Deferred Compensation Agreement, dated as of October 15, 2004,
between Liberty and Robert R. Bennett, filed herewith.

   10.25   Amended and Restated Stock Purchase Agreement, dated as of
June 30, 2003, by and among Liberty, Comcast, Comcast QVC, Inc. and QVC, Inc.
(incorporated by reference to Exhibit 99.1 to the Company's Current Report on
Form 8-K filed on September 18, 2003, Commission File No. 0-20421).

21--Subsidiaries of Liberty Media Corporation, filed herewith.

23.1   Consent of KPMG LLP, filed herewith.

23.2   Consent of PricewaterhouseCoopers LLP, filed herewith.

31.1   Rule 13a-14(a)/15d-14(a) Certification, filed herewith.

31.2   Rule 13a-14(a)/15d-14(a) Certification, filed herewith.

31.3   Rule 13a-14(a)/15d-14(a) Certification, filed herewith.

32--Section 1350 Certification, filed herewith.

EX-10.16

                                                                   EXHIBIT 10.16

                            LIBERTY MEDIA CORPORATION
                               2000 INCENTIVE PLAN

               (As Amended and Restated Effective April 19, 2004)

                                    ARTICLE I

                         PURPOSE AND ASSUMPTION OF PLAN

     1.1 PURPOSE. The purpose of the Plan is to promote the success of the
Company by providing a method whereby (i) eligible employees of the Company and
its Subsidiaries and (ii) independent contractors providing services to the
Company and its Subsidiaries may be awarded additional remuneration for services
rendered and encouraged to invest in capital stock of the Company, thereby
increasing their proprietary interest in the Company's businesses, encouraging
them to remain in the employ of the Company or its Subsidiaries, and increasing
their personal interest in the continued success and progress of the Company and
its Subsidiaries. The Plan is also intended to aid in (i) attracting Persons of
exceptional ability to become officers and employees of the Company and its
Subsidiaries and (ii) inducing independent contractors to agree to provide
services to the Company and its Subsidiaries.

     1.2 ASSUMPTION OF PLAN; AMENDMENT AND RESTATEMENT OF PLAN. The Plan was
previously adopted as the Amended and Restated AT&T Corp. Liberty Media Group
2000 Incentive Plan, by the board of directors of AT&T Corp., the Company's
former parent corporation. The Board approved the amendment and restatement of
the Plan, effective August 10, 2001, and assumed and adopted the Plan on behalf
of the Company. The Plan was later amended and restated, effective September 11,
2002.

     1.3 FURTHER AMENDMENT AND RESTATEMENT OF PLAN. The Plan is being further
amended and restated as set forth herein. The Committee has approved the further
amendment and restatement of the Plan as set forth herein, effective April 19,
2004.

                                   ARTICLE II

                                   DEFINITIONS

     2.1 CERTAIN DEFINED TERMS. Capitalized terms not defined elsewhere in the
Plan shall have the following meanings (whether used in the singular or plural):

          "Affiliate" of the Company means any corporation, partnership or other
     business association that, directly or indirectly, through one or more
     intermediaries, controls, is controlled by, or is under common control with
     the Company.

          "Agreement" means a stock option agreement, stock appreciation rights
     agreement, restricted shares agreement, stock units agreement, cash award
     agreement or an agreement evidencing more than one type of Award, specified
     in Section 11.5, as any such Agreement may be supplemented or amended from
     time to time.



          "Approved Transaction" means any transaction in which the Board (or,
     if approval of the Board is not required as a matter of law, the
     stockholders of the Company) shall approve (i) any consolidation or merger
     of the Company, or binding share exchange, pursuant to which shares of
     Common Stock of the Company would be changed or converted into or exchanged
     for cash, securities, or other property, other than any such transaction in
     which the common stockholders of the Company immediately prior to such
     transaction have the same proportionate ownership of the Common Stock of,
     and voting power with respect to, the surviving corporation immediately
     after such transaction, (ii) any merger, consolidation or binding share
     exchange to which the Company is a party as a result of which the Persons
     who are common stockholders of the Company immediately prior thereto have
     less than a majority of the combined voting power of the outstanding
     capital stock of the Company ordinarily (and apart from the rights accruing
     under special circumstances) having the right to vote in the election of
     directors immediately following such merger, consolidation or binding share
     exchange, (iii) the adoption of any plan or proposal for the liquidation or
     dissolution of the Company, or (iv) any sale, lease, exchange or other
     transfer (in one transaction or a series of related transactions) of all,
     or substantially all, of the assets of the Company.

          "Award" means a grant of Options, SARs, Restricted Shares, Stock
     Units, Performance Awards, Cash Awards and/or cash amounts under the Plan.

          "Board" means the Board of Directors of the Company.

          "Board Change" means, during any period of two consecutive years,
     individuals who at the beginning of such period constituted the entire
     Board cease for any reason to constitute a majority thereof unless the
     election, or the nomination for election, of each new director was approved
     by a vote of at least two-thirds of the directors then still in office who
     were directors at the beginning of the period.

          "Cash Award" means an Award made pursuant to Section 10.1 of the Plan
     to a Holder that is paid solely on account of the attainment of one or more
     Performance Objectives that have been preestablished by the Committee.

          "Code" means the Internal Revenue Code of 1986, as amended from time
     to time, or any successor statute or statutes thereto. Reference to any
     specific Code section shall include any successor section.

          "Committee" means the committee of the Board appointed pursuant to
     Section 3.1 to administer the Plan.

          "Common Stock" means each or any (as the context may require) series
     of the Company's common stock.

          "Company" means Liberty Media Corporation, a Delaware corporation.

                                       2


          "Control Purchase" means any transaction (or series of related
     transactions) in which (i) any person (as such term is defined in Sections
     13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity
     (other than the Company, any Subsidiary of the Company or any employee
     benefit plan sponsored by the Company or any Subsidiary of the Company)
     shall purchase any Common Stock of the Company (or securities convertible
     into Common Stock of the Company) for cash, securities or any other
     consideration pursuant to a tender offer or exchange offer, without the
     prior consent of the Board, or (ii) any person (as such term is so
     defined), corporation or other entity (other than the Company, any
     Subsidiary of the Company, any employee benefit plan sponsored by the
     Company or any Subsidiary of the Company or any Exempt Person (as defined
     below)) shall become the "beneficial owner" (as such term is defined in
     Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
     of the Company representing 20% or more of the combined voting power of the
     then outstanding securities of the Company ordinarily (and apart from the
     rights accruing under special circumstances) having the right to vote in
     the election of directors (calculated as provided in Rule 13d-3(d) under
     the Exchange Act in the case of rights to acquire the Company's
     securities), other than in a transaction (or series of related
     transactions) approved by the Board. For purposes of this definition,
     "Exempt Person" means each of (a) the Chairman of the Board, the President
     and each of the directors of the Company as of April 19, 2004, and (b) the
     respective family members, estates and heirs of each of the Persons
     referred to in clause (a) above and any trust or other investment vehicle
     for the primary benefit of any of such Persons or their respective family
     members or heirs. As used with respect to any Person, the term "family
     member" means the spouse, siblings and lineal descendants of such Person.

          "Disability" means the inability to engage in any substantial gainful
     activity by reason of any medically determinable physical or mental
     impairment which can be expected to result in death or which has lasted or
     can be expected to last for a continuous period of not less than 12 months.

          "Dividend Equivalents" means, with respect to Restricted Shares to be
     issued at the end of the Restriction Period, to the extent specified by the
     Committee only, an amount equal to all dividends and other distributions
     (or the economic equivalent thereof) which are payable to stockholders of
     record during the Restriction Period on a like number and kind of shares of
     Common Stock.

          "Domestic Relations Order" means a domestic relations order as defined
     by the Code or Title I of the Employee Retirement Income Security Act, or
     the rules thereunder.

          "Effective Date" means December 6, 2000, the date on which the Plan
     originally became effective.

          "Equity Security" shall have the meaning ascribed to such term in
     Section 3(a)(11) of the Exchange Act, and an equity security of an issuer
     shall have the meaning ascribed thereto in Rule 16a-1 promulgated under the
     Exchange Act, or any successor Rule.

                                       3


          "Exchange Act" means the Securities Exchange Act of 1934, as amended
     from time to time, or any successor statute or statutes thereto. Reference
     to any specific Exchange Act section shall include any successor section.

          "Fair Market Value" of a share of any series of Common Stock on any
     day means the last sale price (or, if no last sale price is reported, the
     average of the high bid and low asked prices) for a share of such series of
     Common Stock on such day (or, if such day is not a trading day, on the next
     preceding trading day) as reported on the consolidated transaction
     reporting system for the principal national securities exchange on which
     shares of such series of Common Stock are listed on such day or if such
     shares are not then listed on a national securities exchange, then as
     reported on Nasdaq or, if such shares are not then listed or quoted on
     Nasdaq, then as quoted by the National Quotation Bureau Incorporated. If
     for any day the Fair Market Value of a share of the applicable series of
     Common Stock is not determinable by any of the foregoing means, then the
     Fair Market Value for such day shall be determined in good faith by the
     Committee on the basis of such quotations and other considerations as the
     Committee deems appropriate.

          "Free Standing SAR" has the meaning ascribed thereto in Section 7.1.

          "Holder" means a Person who has received an Award under the Plan.

          "Nasdaq" means The Nasdaq Stock Market.

          "Nonqualified Stock Option" means a stock option granted under Article
     VI.

          "Option" means a Nonqualified Stock Option.

          "Performance Award" means an Award made pursuant to Article X of the
     Plan to a Holder that is subject to the attainment of one or more
     Performance Objectives.

          "Performance Objective" means a standard established by the Committee
     to determine in whole or in part whether a Performance Award shall be
     earned.

          "Person" means an individual, corporation, limited liability company,
     partnership, trust, incorporated or unincorporated association, joint
     venture or other entity of any kind.

          "Plan" means this Liberty Media Corporation 2000 Incentive Plan (As
     Amended and Restated Effective April 19, 2004).

          "Restricted Shares" means shares of any series of Common Stock or the
     right to receive shares of any specified series of Common Stock, as the
     case may be, awarded pursuant to Article VIII.

          "Restriction Period" means a period of time beginning on the date of
     each Award of Restricted Shares and ending on the Vesting Date with respect
     to such Award.

                                       4


          "Retained Distribution" has the meaning ascribed thereto in Section
     8.3.

          "SARs" means stock appreciation rights, awarded pursuant to Article
     VII, with respect to shares of any specified series of Common Stock.

          "Stock Unit Awards" has the meaning ascribed thereto in Section 9.1.

          "Subsidiary" of a Person means any present or future subsidiary (as
     defined in Section 424(f) of the Code) of such Person or any business
     entity in which such Person owns, directly or indirectly, 50% or more of
     the voting, capital or profits interests. An entity shall be deemed a
     subsidiary of a Person for purposes of this definition only for such
     periods as the requisite ownership or control relationship is maintained.

          "Tandem SARs" has the meaning ascribed thereto in Section 7.1.

          "Vesting Date," with respect to any Restricted Shares awarded
     hereunder, means the date on which such Restricted Shares cease to be
     subject to a risk of forfeiture, as designated in or determined in
     accordance with the Agreement with respect to such Award of Restricted
     Shares pursuant to Article VIII. If more than one Vesting Date is
     designated for an Award of Restricted Shares, reference in the Plan to a
     Vesting Date in respect of such Award shall be deemed to refer to each part
     of such Award and the Vesting Date for such part.

                                   ARTICLE III

                                 ADMINISTRATION

     3.1 COMMITTEE. The Plan shall be administered by the Compensation Committee
of the Board unless a different committee is appointed by the Board. The
Committee shall be comprised of not less than two Persons. The Board may from
time to time appoint members of the Committee in substitution for or in addition
to members previously appointed, may fill vacancies in the Committee and may
remove members of the Committee. The Committee shall select one of its members
as its chairman and shall hold its meetings at such times and places as it shall
deem advisable. A majority of its members shall constitute a quorum and all
determinations shall be made by a majority of such quorum. Any determination
reduced to writing and signed by all of the members shall be as fully effective
as if it had been made by a majority vote at a meeting duly called and held.

     3.2 POWERS. The Committee shall have full power and authority to grant to
eligible Persons Options under Article VI of the Plan, SARs under Article VII of
the Plan, Restricted Shares under Article VIII of the Plan, Stock Units under
Article IX of the Plan, Cash Awards under Article X of the Plan and/or
Performance Awards under Article X of the Plan, to determine the terms and
conditions (which need not be identical) of all Awards so granted, to interpret
the provisions of the Plan and any Agreements relating to Awards granted under
the Plan and to supervise the administration of the Plan. The Committee in
making an Award may

                                       5


provide for the granting or issuance of additional, replacement or alternative
Awards upon the occurrence of specified events, including the exercise of the
original Award. The Committee shall have sole authority in the selection of
Persons to whom Awards may be granted under the Plan and in the determination of
the timing, pricing and amount of any such Award, subject only to the express
provisions of the Plan. In making determinations hereunder, the Committee may
take into account the nature of the services rendered by the respective
employees and independent contractors, their present and potential contributions
to the success of the Company and its Subsidiaries, and such other factors as
the Committee in its discretion deems relevant.

     3.3 INTERPRETATION. The Committee is authorized, subject to the provisions
of the Plan, to establish, amend and rescind such rules and regulations as it
deems necessary or advisable for the proper administration of the Plan and to
take such other action in connection with or in relation to the Plan as it deems
necessary or advisable. Each action and determination made or taken pursuant to
the Plan by the Committee, including any interpretation or construction of the
Plan, shall be final and conclusive for all purposes and upon all Persons. No
member of the Committee shall be liable for any action or determination made or
taken by him or the Committee in good faith with respect to the Plan.

                                   ARTICLE IV

                           SHARES SUBJECT TO THE PLAN

     4.1 NUMBER OF SHARES. Subject to the provisions of this Article IV, the
maximum number of shares of Common Stock with respect to which Awards may be
granted during the term of the Plan shall be 160 million shares. Shares of
Common Stock will be made available from the authorized but unissued shares of
the Company or from shares reacquired by the Company, including shares purchased
in the open market. The shares of Common Stock subject to (i) any Award granted
under the Plan that shall expire, terminate or be annulled for any reason
without having been exercised (or considered to have been exercised as provided
in Section 7.2), (ii) any Award of any SARs granted under the Plan that shall be
exercised for cash, and (iii) any Award of Restricted Shares or Stock Units that
shall be forfeited prior to becoming vested (provided that the Holder received
no benefits of ownership of such Restricted Shares or Stock Units other than
voting rights and the accumulation of Retained Distributions and unpaid Dividend
Equivalents that are likewise forfeited) shall again be available for purposes
of the Plan. Except for Awards described in Section 11.1, no Person may be
granted in any calendar year Awards covering more than 25 million shares of
Common Stock (as such amount may be adjusted from time to time as provided in
Section 4.2). No Person shall receive payment for Performance Awards during any
calendar year aggregating in excess of $10,000,000.

     4.2 ADJUSTMENTS. If the Company subdivides its outstanding shares of any
series of Common Stock into a greater number of shares of such series of Common
Stock (by stock dividend, stock split, reclassification, or otherwise) or
combines its outstanding shares of any series of Common Stock into a smaller
number of shares of such series of Common Stock (by reverse stock split,
reclassification, or otherwise) or if the Committee determines that any stock
dividend, extraordinary cash dividend, reclassification, recapitalization,
reorganization, split-up, spin-off, combination, exchange of shares, warrants or
rights offering to purchase such series of

                                       6


Common Stock or other similar corporate event (including mergers or
consolidations other than those which constitute Approved Transactions,
adjustments with respect to which shall be governed by Section 11.1(b)) affects
any series of Common Stock so that an adjustment is required to preserve the
benefits or potential benefits intended to be made available under the Plan,
then the Committee, in its sole discretion and in such manner as the Committee
may deem equitable and appropriate, may make such adjustments to any or all of
(i) the number and kind of shares of stock which thereafter may be awarded,
optioned or otherwise made subject to the benefits contemplated by the Plan,
(ii) the number and kind of shares of stock subject to outstanding Awards, and
(iii) the purchase or exercise price and the relevant appreciation base with
respect to any of the foregoing, PROVIDED, HOWEVER, that the number of shares
subject to any Award shall always be a whole number. Notwithstanding the
foregoing, if all shares of any series of Common Stock are redeemed, then each
outstanding Award shall be adjusted to substitute for the shares of such series
of Common Stock subject thereto the kind and amount of cash, securities or other
assets issued or paid in the redemption of the equivalent number of shares of
such series of Common Stock and otherwise the terms of such Award, including, in
the case of Options or similar rights, the total exercise price, and, in the
case of Free Standing SARs, the base price, shall remain constant before and
after the substitution (unless otherwise determined by the Committee and
provided in the applicable Agreement). The Committee may, if deemed appropriate,
provide for a cash payment to any Holder of an Award in connection with any
adjustment made pursuant to this Section 4.2.

                                    ARTICLE V

                                   ELIGIBILITY

     5.1 GENERAL. The Persons who shall be eligible to participate in the Plan
and to receive Awards under the Plan shall, subject to Section 5.2, be such
Persons who are employees (including officers and directors) of or independent
contractors providing services to the Company or its Subsidiaries as the
Committee shall select. Awards may be made to employees or independent
contractors who hold or have held Awards under the Plan or any similar or other
awards under any other plan of the Company or any of its Affiliates.

     5.2 INELIGIBILITY. No member of the Committee, while serving as such, shall
be eligible to receive an Award.

                                   ARTICLE VI

                                  STOCK OPTIONS

     6.1 GRANT OF OPTIONS. Subject to the limitations of the Plan, the Committee
shall designate from time to time those eligible Persons to be granted Options,
the time when each Option shall be granted to such eligible Persons, the series
and number of shares of Common Stock subject to such Option, and, subject to
Section 6.2, the purchase price of the shares of Common Stock subject to such
Option.

                                       7


     6.2 OPTION PRICE. The price at which shares may be purchased upon exercise
of an Option shall be fixed by the Committee and may be more than, less than or
equal to the Fair Market Value of the shares of the applicable series of Common
Stock subject to the Option as of the date the Option is granted.

     6.3 TERM OF OPTIONS. Subject to the provisions of the Plan with respect to
death, retirement and termination of employment, the term of each Option shall
be for such period as the Committee shall determine as set forth in the
applicable Agreement.

     6.4 EXERCISE OF OPTIONS. An Option granted under the Plan shall become (and
remain) exercisable during the term of the Option to the extent provided in the
applicable Agreement and the Plan and, unless the Agreement otherwise provides,
may be exercised to the extent exercisable, in whole or in part, at any time and
from time to time during such term; PROVIDED, HOWEVER, that subsequent to the
grant of an Option, the Committee, at any time before complete termination of
such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part (without reducing the term of such Option).

     6.5 MANNER OF EXERCISE.

          (a) FORM OF PAYMENT. An Option shall be exercised by written notice to
     the Company upon such terms and conditions as the Agreement may provide and
     in accordance with such other procedures for the exercise of Options as the
     Committee may establish from time to time. The method or methods of payment
     of the purchase price for the shares to be purchased upon exercise of an
     Option and of any amounts required by Section 11.9 shall be determined by
     the Committee and may consist of (i) cash, (ii) check, (iii) promissory
     note (subject to applicable law), (iv) whole shares of any series of Common
     Stock, (v) the withholding of shares of the applicable series of Common
     Stock issuable upon such exercise of the Option, (vi) the delivery,
     together with a properly executed exercise notice, of irrevocable
     instructions to a broker to deliver promptly to the Company the amount of
     sale or loan proceeds required to pay the purchase price, or (vii) any
     combination of the foregoing methods of payment, or such other
     consideration and method of payment as may be permitted for the issuance of
     shares under the Delaware General Corporation Law. The permitted method or
     methods of payment of the amounts payable upon exercise of an Option, if
     other than in cash, shall be set forth in the applicable Agreement and may
     be subject to such conditions as the Committee deems appropriate.

          (b) VALUE OF SHARES. Unless otherwise determined by the Committee and
     provided in the applicable Agreement, shares of any series of Common Stock
     delivered in payment of all or any part of the amounts payable in
     connection with the exercise of an Option, and shares of any series of
     Common Stock withheld for such payment, shall be valued for such purpose at
     their Fair Market Value as of the exercise date.

          (c) ISSUANCE OF SHARES. The Company shall effect the transfer of the
     shares of Common Stock purchased under the Option as soon as practicable
     after the exercise thereof and payment in full of the purchase price
     therefor and of any amounts required by

                                       8


     Section 11.9, and within a reasonable time thereafter, such transfer shall
     be evidenced on the books of the Company. Unless otherwise determined by
     the Committee and provided in the applicable Agreement, (i) no Holder or
     other Person exercising an Option shall have any of the rights of a
     stockholder of the Company with respect to shares of Common Stock subject
     to an Option granted under the Plan until due exercise and full payment has
     been made, and (ii) no adjustment shall be made for cash dividends or other
     rights for which the record date is prior to the date of such due exercise
     and full payment.

     6.6 NONTRANSFERABILITY. Unless otherwise determined by the Committee and
provided in the applicable Agreement, Options shall not be transferable other
than by will or the laws of descent and distribution or pursuant to a Domestic
Relations Order, and, except as otherwise required pursuant to a Domestic
Relations Order, Options may be exercised during the lifetime of the Holder
thereof only by such Holder (or his or her court-appointed legal
representative).

                                   ARTICLE VII

                                      SARs

     7.1 GRANT OF SARs. Subject to the limitations of the Plan, SARs may be
granted by the Committee to such eligible Persons in such numbers, with respect
to any specified series of Common Stock, and at such times during the term of
the Plan as the Committee shall determine. A SAR may be granted to a Holder of
an Option (hereinafter called a "related Option") with respect to all or a
portion of the shares of Common Stock subject to the related Option (a "Tandem
SAR") or may be granted separately to an eligible employee (a "Free Standing
SAR"). Subject to the limitations of the Plan, SARs shall be exercisable in
whole or in part upon notice to the Company upon such terms and conditions as
are provided in the Agreement.

     7.2 TANDEM SARs. A Tandem SAR may be granted either concurrently with the
grant of the related Option or at any time thereafter prior to the complete
exercise, termination, expiration or cancellation of such related Option. Tandem
SARs shall be exercisable only at the time and to the extent that the related
Option is exercisable (and may be subject to such additional limitations on
exercisability as the Agreement may provide) and in no event after the complete
termination or full exercise of the related Option. Upon the exercise or
termination of the related Option, the Tandem SARs with respect thereto shall be
canceled automatically to the extent of the number of shares of Common Stock
with respect to which the related Option was so exercised or terminated. Subject
to the limitations of the Plan, upon the exercise of a Tandem SAR and unless
otherwise determined by the Committee and provided in the applicable Agreement,
(i) the Holder thereof shall be entitled to receive from the Company, for each
share of the applicable series of Common Stock with respect to which the Tandem
SAR is being exercised, consideration (in the form determined as provided in
Section 7.4) equal in value to the excess of the Fair Market Value of a share of
the applicable series of Common Stock with respect to which the Tandem SAR was
granted on the date of exercise over the related Option purchase price per
share, and (ii) the related Option with respect thereto shall be canceled
automatically to the extent of the number of shares of Common Stock with respect
to which the Tandem SAR was so exercised.

                                       9


     7.3 FREE STANDING SARs. Free Standing SARs shall be exercisable at the
time, to the extent and upon the terms and conditions set forth in the
applicable Agreement. The base price of a Free Standing SAR may be more than,
less than or equal to the Fair Market Value of the applicable series of Common
Stock with respect to which the Free Standing SAR was granted as of the date the
Free Standing SAR is granted. Subject to the limitations of the Plan, upon the
exercise of a Free Standing SAR and unless otherwise determined by the Committee
and provided in the applicable Agreement, the Holder thereof shall be entitled
to receive from the Company, for each share of the applicable series of Common
Stock with respect to which the Free Standing SAR is being exercised,
consideration (in the form determined as provided in Section 7.4) equal in value
to the excess of the Fair Market Value of a share of the applicable series of
Common Stock with respect to which the Free Standing SAR was granted on the date
of exercise over the base price per share of such Free Standing SAR.

     7.4 CONSIDERATION. The consideration to be received upon the exercise of a
SAR by the Holder shall be paid in cash, shares of the applicable series of
Common Stock with respect to which the SAR was granted (valued at Fair Market
Value on the date of exercise of such SAR), a combination of cash and such
shares of the applicable series of Common Stock or such other consideration, in
each case, as provided in the Agreement. No fractional shares of Common Stock
shall be issuable upon exercise of a SAR, and unless otherwise provided in the
applicable Agreement, the Holder will receive cash in lieu of fractional shares.
Unless the Committee shall otherwise determine, to the extent a Free Standing
SAR is exercisable, it will be exercised automatically for cash on its
expiration date.

     7.5 LIMITATIONS. The applicable Agreement may provide for a limit on the
amount payable to a Holder upon exercise of SARs at any time or in the
aggregate, for a limit on the number of SARs that may be exercised by the Holder
in whole or in part for cash during any specified period, for a limit on the
time periods during which a Holder may exercise SARs, and for such other limits
on the rights of the Holder and such other terms and conditions of the SAR,
including a condition that the SAR may be exercised only in accordance with
rules and regulations adopted from time to time, as the Committee may determine.
Unless otherwise so provided in the applicable Agreement, any such limit
relating to a Tandem SAR shall not restrict the exercisability of the related
Option. Such rules and regulations may govern the right to exercise SARs granted
prior to the adoption or amendment of such rules and regulations as well as SARs
granted thereafter.

     7.6 EXERCISE. For purposes of this Article VII, the date of exercise of a
SAR shall mean the date on which the Company shall have received notice from the
Holder of the SAR of the exercise of such SAR (unless otherwise determined by
the Committee and provided in the applicable Agreement).

     7.7 NONTRANSFERABILITY. Unless otherwise determined by the Committee and
provided in the applicable Agreement, (i) SARs shall not be transferable other
than by will or the laws of descent and distribution or pursuant to a Domestic
Relations Order, and (ii) except as otherwise required pursuant to a Domestic
Relations Order, SARs may be exercised during the lifetime of the Holder thereof
only by such Holder (or his or her court-appointed legal representative).

                                       10


                                  ARTICLE VIII

                                RESTRICTED SHARES

     8.1 GRANT. Subject to the limitations of the Plan, the Committee shall
designate those eligible Persons to be granted Awards of Restricted Shares,
shall determine the time when each such Award shall be granted, shall determine
whether shares of Common Stock covered by Awards of Restricted Shares will be
issued at the beginning or the end of the Restriction Period and whether
Dividend Equivalents will be paid during the Restriction Period in the event
shares of the applicable series of Common Stock are to be issued at the end of
the Restriction Period, and shall designate (or set forth the basis for
determining) the Vesting Date or Vesting Dates for each Award of Restricted
Shares, and may prescribe other restrictions, terms and conditions applicable to
the vesting of such Restricted Shares in addition to those provided in the Plan.
The Committee shall determine the price, if any, to be paid by the Holder for
the Restricted Shares; PROVIDED, HOWEVER, that the issuance of Restricted Shares
shall be made for at least the minimum consideration necessary to permit such
Restricted Shares to be deemed fully paid and nonassessable. All determinations
made by the Committee pursuant to this Section 8.1 shall be specified in the
Agreement.

     8.2 ISSUANCE OF RESTRICTED SHARES AT BEGINNING OF THE RESTRICTION PERIOD.
If shares of the applicable series of Common Stock are issued at the beginning
of the Restriction Period, the stock certificate or certificates representing
such Restricted Shares shall be registered in the name of the Holder to whom
such Restricted Shares shall have been awarded. During the Restriction Period,
certificates representing the Restricted Shares and any securities constituting
Retained Distributions shall bear a restrictive legend to the effect that
ownership of the Restricted Shares (and such Retained Distributions), and the
enjoyment of all rights appurtenant thereto, are subject to the restrictions,
terms and conditions provided in the Plan and the applicable Agreement. Such
certificates shall remain in the custody of the Company or its designee, and the
Holder shall deposit with the custodian stock powers or other instruments of
assignment, each endorsed in blank, so as to permit retransfer to the Company of
all or any portion of the Restricted Shares and any securities constituting
Retained Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and the applicable Agreement.

     8.3 RESTRICTIONS. Restricted Shares issued at the beginning of the
Restriction Period shall constitute issued and outstanding shares of the
applicable series of Common Stock for all corporate purposes. The Holder will
have the right to vote such Restricted Shares, to receive and retain such
dividends and distributions, as the Committee may designate, paid or distributed
on such Restricted Shares, and to exercise all other rights, powers and
privileges of a Holder of shares of the applicable series of Common Stock with
respect to such Restricted Shares; EXCEPT, THAT, unless otherwise determined by
the Committee and provided in the applicable Agreement, (i) the Holder will not
be entitled to delivery of the stock certificate or certificates representing
such Restricted Shares until the Restriction Period shall have expired and
unless all other vesting requirements with respect thereto shall have been
fulfilled or waived; (ii) the Company or its designee will retain custody of the
stock certificate or certificates representing the Restricted Shares during the
Restriction Period as provided in Section 8.2; (iii) other than such dividends

                                       11


and distributions as the Committee may designate, the Company or its designee
will retain custody of all distributions ("Retained Distributions") made or
declared with respect to the Restricted Shares (and such Retained Distributions
will be subject to the same restrictions, terms and vesting, and other
conditions as are applicable to the Restricted Shares) until such time, if ever,
as the Restricted Shares with respect to which such Retained Distributions shall
have been made, paid or declared shall have become vested, and such Retained
Distributions shall not bear interest or be segregated in a separate account;
(iv) the Holder may not sell, assign, transfer, pledge, exchange, encumber or
dispose of the Restricted Shares or any Retained Distributions or his interest
in any of them during the Restriction Period; and (v) a breach of any
restrictions, terms or conditions provided in the Plan or established by the
Committee with respect to any Restricted Shares or Retained Distributions will
cause a forfeiture of such Restricted Shares and any Retained Distributions with
respect thereto.

     8.4 ISSUANCE OF STOCK AT END OF THE RESTRICTION PERIOD. Restricted Shares
issued at the end of the Restriction Period shall not constitute issued and
outstanding shares of the applicable series of Common Stock, and the Holder
shall not have any of the rights of a stockholder with respect to the shares of
Common Stock covered by such an Award of Restricted Shares, in each case until
such shares shall have been transferred to the Holder at the end of the
Restriction Period. If and to the extent that shares of Common Stock are to be
issued at the end of the Restriction Period, the Holder shall be entitled to
receive Dividend Equivalents with respect to the shares of Common Stock covered
thereby either (i) during the Restriction Period or (ii) in accordance with the
rules applicable to Retained Distributions, as the Committee may specify in the
Agreement.

     8.5 CASH PAYMENTS. In connection with any Award of Restricted Shares, an
Agreement may provide for the payment of a cash amount to the Holder of such
Restricted Shares at any time after such Restricted Shares shall have become
vested. Such cash amounts shall be payable in accordance with such additional
restrictions, terms and conditions as shall be prescribed by the Committee in
the Agreement and shall be in addition to any other salary, incentive, bonus or
other compensation payments which such Holder shall be otherwise entitled or
eligible to receive from the Company.

     8.6 COMPLETION OF RESTRICTION PERIOD. On the Vesting Date with respect to
each Award of Restricted Shares and the satisfaction of any other applicable
restrictions, terms and conditions, (i) all or the applicable portion of such
Restricted Shares shall become vested, (ii) any Retained Distributions and any
unpaid Dividend Equivalents with respect to such Restricted Shares shall become
vested to the extent that the Restricted Shares related thereto shall have
become vested, and (iii) any cash amount to be received by the Holder with
respect to such Restricted Shares shall become payable, all in accordance with
the terms of the applicable Agreement. Any such Restricted Shares, Retained
Distributions and any unpaid Dividend Equivalents that shall not become vested
shall be forfeited to the Company, and the Holder shall not thereafter have any
rights (including dividend and voting rights) with respect to such Restricted
Shares, Retained Distributions and any unpaid Dividend Equivalents that shall
have been so forfeited. The Committee may, in its discretion, provide that the
delivery of any Restricted Shares, Retained Distributions and unpaid Dividend
Equivalents that shall have become vested, and payment of any related cash
amounts that shall have become payable under

                                       12


this Article VIII, shall be deferred until such date or dates as the recipient
may elect. Any election of a recipient pursuant to the preceding sentence shall
be filed in writing with the Committee in accordance with such rules and
regulations, including any deadline for the making of such an election, as the
Committee may provide.

                                   ARTICLE IX

                                   STOCK UNITS

     9.1 GRANT. In addition to granting Awards of Options, SARs and Restricted
Shares, the Committee shall, subject to the limitations of the Plan, have
authority to grant to eligible Persons Awards of Stock Units which may be in the
form of shares of any specified series of Common Stock or units, the value of
which is based, in whole or in part, on the Fair Market Value of the shares of
any specified series of Common Stock. Subject to the provisions of the Plan,
including any rules established pursuant to Section 9.2, Awards of Stock Units
shall be subject to such terms, restrictions, conditions, vesting requirements
and payment rules as the Committee may determine in its discretion, which need
not be identical for each Award. The determinations made by the Committee
pursuant to this Section 9.1 shall be specified in the applicable Agreement.

     9.2 RULES. The Committee may, in its discretion, establish any or all of
the following rules for application to an Award of Stock Units:

          (a) Any shares of Common Stock which are part of an Award of Stock
     Units may not be assigned, sold, transferred, pledged or otherwise
     encumbered prior to the date on which the shares are issued or, if later,
     the date provided by the Committee at the time of the Award.

          (b) Such Awards may provide for the payment of cash consideration by
     the Person to whom such Award is granted or provide that the Award, and any
     shares of Common Stock to be issued in connection therewith, if applicable,
     shall be delivered without the payment of cash consideration; PROVIDED,
     HOWEVER, that the issuance of any shares of Common Stock in connection with
     an Award of Stock Units shall be for at least the minimum consideration
     necessary to permit such shares to be deemed fully paid and nonassessable.

          (c) Awards of Stock Units may provide for deferred payment schedules,
     vesting over a specified period of employment, the payment (on a current or
     deferred basis) of dividend equivalent amounts with respect to the number
     of shares of Common Stock covered by the Award, and elections by the
     employee to defer payment of the Award or the lifting of restrictions on
     the Award, if any.

          (d) In such circumstances as the Committee may deem advisable, the
     Committee may waive or otherwise remove, in whole or in part, any
     restrictions or limitations to which a Stock Unit Award was made subject at
     the time of grant.

                                       13


                                    ARTICLE X

                       CASH AWARDS AND PERFORMANCE AWARDS

     10.1 CASH AWARDS. In addition to granting Options, SARs, Restricted Shares
and Stock Units, the Committee shall, subject to the limitations of the Plan,
have authority to grant to eligible Persons Cash Awards. Each Cash Award shall
be subject to such terms and conditions, restrictions and contingencies, if any,
as the Committee shall determine. Restrictions and contingencies limiting the
right to receive a cash payment pursuant to a Cash Award shall be based upon the
achievement of single or multiple Performance Objectives over a performance
period established by the Committee. The determinations made by the Committee
pursuant to this Section 10.1 shall be specified in the applicable Agreement.

     10.2 DESIGNATION AS A PERFORMANCE AWARD. The Committee shall have the right
to designate any Award of Options, SARs, Restricted Shares or Stock Units as a
Performance Award. All Cash Awards shall be designated as Performance Awards.

     10.3 PERFORMANCE OBJECTIVES. The grant or vesting of a Performance Award
shall be subject to the achievement of Performance Objectives over a performance
period established by the Committee based upon one or more of the following
business criteria that apply to the Holder, one or more business units,
divisions or Subsidiaries of the Company or the applicable sector of the
Company, or the Company as a whole, and if so desired by the Committee, by
comparison with a peer group of companies: increased revenue; net income
measures (including income after capital costs and income before or after
taxes); stock price measures (including growth measures and total stockholder
return); price per share of Common Stock; market share; earnings per share
(actual or targeted growth); earnings before interest, taxes, depreciation and
amortization (EBITDA); economic value added (or an equivalent metric); market
value added; debt to equity ratio; cash flow measures (including cash flow
return on capital, cash flow return on tangible capital, net cash flow and net
cash flow before financing activities); return measures (including return on
equity, return on average assets, return on capital, risk-adjusted return on
capital, return on investors' capital and return on average equity); operating
measures (including operating income, funds from operations, cash from
operations, after-tax operating income, sales volumes, production volumes and
production efficiency); expense measures (including overhead cost and general
and administrative expense); margins; stockholder value; total stockholder
return; proceeds from dispositions; total market value and corporate values
measures (including ethics compliance, environmental and safety). Unless
otherwise stated, such a Performance Objective need not be based upon an
increase or positive result under a particular business criterion and could
include, for example, maintaining the status quo or limiting economic losses
(measured, in each case, by reference to specific business criteria). The
Committee shall have the authority to determine whether the Performance
Objectives and other terms and conditions of the Award are satisfied, and the
Committee's determination as to the achievement of Performance Objectives
relating to a Performance Award shall be made in writing.

     10.4 SECTION 162(m) OF THE CODE. Notwithstanding the foregoing provisions,
if the Committee intends for a Performance Award to be granted and administered
in a manner designed to preserve the deductibility of the compensation resulting
from such Award in

                                       14


accordance with Section 162(m) of the Code, then the Performance Objectives for
such particular Performance Award relative to the particular period of service
to which the Performance Objectives relate shall be established by the Committee
in writing (i) no later than 90 days after the beginning of such period and (ii)
prior to the completion of 25% of such period.

     10.5 WAIVER OF PERFORMANCE OBJECTIVES. The Committee shall have no
discretion to modify or waive the Performance Objectives or conditions to the
grant or vesting of a Performance Award unless such Award is not intended to
qualify as qualified performance-based compensation under Section 162(m) of the
Code and the relevant Agreement provides for such discretion.

                                   ARTICLE XI

                               GENERAL PROVISIONS

     11.1 ACCELERATION OF AWARDS.

          (a) DEATH OR DISABILITY. If a Holder's employment shall terminate by
     reason of death or Disability, notwithstanding any contrary waiting period,
     installment period, vesting schedule or Restriction Period in any Agreement
     or in the Plan, unless the applicable Agreement provides otherwise: (i) in
     the case of an Option or SAR, each outstanding Option or SAR granted under
     the Plan shall immediately become exercisable in full in respect of the
     aggregate number of shares covered thereby; (ii) in the case of Restricted
     Shares, the Restriction Period applicable to each such Award of Restricted
     Shares shall be deemed to have expired and all such Restricted Shares, any
     related Retained Distributions and any unpaid Dividend Equivalents shall
     become vested and any related cash amounts payable pursuant to the
     applicable Agreement shall be adjusted in such manner as may be provided in
     the Agreement; and (iii) in the case of Stock Units, each such Award of
     Stock Units shall become vested in full.

          (b) APPROVED TRANSACTIONS; BOARD CHANGE; CONTROL PURCHASE. In the
     event of any Approved Transaction, Board Change or Control Purchase,
     notwithstanding any contrary waiting period, installment period, vesting
     schedule or Restriction Period in any Agreement or in the Plan, unless the
     applicable Agreement provides otherwise: (i) in the case of an Option or
     SAR, each such outstanding Option or SAR granted under the Plan shall
     become exercisable in full in respect of the aggregate number of shares
     covered thereby; (ii) in the case of Restricted Shares, the Restriction
     Period applicable to each such Award of Restricted Shares shall be deemed
     to have expired and all such Restricted Shares, any related Retained
     Distributions and any unpaid Dividend Equivalents shall become vested and
     any related cash amounts payable pursuant to the applicable Agreement shall
     be adjusted in such manner as may be provided in the Agreement; and (iii)
     in the case of Stock Units, each such Award of Stock Units shall become
     vested in full, in each case effective upon the Board Change or Control
     Purchase or immediately prior to consummation of the Approved Transaction.
     The effect, if any, on a Cash Award of an Approved Transaction, Board
     Change or Control Purchase shall be prescribed in the applicable Agreement.
     Notwithstanding the foregoing, unless otherwise provided in the

                                       15


     applicable Agreement, the Committee may, in its discretion, determine that
     any or all outstanding Awards of any or all types granted pursuant to the
     Plan will not vest or become exercisable on an accelerated basis in
     connection with an Approved Transaction if effective provision has been
     made for the taking of such action which, in the opinion of the Committee,
     is equitable and appropriate to substitute a new Award for such Award or to
     assume such Award and to make such new or assumed Award, as nearly as may
     be practicable, equivalent to the old Award (before giving effect to any
     acceleration of the vesting or exercisability thereof), taking into
     account, to the extent applicable, the kind and amount of securities, cash
     or other assets into or for which the applicable series of Common Stock may
     be changed, converted or exchanged in connection with the Approved
     Transaction.

     11.2 TERMINATION OF EMPLOYMENT.

          (a) GENERAL. If a Holder's employment shall terminate prior to the
     complete exercise of an Option or SAR (or deemed exercise thereof, as
     provided in Section 7.2) or during the Restriction Period with respect to
     any Restricted Shares or prior to the vesting or complete exercise of any
     Stock Units, then such Option, SAR or Stock Unit shall thereafter be
     exercisable, and the Holder's rights to any unvested Restricted Shares,
     Retained Distributions, unpaid Dividend Equivalents and related cash
     amounts and any such unvested Stock Units shall thereafter vest, in each
     case solely to the extent provided in the applicable Agreement; PROVIDED,
     HOWEVER, that, unless otherwise determined by the Committee and provided in
     the applicable Agreement, (i) no Option or SAR may be exercised after the
     scheduled expiration date thereof; (ii) if the Holder's employment
     terminates by reason of death or Disability, the Option or SAR shall remain
     exercisable for a period of at least one year following such termination
     (but not later than the scheduled expiration of such Option or SAR); and
     (iii) any termination of the Holder's employment for cause will be treated
     in accordance with the provisions of Section 11.2(b). The effect on a Cash
     Award of the termination of a Holder's employment for any reason, including
     by reason of death or Disability or for cause, shall be prescribed in the
     applicable Agreement.

          (b) TERMINATION FOR CAUSE. If a Holder's employment with the Company
     or a Subsidiary of the Company shall be terminated by the Company or such
     Subsidiary during the Restriction Period with respect to any Restricted
     Shares, or prior to the exercise of any Option or SAR or prior to the
     vesting or complete exercise of any Stock Unit for cause (for these
     purposes, cause shall have the meaning ascribed thereto in any employment
     agreement to which such Holder is a party or, in the absence thereof, shall
     include, but not be limited to, insubordination, dishonesty, incompetence,
     moral turpitude, other misconduct of any kind and the refusal to perform
     his duties and responsibilities for any reason other than illness or
     incapacity; PROVIDED, HOWEVER, that if such termination occurs within 12
     months after an Approved Transaction or Control Purchase or Board Change,
     termination for cause shall mean only a felony conviction for fraud,
     misappropriation, or embezzlement), then, unless otherwise determined by
     the Committee and provided in the applicable Agreement, (i) all Options and
     SARs and all unvested or unexercised Stock Units held by such Holder shall
     immediately terminate

                                       16


     and (ii) such Holder's rights to all Restricted Shares, Retained
     Distributions, any unpaid Dividend Equivalents and any related cash amounts
     shall be forfeited immediately.

          (c) MISCELLANEOUS. The Committee may determine whether any given leave
     of absence constitutes a termination of employment; PROVIDED, HOWEVER, that
     for purposes of the Plan, (i) a leave of absence, duly authorized in
     writing by the Company for military service or sickness, or for any other
     purpose approved by the Company if the period of such leave does not exceed
     90 days, and (ii) a leave of absence in excess of 90 days, duly authorized
     in writing by the Company provided the employee's right to reemployment is
     guaranteed either by statute or contract, shall not be deemed a termination
     of employment. Unless otherwise determined by the Committee and provided in
     the applicable Agreement, Awards made under the Plan shall not be affected
     by any change of employment so long as the Holder continues to be an
     employee of the Company.

     11.3 RIGHT OF COMPANY TO TERMINATE EMPLOYMENT. Nothing contained in the
Plan or in any Award, and no action of the Company or the Committee with respect
thereto, shall confer or be construed to confer on any Holder any right to
continue in the employ of the Company or any of its Subsidiaries or interfere in
any way with the right of the Company or any Subsidiary of the Company to
terminate the employment of the Holder at any time, with or without cause,
subject, however, to the provisions of any employment agreement between the
Holder and the Company or any Subsidiary of the Company.

     11.4 NONALIENATION OF BENEFITS. Except as set forth herein, no right or
benefit under the Plan shall be subject to anticipation, alienation, sale,
assignment, hypothecation, pledge, exchange, transfer, encumbrance or charge,
and any attempt to anticipate, alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be void. No right or
benefit hereunder shall in any manner be liable for or subject to the debts,
contracts, liabilities or torts of the Person entitled to such benefits.

     11.5 WRITTEN AGREEMENT. Each Award of Options shall be evidenced by a stock
option agreement; each Award of SARs shall be evidenced by a stock appreciation
rights agreement; each Award of Restricted Shares shall be evidenced by a
restricted shares agreement; each Award of Stock Units shall be evidenced by a
stock units agreement; each Cash Award shall be evidenced by a cash award
agreement; and each Performance Award shall be evidenced by a performance award
agreement, each in such form and containing such terms and provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve; PROVIDED, HOWEVER, that if more than one type of Award is made to
the same Holder, such Awards may be evidenced by a single Agreement with such
Holder. Each grantee of an Option, SAR, Restricted Shares, Stock Units, Cash
Award or Performance Award shall be notified promptly of such grant, and a
written Agreement shall be promptly executed and delivered by the Company. Any
such written Agreement may contain (but shall not be required to contain) such
provisions as the Committee deems appropriate (i) to insure that the penalty
provisions of Section 4999 of the Code will not apply to any stock or cash
received by the Holder from the Company or (ii) to provide cash payments to the
Holder to mitigate the impact of such penalty provisions upon the Holder. Any
such Agreement may be supplemented or amended from time to time as approved by
the Committee as contemplated by Section 11.7(b).

                                       17


     11.6 DESIGNATION OF BENEFICIARIES. Each Person who shall be granted an
Award under the Plan may designate a beneficiary or beneficiaries and may change
such designation from time to time by filing a written designation of
beneficiary or beneficiaries with the Committee on a form to be prescribed by
it, provided that no such designation shall be effective unless so filed prior
to the death of such Person.

     11.7 TERMINATION AND AMENDMENT.

          (a) GENERAL. Unless the Plan shall theretofore have been terminated as
     hereinafter provided, no Awards may be made under the Plan on or after the
     tenth anniversary of the Effective Date. The Plan may be terminated at any
     time prior to the tenth anniversary of the Effective Date and may, from
     time to time, be suspended or discontinued or modified or amended if such
     action is deemed advisable by the Committee.

          (b) MODIFICATION. No termination, modification or amendment of the
     Plan may, without the consent of the Person to whom any Award shall
     theretofore have been granted, adversely affect the rights of such Person
     with respect to such Award. No modification, extension, renewal or other
     change in any Award granted under the Plan shall be made after the grant of
     such Award, unless the same is consistent with the provisions of the Plan.
     With the consent of the Holder and subject to the terms and conditions of
     the Plan (including Section 11.7(a)), the Committee may amend outstanding
     Agreements with any Holder, including any amendment which would (i)
     accelerate the time or times at which the Award may be exercised and/or
     (ii) extend the scheduled expiration date of the Award. Without limiting
     the generality of the foregoing, the Committee may, but solely with the
     Holder's consent unless otherwise provided in the Agreement, agree to
     cancel any Award under the Plan and grant a new Award in substitution
     therefor, provided that the Award so substituted shall satisfy all of the
     requirements of the Plan as of the date such new Award is made. Nothing
     contained in the foregoing provisions of this Section 11.7(b) shall be
     construed to prevent the Committee from providing in any Agreement that the
     rights of the Holder with respect to the Award evidenced thereby shall be
     subject to such rules and regulations as the Committee may, subject to the
     express provisions of the Plan, adopt from time to time or impair the
     enforceability of any such provision.

     11.8 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company with
respect to Awards shall be subject to all applicable laws, rules and regulations
and such approvals by any governmental agencies as may be required, including
the effectiveness of any registration statement required under the Securities
Act of 1933, and the rules and regulations of any securities exchange or
association on which the Common Stock may be listed or quoted. For so long as
any series of Common Stock are registered under the Exchange Act, the Company
shall use its reasonable efforts to comply with any legal requirements (i) to
maintain a registration statement in effect under the Securities Act of 1933
with respect to all shares of the applicable series of Common Stock that may be
issued to Holders under the Plan and (ii) to file in a timely manner all reports
required to be filed by it under the Exchange Act.

                                       18


     11.9 WITHHOLDING. The Company's obligation to deliver shares of Common
Stock or pay cash in respect of any Award under the Plan shall be subject to
applicable federal, state and local tax withholding requirements. Federal, state
and local withholding tax due at the time of an Award, upon the exercise of any
Option or SAR or upon the vesting of, or expiration of restrictions with respect
to, Restricted Shares or Stock Units or the satisfaction of the Performance
Objectives applicable to a Performance Award, as appropriate, may, in the
discretion of the Committee, be paid in shares of the applicable series of
Common Stock already owned by the Holder or through the withholding of shares
otherwise issuable to such Holder, upon such terms and conditions (including the
conditions referenced in Section 6.5) as the Committee shall determine. If the
Holder shall fail to pay, or make arrangements satisfactory to the Committee for
the payment to the Company of, all such federal, state and local taxes required
to be withheld by the Company, then the Company shall, to the extent permitted
by law, have the right to deduct from any payment of any kind otherwise due to
such Holder an amount equal to any federal, state or local taxes of any kind
required to be withheld by the Company with respect to such Award.

     11.10 NONEXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board or
the Committee shall not be construed as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including the granting of stock options and the awarding of stock and cash
otherwise than under the Plan, and such arrangements may be either generally
applicable or applicable only in specific cases.

     11.11 EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION. By acceptance
of an Award, unless otherwise provided in the applicable Agreement, each Holder
shall be deemed to have agreed that such Award is special incentive compensation
that will not be taken into account, in any manner, as salary, compensation or
bonus in determining the amount of any payment under any pension, retirement or
other employee benefit plan, program or policy of the Company or any Subsidiary
of the Company. In addition, each beneficiary of a deceased Holder shall be
deemed to have agreed that such Award will not affect the amount of any life
insurance coverage, if any, provided by the Company on the life of the Holder
which is payable to such beneficiary under any life insurance plan covering
employees of the Company or any Subsidiary of the Company.

     11.12 UNFUNDED PLAN. Neither the Company nor any Subsidiary of the Company
shall be required to segregate any cash or any shares of Common Stock which may
at any time be represented by Awards, and the Plan shall constitute an
"unfunded" plan of the Company. Except as provided in Article VIII with respect
to Awards of Restricted Shares and except as expressly set forth in an
Agreement, no employee shall have voting or other rights with respect to the
shares of Common Stock covered by an Award prior to the delivery of such shares.
Neither the Company nor any Subsidiary of the Company shall, by any provisions
of the Plan, be deemed to be a trustee of any shares of Common Stock or any
other property, and the liabilities of the Company and any Subsidiary of the
Company to any employee pursuant to the Plan shall be those of a debtor pursuant
to such contract obligations as are created by or pursuant to the Plan, and the
rights of any employee, former employee or beneficiary under the Plan shall be
limited to those of a general creditor of the Company or the applicable
Subsidiary of the

                                       19


Company, as the case may be. In its sole discretion, the Board may authorize the
creation of trusts or other arrangements to meet the obligations of the Company
under the Plan, PROVIDED, HOWEVER, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.

     11.13 GOVERNING LAW. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware.

     11.14 ACCOUNTS. The delivery of any shares of Common Stock and the payment
of any amount in respect of an Award shall be for the account of the Company or
the applicable Subsidiary of the Company, as the case may be, and any such
delivery or payment shall not be made until the recipient shall have paid or
made satisfactory arrangements for the payment of any applicable withholding
taxes as provided in Section 11.9.

     11.15 LEGENDS. Each certificate evidencing shares of Common Stock subject
to an Award shall bear such legends as the Committee deems necessary or
appropriate to reflect or refer to any terms, conditions or restrictions of the
Award applicable to such shares, including any to the effect that the shares
represented thereby may not be disposed of unless the Company has received an
opinion of counsel, acceptable to the Company, that such disposition will not
violate any federal or state securities laws.

     11.16 COMPANY'S RIGHTS. The grant of Awards pursuant to the Plan shall not
affect in any way the right or power of the Company to make reclassifications,
reorganizations or other changes of or to its capital or business structure or
to merge, consolidate, liquidate, sell or otherwise dispose of all or any part
of its business or assets.

                                       20

EX-10.17

                                                                   EXHIBIT 10.17

                            LIBERTY MEDIA CORPORATION
                               2000 INCENTIVE PLAN
             (AS AMENDED AND RESTATED EFFECTIVE APRIL 19, 2004)
                      NON-QUALIFIED STOCK OPTION AGREEMENT

     THIS NON-QUALIFIED STOCK OPTION AGREEMENT ("Agreement") is made as
of_________________, 2004 (the "Effective Date"), by and between LIBERTY MEDIA
CORPORATION, a Delaware corporation (the "Company"), and the individual whose
name, address and social security number appear on the signature page hereto
(the "Grantee").

     The Company has adopted the Liberty Media Corporation 2000 Incentive Plan
(As Amended and Restated April 19, 2004) (the "Plan"), a copy of which is
attached to this Agreement as Exhibit A and by this reference made a part
hereof, for the benefit of eligible employees of the Company and its
Subsidiaries. Capitalized terms used and not otherwise defined herein will have
the meaning given thereto in the Plan.

     Pursuant to the Plan, the Incentive Plan Committee (the "Committee")
appointed by the Board pursuant to Section 3.1 of the Plan to administer the
Plan has determined that it would be in the interest of the Company and its
stockholders to award Options to Grantee, subject to the conditions and
restrictions set forth herein and in the Plan, in order to provide the Grantee
additional remuneration for services rendered, to encourage the Grantee to
remain in the employ of the Company or its Subsidiaries and to increase the
Grantee's personal interest in the continued success and progress of the
Company.

     The Company and the Grantee therefore agree as follows:

     1. DEFINITIONS. The following terms, when used in this Agreement, have the
following meanings:

     "Base Price" means $______.

     "Business Day" means any day other than Saturday, Sunday or a day on which
banking institutions in Denver, Colorado, are required or authorized to be
closed.

     "Cause" has the meaning specified for "cause" in Section 10.2(b) of the
Plan.

     "Close of Business" means, on any day, 5:00 p.m., Denver, Colorado time.

     "Committee" has the meaning specified in the recitals to this Agreement.

     "Company" has the meaning specified in the preamble to this Agreement.

     "Effective Date" has the meaning specified in the preamble to this
Agreement.

     "Grantee" has the meaning specified in the preamble to this Agreement.

     "L Options" has the meaning specified in Section 2 of this Agreement.



     "L Stock" has the meaning specified in Section 2 of this Agreement.

     "Option Shares" has the meaning specified in Section 4(a) of this
Agreement.

     "Plan" has the meaning specified in the recitals of this Agreement.

     "Required Withholding Amount" has the meaning specified in Section 5 of
this Agreement.

     "Special Termination Period" has the meaning specified in Section 7(d) of
this Agreement.

     "Term" has the meaning specified in Section 2 of this Agreement.

     "Vesting Anniversary Date" means _____________________, 2004.

     "Year of Continuous Service" has the meaning specified in Section 7(d) of
this Agreement.

     2. GRANT OF OPTIONS. Subject to the terms and conditions herein, pursuant
to the Plan, the Company grants to the Grantee options to purchase from the
Company, exercisable during the period commencing on the Effective Date and
expiring at Close of Business on _____________, 2014 (the "Term"), subject to
earlier termination as provided in Section 7 below, at the Base Price, the
number of shares of Liberty Media Corporation Series A Common Stock ("L Stock")
set forth on the signature page hereto. The Options granted hereunder are
"Nonqualified Stock Options" and are hereinafter referred to as the "L Options."
The Base Price and L Options are subject to adjustment pursuant to Section 10
below. No fractional shares of L Stock will be issuable upon exercise of an L
Option, and the Grantee will receive, in lieu of any fractional share of L Stock
that the Grantee otherwise would receive upon such exercise, cash equal to the
fraction representing such fractional share multiplied by the Fair Market Value
of one share of L Stock as of the date on which such exercise is considered to
occur pursuant to Section 4 below.

     3. CONDITIONS OF EXERCISE. Unless otherwise determined by the Committee in
its sole discretion, the L Options will be exercisable only in accordance with
the conditions stated in this Section 3.

     (a) Except as otherwise provided in Section 10.1(b) of the Plan or in the
last sentence of this Section 3(a), the L Options may be exercised only to the
extent they have become exercisable in accordance with the following schedule:

                                       2




                                                         PERCENTAGE OF L STOCK
     DATE                                            OPTIONS BECOMING EXERCISABLE
     ----                                            ----------------------------
                                                  

     __________________________ , 2005                           20%
     __________________________ , 2006                           20%
     __________________________ , 2007                           20%
     __________________________ , 2008                           20%
     __________________________ , 2009                           20%
                                                                ---
              Total                                             100%


Notwithstanding the foregoing, (i) all L Options will become exercisable on the
date of the Grantee's termination of employment if (A) the Grantee's employment
with the Company and its Subsidiaries terminates by reason of Disability or (B)
the Grantee dies while employed by the Company or a Subsidiary, and (ii) if the
Grantee's employment with the Company and its Subsidiaries is terminated by the
Company or a Subsidiary without Cause (as determined in the sole discretion of
the Committee), any L Options that otherwise would become exercisable during the
remainder of the calendar year in which the Grantee's employment with the
Company and its Subsidiaries is terminated will become exercisable on the date
of the Grantee's termination of employment.

     (b) To the extent the L Options become exercisable, such L Options may be
exercised in whole or in part (at any time or from time to time, except as
otherwise provided herein) until expiration of the Term or earlier termination
thereof.

     (c) The Grantee acknowledges and agrees that the Committee, in its
discretion and as contemplated by Section 3.3 of the Plan, may adopt rules and
regulations from time to time after the date hereof with respect to the exercise
of the L Options and that the exercise by the Grantee of L Options will be
subject to the further condition that such exercise is made in accordance with
all such rules and regulations as the Committee may determine are applicable
thereto.

     4. MANNER OF EXERCISE. L Options will be considered exercised (as to the
number of L Options specified in the notice referred to in Section 4(a) below)
on the latest of (i) the date of exercise designated in the written notice
referred to in Section 4(a) below, (ii) if the date so designated is not a
Business Day, the first Business Day following such date or (iii) the earliest
Business Day by which the Company has received all of the following:

     (a) Written notice, in such form as the Committee may require, containing
such representations and warranties as the Committee may require and
designating, among other things, the date of exercise and the number of shares
of L Stock ("Option Shares") to be purchased;

                                       3


     (b) Payment of the Base Price for each Option Share to be purchased in any
(or a combination) of the following forms: (A) cash, (B) check or (C) the
delivery, together with a properly executed exercise notice, of irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the purchase price (and, if applicable the
Required Withholding Amount, as described in Section 5 below); and

     (c) Any other documentation that the Committee may reasonably require.

     5. MANDATORY WITHHOLDING FOR TAXES. The Grantee acknowledges and agrees
that the Company will deduct from the shares of L Stock otherwise payable or
deliverable upon exercise of any L Options that number of shares of L Stock
(valued at their Fair Market Value on the date of exercise) that is equal to the
amount of all federal, state and local taxes required to be withheld by the
Company upon such exercise, as determined by the Committee (the "Required
Withholding Amount"). If the Grantee elects to make payment of the Base Price by
delivery of irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds required to pay the purchase price,
such instructions may also include instructions to deliver the Required
Withholding Amount to the Company. In such case, the Company will notify the
broker promptly of the Committee's determination of the Required Withholding
Amount.

     6. PAYMENT OR DELIVERY BY THE COMPANY. As soon as practicable after receipt
of all items referred to in Section 4, and subject to the withholding referred
to in Section 5, the Company will deliver or cause to be delivered to the
Grantee certificates issued in the Grantee's name for the number of shares of L
Stock purchased by exercise of L Options, and (ii) any cash payment to which the
Grantee is entitled in lieu of a fractional share of L Stock, as provided in
Section 2 above. Any delivery of shares of L Stock will be deemed effected for
all purposes when certificates representing such shares have been delivered
personally to the Grantee or, if delivery is by mail, when the stock transfer
agent of the Company has deposited the certificates in the United States mail,
addressed to the Grantee, and any cash payment will be deemed effected when a
check from the Company, payable to the Grantee and in the amount equal to the
amount of the cash payment, has been delivered personally to the Grantee or
deposited in the United States mail, addressed to the Grantee.

     7. EARLY TERMINATION OF L OPTIONS. Unless otherwise determined by the
Committee in its sole discretion, the L Options will terminate, prior to the
expiration of the Term, at the time specified below:(a) Subject to Section 7(b),
if the Grantee's employment with the Company and its Subsidiaries is terminated
other than (i) by the Company or a Subsidiary (whether for Cause or without
Cause) or (ii) by reason of death or Disability, then the L Options will
terminate at the Close of Business on the first Business Day following the
expiration of the 90-day period which began on the date of termination of the
Grantee's employment.

     (b) If the Grantee dies (i) while employed by the Company or a Subsidiary,
or prior to the expiration of a period of time following termination of the
Grantee's employment during which the L Options remain exercisable as provided
in Section 7(a) or Section 7(c), as

                                       4


applicable, the L Options will terminate at the Close of Business on the first
Business Day following the expiration of the one-year period which began on the
date of the Grantee's death, or (ii) prior to the expiration of a period of time
following termination of the Grantee's employment during which the L Options
remain exercisable as provided in Section 7(d), the L Options will terminate at
the Close of Business on the first Business Day following the expiration of (A)
the one-year period which began on the date of the Grantee's death or (B) the
Special Termination Period, whichever period is longer.

     (c) Subject to Section 7(b), if the Grantee's employment with the Company
and its Subsidiaries terminates by reason of Disability, then the L Options will
terminate at the Close of Business on the first Business Day following the
expiration of the one-year period which began on the date of termination of the
Grantee's employment.

     (d) If the Grantee's employment with the Company and its Subsidiaries is
terminated by the Company or a Subsidiary without Cause (as determined in the
sole discretion of the Committee), the L Options will terminate at the Close of
Business on the first Business Day following the expiration of the Special
Termination Period. The Special Termination Period is the period of time
beginning on the date of the Grantee's termination of employment and continuing
for the number of days that is equal to the sum of (a) 90, plus (b) 180
multiplied by the Grantee's total Years of Continuous Service. A Year of
Continuous Service means a consecutive 12-month period, measured by the
Grantee's hire date (as reflected in the payroll records of the Company or a
Subsidiary) and the anniversaries of that date, during which the Grantee is
employed by the Company or a Subsidiary without interruption. For purposes of
determining the Grantee's Years of Continuous Service, Grantee's employment with
the Company's former parent, AT&T Broadband LLC, formerly known as
Tele-Communications, Inc. ("TCI"), and any predecessor of the Company or TCI
will be included, provided that the Grantee's hire date with the Company or a
Subsidiary occurred within 30 days following the Grantee's termination of
employment with TCI or such predecessor. If the Grantee was employed by a
Subsidiary at the time of such Subsidiary's acquisition by the Company, the
Grantee's employment with the Subsidiary prior to the acquisition date will not
be included in determining the Grantee's Years of Continuous Service unless the
Committee, in its sole discretion, determines that such prior employment will be
included.

     (e) If the Grantee's employment with the Company and its Subsidiaries is
terminated by the Company for Cause, then the L Options will terminate
immediately upon such termination of the Grantee's employment.

     In any event in which L Options remain exercisable for a period of time
following the date of termination of the Grantee's employment as provided above,
the L Options may be exercised during such period of time only to the extent the
same were exercisable as provided in Section 3 above on such date of termination
of the Grantee's employment. Unless the Committee otherwise determines, a change
of the Grantee's employment from the Company to a Subsidiary or from one
Subsidiary to another Subsidiary will be a termination of employment within the
meaning of this Section 7. Notwithstanding any period of time referenced in this

                                       5


Section 7 or any other provision of this Section 7 that may be construed to the
contrary, the L Options will in any event terminate upon the expiration of the
Term.

     8. NONTRANSFERABILITY. During the Grantee's lifetime, the L Options are not
transferable (voluntarily or involuntarily) other than pursuant to a Domestic
Relations Order and, except as otherwise required pursuant to a Domestic
Relations Order, are exercisable only by the Grantee or the Grantee's court
appointed legal representative. The Grantee may designate a beneficiary or
beneficiaries to whom the L Options will pass upon the Grantee's death and may
change such designation from time to time by filing a written designation of
beneficiary or beneficiaries with the Committee on the form annexed hereto as
Exhibit B or such other form as may be prescribed by the Committee, provided
that no such designation will be effective unless so filed prior to the death of
the Grantee. If no such designation is made or if the designated beneficiary
does not survive the Grantee's death, the L Options will pass by will or the
laws of descent and distribution. Following the Grantee's death, the L Options,
if otherwise exercisable, may be exercised by the person to whom such option or
right passes according to the foregoing and such person will be deemed the
Grantee for purposes of any applicable provisions of this Agreement.

     9. NO STOCKHOLDER RIGHTS. Prior to the exercise of L Options in accordance
with the terms and conditions set forth in this Agreement, the Grantee will not
be deemed for any purpose to be, or to have any of the rights of, a stockholder
of the Company with respect to any shares of L Stock, nor will the existence of
this Agreement affect in any way the right or power of the Company or any
stockholder of the Company to accomplish any corporate act, including, without
limitation, the acts referred to in Section 10.16 of the Plan.

     10. ADJUSTMENTS. If the outstanding shares of L Stock are subdivided into a
greater number of shares (by stock dividend, stock split, reclassification or
otherwise) or are combined into a smaller number of shares (by reverse stock
split, reclassification or otherwise), or if the Committee determines that any
stock dividend, extraordinary cash dividend, reclassification, recapitalization,
reorganization, split-up-spin-off, combination, exchange of shares, warrants or
rights offering to purchase any shares of L Stock, or other similar corporate
event (including mergers or consolidations other than those which constitute
Approved Transactions, which shall be governed by Section 10.1(b) of the Plan)
affects shares of L Stock such that an adjustment is required to preserve the
benefits or potential benefits intended to be made available under this
Agreement, then the L Options will be subject to adjustment (including, without
limitation, as to the number of L Options and the Base Price per share of such L
Options) in the sole discretion of the Committee and in such manner as the
Committee may deem equitable and appropriate in connection with the occurrence
of any of the events described in this Section 10 following the Vesting
Anniversary Date.

     11. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of Section
10.8 of the Plan, the Grantee will not exercise the L Options, and the Company
will not be obligated to make any cash payment or issue or cause to be issued
any shares of L Stock, if counsel to the Company determines that such exercise,
payment or issuance would violate any



                                       6


applicable law or any rule or regulation of any governmental authority or any
rule or regulation of, or agreement of the Company with, any securities exchange
or association upon which shares of L Stock are listed or quoted. The Company
will in no event be obligated to take any affirmative action in order to cause
the exercise of the L Options or the resulting payment of cash or issuance of
shares of L Stock to comply with any such law, rule, regulation or agreement.

     12. NOTICE. Unless the Company notifies the Grantee in writing of a
different procedure, any notice or other communication to the Company with
respect to this Agreement will be in writing and will be delivered personally or
sent by United States first class mail, postage prepaid and addressed as
follows:

                    Liberty Media Corporation
                    12300 Liberty Boulevard
                    Englewood, Colorado 80112
                    Attn: Charles Y. Tanabe, Esq.

Any notice or other communication to the Grantee with respect to this Agreement
will be in writing and will be delivered personally, or will be sent by United
States first class mail, postage prepaid, to the Grantee's address as listed in
the records of the Company on the Effective Date, unless the Company has
received written notification from the Grantee of a change of address.

     13. AMENDMENT. Notwithstanding any other provision hereof, this Agreement
may be supplemented or amended from time to time as approved by the Committee as
contemplated in Section 10.7(b) of the Plan. Without limiting the generality of
the foregoing, without the consent of the Grantee,

     (a) this Agreement may be amended or supplemented from time to time as
approved by the Committee (i) to cure any ambiguity or to correct or supplement
any provision herein which may be defective or inconsistent with any other
provision herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of the Grantee or surrender any right or power reserved to or
conferred upon the Company in this Agreement, subject to any required approval
of the Company's stockholders and, provided, in each case, that such changes or
corrections will not adversely affect the rights of the Grantee with respect to
the Award evidenced hereby, or (iii) to make such other changes as the Company,
upon advice of counsel, determines are necessary or advisable because of the
adoption or promulgation of, or change in or of the interpretation of, any law
or governmental rule or regulation, including any applicable federal or state
securities laws; and

     (b) subject to any required action by the Board or the stockholders of the
Company, the L Options granted under this Agreement may be canceled by the
Company and a new Award made in substitution therefor, provided that the Award
so substituted will satisfy all of the requirements of the Plan as of the date
such new Award is made and no such action will adversely affect any L Options to
the extent then exercisable.

                                       7


     14. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and no action
of the Company or the Committee with respect hereto, will confer or be construed
to confer on the Grantee any right to continue in the employ of the Company or
any of its Subsidiaries or interfere in any way with the right of the Company or
any employing Subsidiary to terminate the Grantee's employment at any time, with
or without cause, subject to the provisions of any employment agreement between
the Grantee and the Company or any Subsidiary.

     15. NONALIENATION OF BENEFITS. Except as provided in Section 8 of this
Agreement, (i) no right or benefit under this Agreement will be subject to
anticipation, alienation, sale, assignment, hypothecation, pledge, exchange,
transfer, encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, hypothecate, pledge, exchange, transfer, encumber or charge the same
will be void, and (ii) no right or benefit hereunder will in any manner be
liable for or subject to the debts, contracts, liabilities or torts of the
Grantee or other person entitled to such benefits.

     16. GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the internal laws of the State of Colorado. Each party
irrevocably submits to the general jurisdiction of the state and federal courts
located in the State of Colorado in any action to interpret or enforce this
Agreement and irrevocably waives any objection to jurisdiction that such party
may have based on inconvenience of forum.

     17. CONSTRUCTION. References in this Agreement to "this Agreement" and the
words "herein," "hereof," "hereunder" and similar terms include all Exhibits and
Schedules appended hereto. The word "include" and all variations thereof are
used in an illustrative sense and not in a limiting sense. All decisions of the
Committee upon questions regarding this Agreement will be conclusive. Unless
otherwise expressly stated herein, in the event of any inconsistency between the
terms of the Plan and this Agreement, the terms of the Plan will control. The
headings of the sections of this Agreement have been included for convenience of
reference only, are not to be considered a part hereof and will in no way modify
or restrict any of the terms or provisions hereof.

     18. DUPLICATE ORIGINALS. The Company and the Grantee may sign any number of
copies of this Agreement. Each signed copy will be an original, but all of them
together represent the same agreement.

     19. RULES BY COMMITTEE. The rights of the Grantee and the obligations of
the Company hereunder will be subject to such reasonable rules and regulations
as the Committee may adopt from time to time.

     20. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between the Company and
the Grantee regarding the subject matter hereof. The Grantee and the Company
hereby declare and represent that no promise or agreement not herein expressed
has been made and that this Agreement

                                       8


contains the entire agreement between the parties hereto with respect to the
Award and replaces and makes null and void any prior agreements between the
Grantee and the Company regarding the Award. This Agreement will be binding upon
and inure to the benefit of the parties and their respective heirs, successors
and assigns.

     21. GRANTEE ACCEPTANCE. The Grantee will signify acceptance of the terms
and conditions of this Agreement by signing in the space provided at the end
hereof and returning a signed copy to the Company.

                                       9


             SIGNATURE PAGE TO NON-QUALIFIED STOCK OPTION AGREEMENT
 DATED AS OF_______________, 2004 BETWEEN LIBERTY MEDIA CORPORATION AND GRANTEE

                                        LIBERTY MEDIA CORPORATION

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                        ACCEPTED:

                                        ----------------------------------------
                                        Grantee Name:
                                                     ---------------------------
                                        Address:
                                                --------------------------------

                                        SSN:
                                            ------------------------------------


Number of shares of L Stock as to which Options are granted ___________________

                                       10


                                    EXHIBIT A
                                       TO
                      NON-QUALIFIED STOCK OPTION AGREEMENT
 DATED AS OF_______________, 2004 BETWEEN LIBERTY MEDIA CORPORATION AND GRANTEE


             [COPY OF LIBERTY MEDIA CORPORATION 2000 INCENTIVE PLAN
             (AS AMENDED AND RESTATED EFFECTIVE APRIL 19, 2004)]


                                       11


                                    EXHIBIT B
                                       TO
                      NON-QUALIFIED STOCK OPTION AGREEMENT
 DATED AS OF_______________, 2004 BETWEEN LIBERTY MEDIA CORPORATION AND GRANTEE

                           DESIGNATION OF BENEFICIARY

     I, ___________________________________________ (the "Grantee"), hereby

declare that upon my death (the "Beneficiary") of ___________________________
                                                            Name
______________________________________________________________________________ ,
Street Address                     City              State            Zip Code

who is my ____________________________________________ , will be entitled to the
                  Relationship to Grantee

L Options and all other rights accorded the Grantee by the above-referenced
grant agreement (the "Agreement").

     It is understood that this Designation of Beneficiary is made pursuant to
the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights will devolve according to the Grantee's will or the laws
of descent and distribution.

     It is further understood that all prior designations of beneficiary under
the Agreement are hereby revoked and that this Designation of Beneficiary may
only be revoked in writing, signed by the Grantee, and filed with the Company
prior to the Grantee's death.


- -----------------------------          -----------------------------------------
Date                                   Grantee

                                       12

EX-10.18

                                                                   EXHIBIT 10.18

                            LIBERTY MEDIA CORPORATION
                               2000 INCENTIVE PLAN
               (AS AMENDED AND RESTATED EFFECTIVE APRIL 19, 2004)

                       STOCK APPRECIATION RIGHTS AGREEMENT

     THIS STOCK APPRECIATION RIGHTS AGREEMENT ("Agreement") is made as of
_________________ (the "Effective Date"), by and between LIBERTY MEDIA
CORPORATION, a Delaware corporation (the "Company"), and the individual whose
name, address, and social security number appear on the signature page hereto
(the "Grantee").

     The Company has adopted the Liberty Media Corporation 2000 Incentive Plan
(As Amended and Restated Effective April 19, 2004) (the "Plan"), a copy of which
is attached to this Agreement as Exhibit A and by this reference made a part
hereof, for the benefit of eligible employees of the Company and its
Subsidiaries. Capitalized terms used and not otherwise defined herein will have
the meaning given to them in the Plan.

     Pursuant to the Plan, the Incentive Plan Committee (the "Committee")
appointed by the Board pursuant to Section 3.1 of the Plan to administer the
Plan has determined that it would be in the interest of the Company and its
stockholders to award Free Standing SARs to Grantee, subject to the conditions
and restrictions set forth herein and in the Plan, in order to provide the
Grantee additional remuneration for services rendered, to encourage the Grantee
to remain in the employ of the Company or its Subsidiaries and to increase the
Grantee's personal interest in the continued success and progress of the
Company.

     The Company and the Grantee therefore agree as follows:

     1. DEFINITIONS. The following terms, when used in this Agreement, have the
following meanings:

          "Base Price" means $______.

          "Business Day" means any day other than Saturday, Sunday or a day on
which banking institutions in Denver, Colorado, are required or authorized to be
closed.

          "Cause" has the meaning specified for "cause" in Section 11.2(b) of
the Plan.

          "Close of Business" means, on any day, 5:00 p.m., Denver, Colorado
time.

          "Committee" has the meaning specified in the recitals to this
Agreement.

          "Company" has the meaning specified in the preamble to this Agreement.

          "Effective Date" has the meaning specified in the preamble to this
Agreement.

          "Grantee" has the meaning specified in the preamble to this Agreement.


          "L SAR" has the meaning specified in Section 2 of this Agreement.

          "L Stock" has the meaning specified in Section 2 of this Agreement.

          "Plan" has the meaning specified in the recitals to this Agreement.

          "Required Withholding Amount" has the meaning specified in Section 5
of this Agreement.

          "Special Termination Period" has the meaning specified in Section 7(d)
of this Agreement.

          "Term" has the meaning specified in Section 2 of this Agreement.

          "Vesting Anniversary Date" means _________.

          "Year of Continuous Service" has the meaning specified in Section 7(d)
of this Agreement.

     2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and conditions
herein, pursuant to the Plan, the Company grants to the Grantee during the
period commencing on the Effective Date and expiring at Close of Business on
________ (the "Term"), subject to earlier termination as provided in Section 7
below, a Free Standing SAR with respect to the number of shares of Liberty Media
Corporation Series A Common Stock ("L Stock") identified on the signature page
hereto (individually, an "L SAR" and collectively, the "L SARs"). Upon exercise
of an L SAR in accordance with this Agreement, the Company will, subject to
Section 5 below, pay to the Grantee consideration equal to the amount, if any,
by which the Fair Market Value of a share of L Stock on the date of exercise
exceeds the Base Price of such L SAR.

     3. CONDITIONS OF EXERCISE. Unless otherwise determined by the Committee in
its sole discretion, the L SARs are exercisable only in accordance with the
conditions stated in this Section 3.

          (a) Except as otherwise provided in Section 11.1(b) of the Plan or in
the last sentence of this Section 3(a), the L SARs may be exercised only to the
extent they have become exercisable in accordance with the following schedule:



                                                   Percentage of L SARs
          Date                                     Becoming Exercisable
          ----                                     --------------------
                                                
                                                            20%
                                                            20%
                                                            20%
                                                            20%
                                                            20%
                                                           ---
               Total                                       100%


                                       2


Notwithstanding the foregoing, (i) all L SARs will become exercisable on the
date of the Grantee's termination of employment if (A) the Grantee's employment
with the Company and its Subsidiaries terminates by reason of Disability or (B)
the Grantee dies while employed by the Company or a Subsidiary, and (ii) if the
Grantee's employment with the Company and its Subsidiaries is terminated by the
Company or a Subsidiary without Cause (as determined in the sole discretion of
the Committee), any L SARs that otherwise would become exercisable during the
remainder of the calendar year in which the Grantee's employment with the
Company and its Subsidiaries is terminated will become exercisable on the date
of the Grantee's termination of employment.

          (b) To the extent the L SARs become exercisable, such L SARs may be
exercised in whole or in part (at any time or from time to time, except as
otherwise provided herein) until expiration of the Term or earlier termination
thereof.

          (c) The Grantee acknowledges and agrees that the Committee may, in its
discretion and as contemplated by Section 3.3 of the Plan, adopt rules and
regulations from time to time after the date hereof with respect to the exercise
of the L SARs and that the exercise by the Grantee of L SARs will be subject to
the further condition that such exercise is made in accordance with all such
rules and regulations as the Committee may determine are applicable thereto.

     4. MANNER OF EXERCISE. L SARs will be considered exercised (as to the
number of L SARs specified in the notice referred to in Section 4(a) below) on
the latest of (i) the date of exercise designated in the written notice referred
to in Section 4(a) below, (ii) if the date so designated is not a Business Day,
the first Business Day following such date or (iii) the earliest Business Day by
which the Company has received all of the following:

          (a) Written notice, in such form as the Committee may require,
containing such representations and warranties as the Committee may require and
designating, among other things, the date of exercise and the number of L SARs
to be exercised; and

          (b) Any other documentation that the Committee may reasonably require.

     5. MANDATORY WITHHOLDING FOR TAXES. The Grantee acknowledges and agrees
that the Company will deduct from the shares of L Stock otherwise deliverable
upon exercise of any L SARs a number of shares of L Stock (valued at their Fair
Market Value on the date of exercise) that is equal to the amount of all
federal, state and local taxes required to be withheld by the Company upon such
exercise, as determined by the Company (the "Required Withholding Amount").

     6. DELIVERY BY THE COMPANY. As soon as practicable after receipt of all
items referred to in Section 4, and subject to the withholding referred to in
Section 5, the Company will deliver or cause to be delivered to the Grantee the
amount of consideration determined under the final sentence of Section 2 above,
which consideration shall consist of shares of L Stock (valued at their Fair
Market Value on the date of exercise), except as provided in the Plan with
respect to

                                       3


fractional shares. Any delivery of shares of L Stock will be deemed effected for
all purposes when certificates representing such shares have been delivered
personally to the Grantee or, if delivery is by mail, when the stock transfer
agent of the Company has deposited the certificates in the United States mail,
addressed to the Grantee, and any cash payment will be deemed effected when a
check from the Company, payable to the Grantee and in the amount equal to the
amount of the cash payment, has been delivered personally to the Grantee or
deposited in the United States mail, addressed to the Grantee.

     7. EARLY TERMINATION OF L SARS. Unless otherwise determined by the
Committee in its sole discretion, the L SARs will terminate, prior to the
expiration of the Term, at the time specified below:

          (a) Subject to Section 7(b), if the Grantee's employment with the
Company and its Subsidiaries is terminated other than (i) by the Company or a
Subsidiary (whether for Cause or without Cause) or (ii) by reason of death or
Disability of the Grantee, then the L SARs will terminate at the Close of
Business on the first Business Day following the expiration of the 90-day period
which began on the date of termination of the Grantee's employment.

          (b) If the Grantee dies (i) while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following termination
of the Grantee's employment during which the L SARs remain exercisable as
provided in Section 7(a) or Section 7(c), as applicable, the L SARs will
terminate at the Close of Business on the first Business Day following the
expiration of the one-year period which began on the date of the Grantee's
death, or (ii) prior to the expiration of a period of time following termination
of the Grantee's employment during which the L SARs remain exercisable as
provided in Section 7(d), the L SARs will terminate at the Close of Business on
the first Business Day following the expiration of (A) the one-year period which
began on the date of the Grantee's death or (B) the Special Termination Period,
whichever period is longer.

          (c) Subject to Section 7(b), if the Grantee's employment with the
Company and its Subsidiaries terminates by reason of Disability, then the L SARs
will terminate at the Close of Business on the first Business Day following the
expiration of the one-year period which began on the date of termination of the
Grantee's employment.

          (d) If the Grantee's employment with the Company and its Subsidiaries
is terminated by the Company or a Subsidiary without Cause (as determined in the
sole discretion of the Committee), the L SARs will terminate at the Close of
Business on the first Business Day following the expiration of the Special
Termination Period. The Special Termination Period is the period of time
beginning on the date of the Grantee's termination of employment and continuing
for the number of days that is equal to the sum of (a) 90, plus (b) 180
multiplied by the Grantee's total Years of Continuous Service. A Year of
Continuous Service means a consecutive 12-month period, measured by the
Grantee's hire date (as reflected in the payroll records of the Company or a
Subsidiary) and the anniversaries of that date, during which the Grantee is
employed by the Company or a Subsidiary without interruption. For purposes of
determining the Grantee's Years of Continuous Service, Grantee's employment with
the Company's former parent, AT&T Broadband LLC, formerly known as
Tele-Communications, Inc. ("TCI"), and any predecessor of the Company or TCI
will be included, provided that the

                                       4


Grantee's hire date with the Company or a Subsidiary occurred within 30 days
following the Grantee's termination of employment with TCI or such predecessor.
If the Grantee was employed by a Subsidiary at the time of such Subsidiary's
acquisition by the Company, the Grantee's employment with the Subsidiary prior
to the acquisition date will not be included in determining the Grantee's Years
of Continuous Service unless the Committee, in its sole discretion, determines
that such prior employment will be included.

          (e) If the Grantee's employment with the Company and its Subsidiaries
is terminated by the Company for Cause, then the L SARs will terminate
immediately upon such termination of the Grantee's employment.

     In any event in which L SARs remain exercisable for a period of time
following the date of termination of the Grantee's employment as provided above,
the L SARs may be exercised during such period of time only to the extent the
same were exercisable as provided in Section 3 above on such date of termination
of the Grantee's employment. Unless the Committee otherwise determines, a change
of the Grantee's employment from the Company to a Subsidiary or from one
Subsidiary to another Subsidiary will be a termination of employment within the
meaning of this Section 7. Notwithstanding any period of time referenced in this
Section 7 or any other provision of this Section 7 that may be construed to the
contrary, the L SARs will in any event terminate upon the expiration of the
Term.

     8. AUTOMATIC EXERCISE OF L SARS. Immediately prior to the termination of L
SARs as provided in Section 7(a), 7(b), 7(c) or 7(d) above or upon expiration of
the Term, all remaining L SARs then exercisable will be deemed to have been
exercised by the Grantee. Notwithstanding any other provision of this Agreement,
no exercise of LSARs will be deemed to occur upon termination of the Grantee's
employment for Cause.

     9. NONTRANSFERABILITY. During the Grantee's lifetime, L SARs are not
transferable (voluntarily or involuntarily) other than pursuant to a Domestic
Relations Order and, except as otherwise required pursuant to a Domestic
Relations Order, are exercisable only by the Grantee or the Grantee's court
appointed legal representative. The Grantee may designate a beneficiary or
beneficiaries to whom the L SARs will pass upon the Grantee's death and may
change such designation from time to time by filing a written designation of
beneficiary or beneficiaries with the Committee on the form annexed hereto as
Exhibit B or such other form as may be prescribed by the Committee, provided
that no such designation will be effective unless so filed prior to the death of
the Grantee. If no such designation is made or if the designated beneficiary
does not survive the Grantee's death, the L SARs will pass by will or the laws
of descent and distribution. Following the Grantee's death, the L SARs, if
otherwise exercisable, may be exercised by the person to whom such right passes
according to the foregoing and such person will be deemed the Grantee for
purposes of any applicable provisions of this Agreement.

     10. NO SToCKHOLDER RIGHTS. The Grantee will not, by reason of the Award
granted under this Agreement, be deemed for any purpose to be, or to have any of
the rights of, a stockholder of the Company or of the Company with respect to
any shares of L Stock, nor will the existence of this Agreement affect in any
way the right or power of the Company or its stockholders to accomplish any
corporate act, including, without limitation, the acts referred to in Section
11.16 of the Plan.

                                       5


     11. ADJUSTMENTS. If the outstanding shares of L Stock are subdivided into a
greater number of shares (by stock dividend, stock split, reclassification or
otherwise) or are combined into a smaller number of shares (by reverse stock
split, reclassification or otherwise), or if the Committee determines that any
stock dividend, extraordinary cash dividend, reclassification, recapitalization,
reorganization, split-up-spin-off, combination, exchange of shares, warrants or
rights offering to purchase any L Stock, or other similar corporate event
(including mergers or consolidations other than those which constitute Approved
Transactions, which shall be governed by Section 11.1(b) of the Plan) affects
shares of L Stock such that an adjustment is required to preserve the benefits
or potential benefits intended to be made available under this Agreement, then
the L SARs will be subject to adjustment (including, without limitation, as to
the number of L SARs and the Base Price per share of such L SARs) in the sole
discretion of the Committee and in such manner as the Committee may deem
equitable and appropriate in connection with the occurrence of any of the events
described in this Section 11 following the Vesting Anniversary Date.

     12. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of Section
11.8 of the Plan, the Grantee will not exercise the L SARs , and the Company
will not be obligated to make any cash payment or issue or cause to be issued
any shares of L Stock, if counsel to the Company determines that such exercise,
payment or issuance would violate any applicable law or any rule or regulation
of any governmental authority or any rule or regulation of, or agreement of the
Company with, any securities exchange or association upon which shares of L
Stock are listed or quoted. The Company will in no event be obligated to take
any affirmative action in order to cause the exercise of the L SARs or the
resulting payment of cash or issuance of L Stock to comply with any such law,
rule, regulation or agreement.

     13. NOTICE. Unless the Company notifies the Grantee in writing of a
different procedure, any notice or other communication to the Company with
respect to this Agreement will be in writing and will be delivered personally or
sent by United States first class mail, postage prepaid and addressed as
follows:

          Liberty Media Corporation
          12300 Liberty Boulevard
          Englewood, Colorado 80112
          Attn: General Counsel

     Any notice or other communication to the Grantee with respect to this
Agreement will be in writing and will be delivered personally, or will be sent
by United States first class mail, postage prepaid, to the Grantee's address as
listed in the records of the Company on the Effective Date, unless the Company
has received written notification from the Grantee of a change of address.

     14. AMENDMENT. Notwithstanding any other provision hereof, this Agreement
may be supplemented or amended from time to time as approved by the Committee as
contemplated in Section 11.7(b) of the Plan. Without limiting the generality of
the foregoing, without the consent of the Grantee,

                                       6


          (a) this Agreement may be amended or supplemented from time to time as
approved by the Committee (i) to cure any ambiguity or to correct or supplement
any provision herein which may be defective or inconsistent with any other
provision herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of the Grantee or surrender any right or power reserved to or
conferred upon the Company in this Agreement, subject to any required approval
of the Company's stockholders and, provided, in each case, that such changes or
corrections will not adversely affect the rights of the Grantee with respect to
the Award evidenced hereby, or (iii) to make such other changes as the Company,
upon advice of counsel, determines are necessary or advisable because of the
adoption or promulgation of, or change in or of the interpretation of, any law
or governmental rule or regulation, including any applicable federal or state
securities laws; and

          (b) subject to any required action by the Board or the stockholders of
the Company, the L SARs granted under this Agreement may be canceled by the
Company and a new Award made in substitution therefor, provided that the Award
so substituted will satisfy all of the requirements of the Plan as of the date
such new Award is made and no such action will adversely affect any L SARs to
the extent then exercisable.

     15. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and no action
of the Company or the Committee with respect hereto, will confer or be construed
to confer on the Grantee any right to continue in the employ of the Company or
any of its Subsidiaries or interfere in any way with the right of the Company or
any employing Subsidiary to terminate the Grantee's employment at any time, with
or without cause, subject to the provisions of any employment agreement between
the Grantee and the Company or any Subsidiary.

     16. NONALIENATION OF BENEFITS. Except as provided in Section 9 of this
Agreement, (i) no right or benefit under this Agreement will be subject to
anticipation, alienation, sale, assignment, hypothecation, pledge, exchange,
transfer, encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, hypothecate, pledge, exchange, transfer, encumber or charge the same
will be void, and (ii) no right or benefit hereunder will in any manner be
liable for or subject to the debts, contracts, liabilities or torts of the
Grantee or other person entitled to such benefits.

     17. GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the internal laws of the State of Colorado. Each party
irrevocably submits to the general jurisdiction of the state and federal courts
located in the State of Colorado in any action to interpret or enforce this
Agreement and irrevocably waives any objection to jurisdiction that such party
may have based on inconvenience of forum.

     18. CONSTRUCTION. References in this Agreement to "this Agreement" and the
words "herein," "hereof," "hereunder" and similar terms include all Exhibits and
Schedules appended hereto. The word "include" and all variations thereof are
used in an illustrative sense and not in a limiting sense. All decisions of the
Committee upon questions regarding this Agreement will be conclusive. Unless
otherwise expressly stated herein, in the event of any inconsistency between the
terms of the Plan and this Agreement, the terms of the Plan will control. The
headings of the sections of this Agreement have been included for convenience of
reference

                                       7


only, are not to be considered a part hereof and will in no way modify or
restrict any of the terms or provisions hereof.

     19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any number of
copies of this Agreement. Each signed copy will be an original, but all of them
together represent the same agreement.

     20. RULES BY COMMITTEE. The rights of the Grantee and the obligations of
the Company hereunder will be subject to such reasonable rules and regulations
as the Committee may adopt from time to time.

     21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between the Company and
the Grantee regarding the subject matter hereof. The Grantee and the Company
hereby declare and represent that no promise or agreement not herein expressed
has been made and that this Agreement contains the entire agreement between the
parties hereto with respect to the Award and replaces and makes null and void
any prior agreements between the Grantee and the Company regarding the Award.
This Agreement will be binding upon and inure to the benefit of the parties and
their respective heirs, successors and assigns.

     22. GRANTEE ACCEPTANCE. The Grantee will signify acceptance of the terms
and conditions of this Agreement by signing in the space provided at the end
hereof and returning a signed copy to the Company.

     23. CODE SECTION 409A COMPLIANCE. If any provision of this Agreement would
result in the imposition of an excise tax under Section 409A of the Code and
related regulations and Treasury pronouncements ("Section 409A"), that provision
will be reformed to avoid imposition of the excise tax and no action taken to
comply with Section 409A shall be deemed to impair a benefit under this
Agreement.

                            [SIGNATURE PAGE FOLLOWS]

                                       8


              SIGNATURE PAGE TO STOCK APPRECIATION RIGHTS AGREEMENT
        DATED ____________ BETWEEN LIBERTY MEDIA CORPORATION AND GRANTEE


                                        LIBERTY MEDIA CORPORATION


                                        By:
                                           ---------------------------------



                                        ACCEPTED:

                                                               , Grantee
                                        -----------------------
                                        Name:
                                                 -------------------------------
                                        Address:
                                                 -------------------------------

                                                 -------------------------------
                                        SSN:
                                                 -------------------------------

     Number of shares of L Stock as to which L SARs are granted:
                                                                 ------


                                       9


                                    EXHIBIT A
                                       TO
                       STOCK APPRECIATION RIGHTS AGREEMENT
                            DATED __________ BETWEEN
                      LIBERTY MEDIA CORPORATION AND GRANTEE

[COPY OF LIBERTY MEDIA CORPORATION 2000 INCENTIVE PLAN (AS AMENDED AND RESTATED
EFFECTIVE APRIL 19, 2004)]




                                       10


                                    EXHIBIT B
                                       TO
                       STOCK APPRECIATION RIGHTS AGREEMENT
                            DATED __________ BETWEEN
                      LIBERTY MEDIA CORPORATION AND GRANTEE

                           DESIGNATION OF BENEFICIARY

     I, ___________________________________________ (the "Grantee"), hereby

declare that upon my death ______________________________ (the "Beneficiary") of
                                         NAME

______________________________________________________________________________ ,
STREET ADDRESS                    CITY           STATE             ZIP CODE

who is my _____________________________________________, will be entitled to the
                    RELATIONSHIP TO GRANTEE


     L SARs and all other rights accorded the Grantee by the above-referenced
grant agreement (the "Agreement").

     It is understood that this Designation of Beneficiary is made pursuant to
the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights will devolve according to the Grantee's will or the laws
of descent and distribution.

     It is further understood that all prior designations of beneficiary under
the Agreement are hereby revoked and that this Designation of Beneficiary may
only be revoked in writing, signed by the Grantee, and filed with the Company
prior to the Grantee's death.


- ---------------------------           ------------------------------------------
          Date                                         Grantee

EX-10.19

                                                                   EXHIBIT 10.19


                        RESTRICTED STOCK AWARD AGREEMENT

     THIS AGREEMENT ("Agreement") is made as of [_____________ (the "Grant
Date"), by and between LIBERTY MEDIA CORPORATION, a Delaware corporation (the
"Company"), and the person signing as "Grantee" on the signature page hereof
(the "Grantee").

     The Company has adopted the Liberty Media Corporation 2000 Incentive Plan
(as Amended and Restated Effective April 19, 2004) (the "Plan"), a copy of
which is appended to this Agreement as EXHIBIT A and by this reference made a
part hereof, for the benefit of eligible employees of the Company and its
Subsidiaries. Capitalized terms used and not otherwise defined herein shall have
the meaning ascribed thereto in the Plan.

     Pursuant to the Plan, the Incentive Plan Committee (the "Committee")
appointed by the Board pursuant to Section 3.1 of the Plan to administer the
Plan, has determined that it would be in the interest of the Company and its
stockholders to award shares of common stock to Grantee, subject to the
conditions and restrictions set forth herein and in the Plan, in order to
provide Grantee with additional remuneration for services rendered, to encourage
Grantee to remain in the employ of the Company or its Subsidiaries and to
increase Grantee's personal interest in the continued success and progress of
the Company.

     The Company and Grantee therefore agree as follows:

     1. AWARD. Pursuant to the terms of the Plan and in consideration of the
covenants and promises of Grantee herein contained, the Company hereby awards to
Grantee as of the Grant Date the number of shares of Liberty Media Corporation
Series A ("L") Common Stock set forth on SCHEDULE 1 hereto, subject to the
conditions and restrictions set forth below and in the Plan (the "Restricted
Shares").

     2. ISSUANCE OF RESTRICTED SHARES AT BEGINNING OF THE RESTRICTION PERIOD.
Upon issuance of the Restricted Shares, the stock certificate or certificates
representing such Restricted Shares shall be registered in the name of Grantee.
During the Restriction Period, certificates representing the Restricted Shares
and any securities constituting Retained Distributions shall bear a restrictive
legend to the effect that ownership of the Restricted Shares (and such Retained
Distributions), and the enjoyment of all rights appurtenant thereto, are subject
to the restrictions, terms and conditions provided in the Plan and this
Agreement. Such certificates shall remain in the custody of the Company, and
Grantee shall deposit with the Company stock powers or other instruments of
assignment, each endorsed in blank, so as to permit retransfer to the Company of
all or any portion of the Restricted Shares and any securities constituting
Retained Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and this Agreement.

     3. RESTRICTIONS. Restricted Shares shall constitute issued and outstanding
shares of Common Stock for all corporate purposes. Grantee will have the right
to vote such Restricted Shares, to receive and retain such dividends and
distributions, as the Committee may in its sole discretion designate, paid or
distributed on such Restricted Shares and to exercise all other rights,



powers and privileges of a holder of Common Stock with respect to such
Restricted Shares, except that (a) Grantee will not be entitled to delivery of
the stock certificate or certificates representing such Restricted Shares until
the Restriction Period shall have expired and unless all other vesting
requirements with respect thereto shall have been fulfilled or waived, (b) the
Company will retain custody of the stock certificate or certificates
representing the Restricted Shares during the Restriction Period as provided in
Section 8.2 of the Plan, (c) other than such dividends and distributions as the
Committee may in its sole discretion designate, the Company or its designee will
retain custody of all distributions ("Retained Distributions") made or declared
with respect to the Restricted Shares (and such Retained Distributions will be
subject to the same restrictions, terms and vesting and other conditions as are
applicable to the Restricted Shares) until such time, if ever, as the Restricted
Shares with respect to which such Retained Distributions shall have been made,
paid or declared shall have become vested, and such Retained Distributions shall
not bear interest or be segregated in a separate account, (d) Grantee may not
sell, assign, transfer, pledge, exchange, encumber or dispose of the Restricted
Shares or any Retained Distributions or Grantee's interest in any of them during
the Restriction Period and (e) a breach of any restrictions, terms or conditions
provided in the Plan or established by the Committee with respect to any
Restricted Shares or Retained Distributions will cause a forfeiture of such
Restricted Shares and any Retained Distributions with respect thereto.

     4. VESTING AND FORFEITURE OF RESTRICTED SHARES. Subject to earlier vesting
in accordance with the provisions of Paragraph 7(b) below, Grantee shall become
vested as to 25% of the Restricted Shares subject to this Agreement on each of
the first four anniversaries of the Grant Date, each such anniversary being a
Vesting Date; provided, however, that Grantee shall not vest, pursuant to this
Paragraph 4, in Restricted Shares as to which Grantee would otherwise vest as of
a given date if Grantee has not been continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date (the vesting or
forfeiture of such shares to be governed instead by the provisions of Paragraph
5). Notwithstanding the foregoing, in the event that any date on which vesting
would otherwise occur is a Saturday, Sunday or a holiday, such vesting shall
instead occur on the business day next following such date.

     5. EARLY TERMINATION OF AWARD. Unless otherwise determined by the Committee
in its sole discretion, the Award shall terminate, to the extent not theretofore
vested, prior to the expiration of the Restricted Period, at the time specified
below:

     (a) If Grantee's employment with the Company and its Subsidiaries
terminates for any reason other than death or Disability, then the Award, to the
extent not theretofore vested, shall be forfeited immediately;

     (b) If Grantee dies while employed by the Company or a Subsidiary, then the
Award, to the extent not theretofore vested, shall immediately become fully
vested; and

     (c) If Grantee's employment with the Company terminates by reason of
Disability, then the Award, to the extent not theretofore vested, shall
immediately become fully vested.

     6. COMPLETION OF THE RESTRICTION PERIOD. On the Vesting Date with respect
to each award of Restricted Shares, and the satisfaction of any other applicable
restrictions, terms and conditions (a) all or the applicable portion of such
Restricted Shares shall become vested, (b) any



                                       2


Retained Distributions and any unpaid Dividend Equivalents with respect to such
Restricted Shares shall become vested to the extent that the Restricted Shares
related thereto shall have become vested and (c) any cash award to be received
by Grantee with respect to such Restricted Shares shall become payable, all in
accordance with the terms of this Agreement. Any such Restricted Shares,
Retained Distributions and any unpaid Dividend Equivalents that shall not become
vested shall be forfeited to the Company, and Grantee shall not thereafter have
any rights (including dividend and voting rights) with respect to such
Restricted Shares, Retained Distributions and any unpaid Dividend Equivalents
that shall have been so forfeited. The Committee may, in its discretion, provide
that the delivery of any Restricted Shares, Retained Distributions and unpaid
Dividend Equivalents that shall have become vested shall be deferred until such
date or dates as the recipient may elect. Any election of a recipient pursuant
to the preceding sentence shall be filed in writing with the Committee in
accordance with such rules and regulations, including any deadline for the
making of such an election, as the Committee may provide.

     7. ADJUSTMENTS.

     (a) The Restricted Shares shall be subject to adjustment (including,
without limitation, as to the number of Restricted Shares) in the sole
discretion of the Committee and in such manner as the Committee may deem
equitable and appropriate in connection with the occurrence of any of the events
described in Section 4.2 of the Plan following the Grant Date.

     (b) In the event of any Approved Transaction, Board Change or Control
Purchase, the restrictions in Paragraph 3 shall lapse. Notwithstanding the
foregoing, the Committee may, in its sole discretion, determine that the
restrictions in Paragraph 3 will not lapse on an accelerated basis in connection
with an Approved Transaction if the Board or the surviving or acquiring
corporation, as the case may be, shall have taken or made effective provision
for the taking of such action as in the opinion of the Committee is equitable
and appropriate to substitute a new Award for the Award evidenced by this
Agreement or to assume this Agreement and the Award evidenced hereby and in
order to make such new or assumed Award, as nearly as may be practicable
equivalent to the Award evidenced by this Agreement as then in effect (but
before giving effect to any acceleration of the exercisability hereof unless
otherwise determined by the Committee), taking into account, to the extent
applicable, the kind and amount of securities, cash or other assets into or for
which shares of L may be changed, converted or exchanged in connection with the
Approved Transaction.

     8. MANDATORY WITHHOLDING FOR TAXES. Upon the expiration of the Restriction
Period, Grantee (or Beneficiary, as defined in Paragraph 10 below) must remit to
the Company the amount of all federal, state or other governmental withholding
tax requirements imposed upon the Company with respect to the vesting of
Restricted Shares, unless provisions to pay such withholding requirements have
been made to the satisfaction of the Committee. Upon the payment of any cash
dividends with respect to Restricted Shares during the Restriction Period, the
amount of such dividends shall be reduced to the extent necessary to satisfy any
withholding tax requirements applicable thereto prior to payment to Grantee.

     9. DELIVERY BY THE COMPANY. As soon as practicable after vesting in
Restricted Shares pursuant to Paragraphs 4, 5 or 7, and subject to the
withholding referred to in

                                       3


Paragraph 8, the Company shall deliver to Grantee certificates issued in
Grantee's name for the number of Restricted Shares. If delivery is by mail,
delivery of shares of L shall be deemed effected for all purposes when a stock
transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to Grantee.

     10. NONTRANSFERABILITY OF RESTRICTED SHARES BEFORE VESTING. Before vesting
and during Grantee's lifetime, the Restricted Shares are not transferable
(voluntarily or involuntarily) other than pursuant to a Domestic Relations Order
and, except as otherwise required pursuant to a Domestic Relations Order, are
exercisable only by Grantee or Grantee's court appointed legal representative.
The Grantee may designate a beneficiary or beneficiaries (each, a
"Beneficiary"), to whom the Restricted Shares shall pass upon Grantee's death
and may change such designation from time to time by filing a written
designation of Beneficiary or Beneficiaries with the Committee on the form
annexed hereto as EXHIBIT B or such other form as may be prescribed by the
Committee, provided that no such designation shall be effective unless so filed
prior to the death of Grantee. If no such designation is made or if the
designated Beneficiary does not survive the Grantee's death, the Restricted
Shares shall pass by will or the laws of descent and distribution. Following
Grantee's death, the Restricted Shares shall pass accordingly to the designated
Beneficiary, and such Beneficiary shall be deemed the Grantee for purposes of
any applicable provisions of this Agreement.

     11. COMPANY'S RIGHTS. The existence of this Agreement shall not affect in
any way the right or power of the Company or its stockholders to accomplish any
corporate act, including, without limitation, the acts referred to in Section
10.16 of the Plan.

     12. LIMITATION OF RIGHTS. Nothing in this Agreement or the Plan shall be
construed to:

     (a) give Grantee any right to be awarded any further Restricted Shares
other than in the sole discretion of the Committee; or

     (b) give Grantee or any other person any interest in any fund or in any
specified asset or assets of the Company or any subsidiary of the Company.

     13. PREREQUISITES TO BENEFITS. Neither Grantee nor any person claiming
through Grantee shall have any right or interest in the Restricted Shares
awarded hereunder, unless and until all the terms, conditions and provisions of
this Agreement and the Plan which affect the Grantee or such other person shall
have been complied with as specified herein.

     14. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of Section
10.8 of the Plan, Grantee agrees that Grantee will not require the Company to
deliver any Restricted Shares and that the Company will not be obligated to
deliver any Restricted Shares if counsel to the Company determines that such
exercise, delivery or payment would violate any applicable law or any rule or
regulation of any governmental authority or any rule or regulation of, or
agreement of the Company with, any securities exchange or association upon which
the L Common Stock is listed or quoted. The Company shall in no event be
obligated to take any affirmative action in order to cause the delivery of any
Restricted Shares to comply with any such law, rule, regulation or agreement.

                                       4


     15. NOTICE. Unless the Company notifies Grantee in writing of a different
procedure or address, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be delivered personally
or sent by first class mail, postage prepaid, to the following address:

                           Liberty Media Corporation
                           12300 Liberty Boulevard
                           Englewood, Colorado 80112
                           Attn: Charles Y. Tanabe

Any notice or other communication to Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by first
class mail, postage prepaid, to Grantee's address as listed in the records of
the Company on the Grant Date, unless the Company has received written
notification from Grantee of a change of address.

     16. AMENDMENT. Notwithstanding any other provision hereof, this Agreement
may be supplemented or amended from time to time as approved by the Committee as
contemplated by Section 10.7(b) of the Plan. Without limiting the generality of
the foregoing, without the consent of Grantee,

     (a) this Agreement may be amended or supplemented from time to time as
approved by the Committee (i) to cure any ambiguity or to correct or supplement
any provision herein which may be defective or inconsistent with any other
provision herein, or (ii) to add to the covenants and agreements of the Company
for the benefit of Grantee or surrender any right or power reserved to or
conferred upon the Company in this Agreement, subject to any required approval
of the Company's stockholders and provided, in each case, that such changes or
corrections shall not adversely affect the rights of Grantee with respect to the
Award evidenced hereby or (iii) to make such other changes as the Company, upon
advice of counsel, determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation of, any law or
governmental rule or regulation, including any applicable federal or state
securities laws; and

     (b) subject to any required action by the Board or the Company's
stockholders, the Award evidenced by this Agreement may be canceled by the
Committee and a new Award made in substitution therefor, provided that the Award
so substituted shall satisfy all of the requirements of the Plan as of the date
such new Award is made and no such action shall adversely affect the Restricted
Shares to the extent then vested.

     17. GRANTEE EMPLOYMENT. Nothing contained in this Agreement, and no action
of the Company or the Committee with respect hereto, shall confer or be
construed to confer on Grantee any right to continue in the employ of the
Company or any of its Subsidiaries or interfere in any way with the right of the
Company or any employing Subsidiary to terminate Grantee's employment at any
time, with or without cause; subject, however, to the provisions of any
employment agreement between Grantee and the Company or any Subsidiary.

     18. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Colorado. Each party
irrevocably submits to

                                       5


the general jurisdiction of the state and federal courts located in the State of
Colorado in any action to interpret or enforce this Agreement and irrevocably
waives any objection to jurisdiction that such party may have based on
inconvenience of forum.

     19. CONSTRUCTION. References in this Agreement to "this Agreement" and the
words "herein," "hereof," "hereunder" and similar terms include all Exhibits and
Schedules appended hereto, including the Plan. This Agreement is entered into,
and the Award evidenced hereby is granted, pursuant to the Plan and shall be
governed by and construed in accordance with the Plan and the administrative
interpretations adopted by the Committee thereunder. All decisions of the
Committee upon questions regarding the Plan or this Agreement shall be
conclusive. Unless otherwise expressly stated herein, in the event of any
inconsistency between the terms of the Plan and this Agreement, the terms of the
Plan shall control. The headings of the paragraphs of this Agreement have been
included for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.

     20. DUPLICATE ORIGINALS. The Company and Grantee may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.

     21. RULES BY COMMITTEE. The rights of Grantee and obligations of the
Company hereunder shall be subject to such reasonable rules and regulations as
the Committee may adopt from time to time hereafter.

     22. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between the Company and
Grantee. Grantee and the Company hereby declare and represent that no promise or
agreement not herein expressed has been made and that this Agreement contains
the entire agreement between the parties hereto with respect to the Restricted
Shares and replaces and makes null and void any prior agreements between Grantee
and the Company regarding the Restricted Shares.

     23. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the terms and
conditions of this Agreement by signing in the space provided at the end hereof
and returning a signed copy to the Company.


                                       6


     SIGNATURE PAGE TO RESTRICTED STOCK AWARD AGREEMENT DATED AS OF [_______],
BETWEEN LIBERTY MEDIA CORPORATION AND GRANTEE.


                                        LIBERTY MEDIA CORPORATION


                                        By:_____________________________________
                                        Name:  Charles Y. Tanabe
                                        Title: Senior Vice President


                                        ACCEPTED:

                                        ----------------------------------------


                                        Address:
                                                --------------------------------

                                                --------------------------------

                                        SSN:
                                            ------------------------------------

                                       7


                                   EXHIBIT A TO RESTRICTED STOCK AWARD AGREEMENT
                                   DATED AS OF [_______] BETWEEN LIBERTY
                                   MEDIA CORPORATION AND GRANTEE


                  LIBERTY MEDIA CORPORATION 2000 INCENTIVE PLAN
             (AS AMENDED AND RESTATED EFFECTIVE APRIL 19, 2004)




                                         EXHIBIT B TO RESTRICTED STOCK AWARD
                                         AGREEMENT DATED AS OF [_______] BETWEEN
                                         LIBERTY MEDIA CORPORATION AND GRANTEE


                           DESIGNATION OF BENEFICIARY

     I, ____________________________________________ (the "Grantee"), hereby

declare that upon my death ___________________________________________ (the
                                        Name

"Beneficiary") of ____________________________________________________________ ,
                  Street Address             City     State           Zip Code

who is my _________________________________________________, shall be entitled
                   Relationship to Grantee

to the Restricted Shares and all other rights accorded the Grantee by the
above-referenced grant agreement (the "Agreement").

     It is understood that this Designation of Beneficiary is made pursuant to
the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights shall devolve according to the Grantee's will or the laws
of descent and distribution.

     It is further understood that all prior designation of beneficiary under
this Agreement are hereby revoked and that this Designation of Beneficiary may
only be revoked in writing, signed by the Grantee, and filed with the Company
prior to the Grantee's death.



                                        SCHEDULE 1 TO RESTRICTED STOCK AWARD
                                        AGREEMENT DATED AS OF [________] BETWEEN
                                        LIBERTY MEDIA CORPORATION AND GRANTEE


Grantee:


Grant Date:


Restricted Shares:  [_______] shares of Liberty Media Corporation Series A
                    Common Stock, $.01 par value per share

EX-10.21

                                                                   EXHIBIT 10.21

                            LIBERTY MEDIA CORPORATION
                    2002 NONEMPLOYEE DIRECTOR INCENTIVE PLAN

                       STOCK APPRECIATION RIGHTS AGREEMENT

     THIS STOCK APPRECIATION RIGHTS AGREEMENT ("Agreement") is made as of June
1, 2004 (the "Effective Date"), by and between LIBERTY MEDIA CORPORATION, a
Delaware corporation (the "Company"), and the individual whose name, address,
and social security number appear on the signature page hereto (the "Grantee").

     The Company has adopted the Liberty Media Corporation 2002 Nonemployee
Director Incentive Plan (the "Plan"), a copy of which is attached to this
Agreement as Exhibit A and by this reference made a part hereof, for the benefit
of eligible Nonemployee Directors of the Company. Capitalized terms used and not
otherwise defined herein will have the meaning given to them in the Plan.

     Pursuant to the Plan, the Board has determined that it would be in the
interest of the Company and its stockholders to award Free Standing SARs to
Grantee, subject to the conditions and restrictions set forth herein and in the
Plan, in order to provide the Grantee additional remuneration for services
rendered as a Nonemployee Director and to increase the Grantee's personal
interest in the continued success and progress of the Company.

     The Company and the Grantee therefore agree as follows:

     1. DEFINITIONS. The following terms, when used in this Agreement, have the
following meanings:

     "Base Price" means $11.00.

     "Business Day" means any day other than Saturday, Sunday or a day on which
banking institutions in Denver, Colorado, are required or authorized to be
closed.

     "Close of Business" means, on any day, 5:00 p.m., Denver, Colorado time.

     "Company" has the meaning specified in the preamble to this Agreement.

     "Effective Date" has the meaning specified in the preamble to this
Agreement.

     "Grantee" has the meaning specified in the preamble to this Agreement.

     "L SAR" has the meaning specified in Section 2 of this Agreement.

     "L Stock" has the meaning specified in Section 2 of this Agreement.

     "Plan" has the meaning specified in the recitals to this Agreement.


     "Required Withholding Amount" has the meaning specified in Section 5 of
this Agreement.

     "Term" has the meaning specified in Section 2 of this Agreement.

     "Vesting Anniversary Date" means June 1, 2004.

     2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and conditions
herein, pursuant to the Plan, the Company grants to the Grantee during the
period commencing on the Effective Date and expiring at Close of Business on
June 1, 2014 (the "Term"), subject to earlier termination as provided in Section
7 below, a Free Standing SAR with respect to the number of shares of Liberty
Media Corporation Series A Common Stock ("L Stock") identified on the signature
page hereto (individually, an "L SAR" and collectively, the "L SARs"). Upon
exercise of an L SAR in accordance with this Agreement, the Company will,
subject to Section 5 below, pay to the Grantee consideration equal to the
amount, if any, by which the Fair Market Value of a share of L Stock on the date
of exercise exceeds the Base Price of such L SAR.

     3. CONDITIONS OF EXERCISE. Unless otherwise determined by the Board in its
sole discretion, the L SARs are exercisable only in accordance with the
conditions stated in this Section 3.

     (a) Except as otherwise provided in Section 11.1(b) of the Plan or in the
last sentence of this Section 3(a), the L SARs may be exercised only on or after
June 1, 2005. Notwithstanding the foregoing, all L SARs will become exercisable
on the date of the Grantee's termination of service as a Nonemployee Director if
(i) the Grantee's service as a Nonemployee Director terminates by reason of
Disability or (ii) the Grantee dies while serving as a Nonemployee Director.

     (b) To the extent the L SARs become exercisable, such L SARs may be
exercised in whole or in part (at any time or from time to time, except as
otherwise provided herein) until expiration of the Term or earlier termination
thereof.

     (c) The Grantee acknowledges and agrees that the Board may, in its
discretion and as contemplated by Section 3.3 of the Plan, adopt rules and
regulations from time to time after the date hereof with respect to the exercise
of the L SARs and that the exercise by the Grantee of L SARs will be subject to
the further condition that such exercise is made in accordance with all such
rules and regulations as the Board may determine are applicable thereto.

     4. MANNER OF EXERCISE. L SARs will be considered exercised (as to the
number of L SARs specified in the notice referred to in Section 4(a) below) on
the latest of (i) the date of exercise designated in the written notice referred
to in Section 4(a) below, (ii) if the date so designated is not a Business Day,
the first Business Day following such date or (iii) the earliest Business Day by
which the Company has received all of the following:

     (a) Written notice, in such form as the Board may require, containing such
representations and warranties as the Board may require and designating, among
other things, the date of exercise and the number of L SARs to be exercised; and

                                       2


     (b) Any other documentation that the Board may reasonably require.

     5. WITHHOLDING FOR TAXES. The Grantee acknowledges and agrees that the
Company will deduct from the cash or shares of L Stock otherwise payable or
deliverable upon exercise of any L SARs an amount of cash, a number of shares of
L Stock (valued at their Fair Market Value on the date of exercise) or a
combination of the foregoing that is equal to the amount, if any, of all
federal, state and local taxes required to be withheld by the Company upon such
exercise, as determined by the Company (the "Required Withholding Amount").

     6. PAYMENT OR DELIVERY BY THE COMPANY. As soon as practicable after
receipt of all items referred to in Section 4, and subject to the withholding
referred to in Section 5, the Company will deliver or cause to be delivered
to the Grantee the amount of consideration determined under the final
sentence of Section 2 above, which consideration shall consist of cash,
shares of L Stock (valued at their Fair Market Value on the date of exercise)
or a combination of the foregoing, as determined by the Board.
Notwithstanding the foregoing, unless the Board otherwise determines, the
consideration will consist of cash in the amount equal to the Required
Withholding Amount, if any (which amount will be withheld from the total
amount payable to the Grantee), and the balance will be delivered to the
Grantee in the form of shares of L Stock.

     Any delivery of shares of L Stock will be deemed effected for all purposes
when certificates representing such shares have been delivered personally to the
Grantee or, if delivery is by mail, when the stock transfer agent of the Company
has deposited the certificates in the United States mail, addressed to the
Grantee, and any cash payment will be deemed effected when a check from the
Company, payable to the Grantee and in the amount equal to the amount of the
cash payment, has been delivered personally to the Grantee or deposited in the
United States mail, addressed to the Grantee.

     7. EARLY TERMINATION OF L SARS. Unless otherwise determined by the Board in
its sole discretion, the L SARs will terminate, prior to the expiration of the
Term, at the time specified below:

     (a) Subject to Section 7(b), if the Grantee's service as a Nonemployee
Director terminates other than (i) by the Company for cause or (ii) by reason of
death or Disability, then the L SARs will terminate at the Close of Business on
the first Business Day following the expiration of the one-year period which
began on the date of termination of the Grantee's service. For purposes of this
Section 7, "cause" will have the meaning specified in Section 11.2(b) of the
Plan.

     (b) If the Grantee dies while serving as a Nonemployee Director, or prior
to the expiration of a period of time following termination of the Grantee's
service during which the L SARs remain exercisable as provided in Section 7(a)
or Section 7(c), as applicable, the L SARs will terminate at the Close of
Business on the first Business Day following the expiration of the one-year
period which began on the date of the Grantee's death.

     (c) Subject to Section 7(b), if the Grantee's service as a Nonemployee
Director terminates by reason of Disability, then the L SARs will terminate at
the Close of Business on the

                                       3


first Business Day following the expiration of the one-year period which began
on the date of termination of the Grantee's service.

     (d) If the Grantee's service as a Nonemployee Director is terminated by the
Company for "cause" (as defined in Section 11.2(b) of the Plan), then the L SARs
will terminate immediately upon such termination of the Grantee's service.

     In any event in which L SARs remain exercisable for a period of time
following the date of termination of the Grantee's service as provided above,
the L SARs may be exercised during such period of time only to the extent the
same were exercisable as provided in Section 3 above on such date of termination
of the Grantee's service. Notwithstanding any period of time referenced in this
Section 7 or any other provision of this Section 7 that may be construed to the
contrary, the L SARs will in any event terminate upon the expiration of the
Term.

     8. AUTOMATIC EXERCISE OF L SARS. Immediately prior to the termination of L
SARs as provided in Section 7(a), 7(b) or 7(c) above or upon expiration of the
Term, all remaining L SARs then exercisable will be deemed to have been
exercised by the Grantee. Notwithstanding any other provision of this Agreement,
no exercise of LSARs will be deemed to occur upon termination of the Grantee's
service for "cause" (as defined in Section 11.2(b) of the Plan).

     9. NONTRANSFERABILITY. During the Grantee's lifetime, L SARs are not
transferable (voluntarily or involuntarily) other than pursuant to a Domestic
Relations Order and, except as otherwise required pursuant to a Domestic
Relations Order, are exercisable only by the Grantee or the Grantee's court
appointed legal representative. The Grantee may designate a beneficiary or
beneficiaries to whom the L SARs will pass upon the Grantee's death and may
change such designation from time to time by filing a written designation of
beneficiary or beneficiaries with the Board on the form annexed hereto as
Exhibit B or such other form as may be prescribed by the Board, provided that no
such designation will be effective unless so filed prior to the death of the
Grantee. If no such designation is made or if the designated beneficiary does
not survive the Grantee's death, the L SARs will pass by will or the laws of
descent and distribution. Following the Grantee's death, the L SARs , if
otherwise exercisable, may be exercised by the person to whom such right passes
according to the foregoing and such person will be deemed the Grantee for
purposes of any applicable provisions of this Agreement.

     10. NO STOCKHOLDER RIGHTS. The Grantee will not, by reason of the Award
granted under this Agreement, be deemed for any purpose to be, or to have any of
the rights of, a stockholder of the Company or of the Company with respect to
any shares of L Stock, nor will the existence of this Agreement affect in any
way the right or power of the Company or its stockholders to accomplish any
corporate act, including, without limitation, the acts referred to in Section
11.15 of the Plan.

     11. ADJUSTMENTS. If the outstanding shares of L Stock are subdivided
into a greater number of shares (by stock dividend, stock split,
reclassification or otherwise) or are combined into a smaller number of
shares (by reverse stock split, reclassification or otherwise), or if the
Board determines that any stock dividend, extraordinary cash dividend,
reclassification, recapitalization, reorganization, split-up-spin-off,
combination, exchange of shares, warrants or rights offering to purchase any
L Stock, or other similar corporate event (including mergers or

                                       4


consolidations other than those which constitute Approved Transactions, which
shall be governed by Section 11.1(b) of the Plan) affects shares of L Stock
such that an adjustment is required to preserve the benefits or potential
benefits intended to be made available under this Agreement, then the L SARs
will be subject to adjustment (including, without limitation, as to the
number of L SARs and the Base Price per share of such L SARs) in the sole
discretion of the Board and in such manner as the Board may deem equitable
and appropriate in connection with the occurrence of any of the events
described in this Section 11 following the Vesting Anniversary Date.

     12. RESTRICTIONS IMPOSED BY LAW. Without limiting the generality of Section
11.7 of the Plan, the Grantee will not exercise the L SARs , and the Company
will not be obligated to make any cash payment or issue or cause to be issued
any shares of L Stock, if counsel to the Company determines that such exercise,
payment or issuance would violate any applicable law or any rule or regulation
of any governmental authority or any rule or regulation of, or agreement of the
Company with, any securities exchange or association upon which shares of L
Stock are listed or quoted. The Company will in no event be obligated to take
any affirmative action in order to cause the exercise of the L SARs or the
resulting payment of cash or issuance of L Stock to comply with any such law,
rule, regulation or agreement.

     13. NOTICE. Unless the Company notifies the Grantee in writing of a
different procedure, any notice or other communication to the Company with
respect to this Agreement will be in writing and will be delivered personally or
sent by United States first class mail, postage prepaid and addressed as
follows:

                  Liberty Media Corporation
                  12300 Liberty Boulevard
                  Englewood, Colorado 80112
                  Attn: General Counsel

     Any notice or other communication to the Grantee with respect to this
Agreement will be in writing and will be delivered personally, or will be sent
by United States first class mail, postage prepaid, to the Grantee's address as
listed in the records of the Company on the Effective Date, unless the Company
has received written notification from the Grantee of a change of address.

     14. AMENDMENT. Notwithstanding any other provision hereof, this Agreement
may be supplemented or amended from time to time as approved by the Board as
contemplated in Section 11.6(b) of the Plan. Without limiting the generality of
the foregoing, without the consent of the Grantee,

     (a) this Agreement may be amended or supplemented from time to time as
approved by the Board (i) to cure any ambiguity or to correct or supplement any
provision herein which may be defective or inconsistent with any other provision
herein, or (ii) to add to the covenants and agreements of the Company for the
benefit of the Grantee or surrender any right or power reserved to or conferred
upon the Company in this Agreement, subject to any required approval of the
Company's stockholders and, provided, in each case, that such changes or
corrections will not adversely affect the rights of the Grantee with respect to
the Award

                                       5


evidenced hereby, or (iii) to make such other changes as the Company, upon
advice of counsel, determines are necessary or advisable because of the adoption
or promulgation of, or change in or of the interpretation of, any law or
governmental rule or regulation, including any applicable federal or state
securities laws; and

     (b) subject to any required action by the Board or the stockholders of the
Company, the L SARs granted under this Agreement may be canceled by the Company
and a new Award made in substitution therefor, provided that the Award so
substituted will satisfy all of the requirements of the Plan as of the date such
new Award is made and no such action will adversely affect any L SARs to the
extent then exercisable.

     15. STATUS AS DIRECTOR. Nothing contained in this Agreement, and no action
of the Company or the Board with respect hereto, will confer or be construed to
confer on the Grantee any right to continue as a director of the Company or
interfere in any way with the right of the Company or its shareholders to
terminate the Grantee's status as a director at any time, with or without cause.

     16. NONALIENATION OF BENEFITS. Except as provided in Section 9 of this
Agreement, (i) no right or benefit under this Agreement will be subject to
anticipation, alienation, sale, assignment, hypothecation, pledge, exchange,
transfer, encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, hypothecate, pledge, exchange, transfer, encumber or charge the same
will be void, and (ii) no right or benefit hereunder will in any manner be
liable for or subject to the debts, contracts, liabilities or torts of the
Grantee or other person entitled to such benefits.

     17. GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the internal laws of the State of Colorado. Each party
irrevocably submits to the general jurisdiction of the state and federal courts
located in the State of Colorado in any action to interpret or enforce this
Agreement and irrevocably waives any objection to jurisdiction that such party
may have based on inconvenience of forum.

     18. CONSTRUCTION. References in this Agreement to "this Agreement" and the
words "herein," "hereof," "hereunder" and similar terms include all Exhibits and
Schedules appended hereto. The word "include" and all variations thereof are
used in an illustrative sense and not in a limiting sense. All decisions of the
Board upon questions regarding this Agreement will be conclusive. Unless
otherwise expressly stated herein, in the event of any inconsistency between the
terms of the Plan and this Agreement, the terms of the Plan will control. The
headings of the sections of this Agreement have been included for convenience of
reference only, are not to be considered a part hereof and will in no way modify
or restrict any of the terms or provisions hereof.

     19. DUPLICATE ORIGINALS. The Company and the Grantee may sign any number of
copies of this Agreement. Each signed copy will be an original, but all of them
together represent the same agreement.

                                       6


     20. RULES BY BOARD. The rights of the Grantee and the obligations of the
Company hereunder will be subject to such reasonable rules and regulations as
the Board may adopt from time to time.

     21. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between the Company and
the Grantee regarding the subject matter hereof. The Grantee and the Company
hereby declare and represent that no promise or agreement not herein expressed
has been made and that this Agreement contains the entire agreement between the
parties hereto with respect to the Award and replaces and makes null and void
any prior agreements between the Grantee and the Company regarding the Award.
This Agreement will be binding upon and inure to the benefit of the parties and
their respective heirs, successors and assigns.

     22. GRANTEE ACCEPTANCE. The Grantee will signify acceptance of the terms
and conditions of this Agreement by signing in the space provided at the end
hereof and returning a signed copy to the Company.

                            [SIGNATURE PAGE FOLLOWS]


                                       7


              SIGNATURE PAGE TO STOCK APPRECIATION RIGHTS AGREEMENT
        DATED JUNE 1, 2004 BETWEEN LIBERTY MEDIA CORPORATION AND GRANTEE


                                        LIBERTY MEDIA CORPORATION


                                        By:
                                           ------------------------------------
                                           Charles Y. Tanabe
                                           Senior Vice President


                                        ACCEPTED:

                                        _______________________, Grantee
                                        Name:
                                        Address:
                                                --------------------------

                                                --------------------------
                                        SSN:
                                            -------------------------------


Number of shares of L Stock as to which L SARs are granted:


                                       8



                                    EXHIBIT A
                                       TO
                       STOCK APPRECIATION RIGHTS AGREEMENT
                           DATED JUNE 1, 2004 BETWEEN
                      LIBERTY MEDIA CORPORATION AND GRANTEE

  [COPY OF 2002 LIBERTY MEDIA CORPORATION NONEMPLOYEE DIRECTOR INCENTIVE PLAN]

                                       9



                                    EXHIBIT B
                                       TO
                       STOCK APPRECIATION RIGHTS AGREEMENT
                           DATED JUNE 1, 2004 BETWEEN
                      LIBERTY MEDIA CORPORATION AND GRANTEE

                           DESIGNATION OF BENEFICIARY

     I, ___________________________________________ (the "Grantee"), hereby

declare that upon my death __________________________________________ (the
                                            NAME

"Beneficiary") of ____________________________________________________________ ,
                  STREET ADDRESS             CITY     STATE             ZIP CODE

who is my _________________________________________________, will be entitled
                         RELATIONSHIP TO GRANTEE

to the L SARs and all other rights accorded the Grantee by the
above-referenced grant agreement (the "Agreement").

     It is understood that this Designation of Beneficiary is made pursuant to
the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of the Grantee's death. If any such condition is not
satisfied, such rights will devolve according to the Grantee's will or the laws
of descent and distribution.

     It is further understood that all prior designations of beneficiary under
the Agreement are hereby revoked and that this Designation of Beneficiary may
only be revoked in writing, signed by the Grantee, and filed with the Company
prior to the Grantee's death.


- -------------------------------       ------------------------------------------
          Date                                         Grantee

EX-10.23

                                                                   EXHIBIT 10.23

                         DEFERRED COMPENSATION AGREEMENT

     THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") is dated as of January
1, 2004, by and between LIBERTY MEDIA CORPORATION, a Delaware corporation ("the
Company"), and Robert R. Bennett (the "Executive").

                                    RECITALS

     The Executive is an employee of the Company. The Incentive Plan Committee
of the Board (the "Committee") has determined that it would be in the interest
of the Company and its stockholders to award to the Executive the benefits
provided herein to provide the Executive with additional remuneration for
services rendered, to encourage the Executive to remain in the employ of the
Company or its Affiliates and to increase the Executive's personal interest in
the continued success and progress of the Company and its Affiliates.

                                    AGREEMENT

     In consideration of the mutual promises and covenants contained in this
Agreement, and intending to be legally bound, the Company and the Executive
agree as follows:

     1. DEFINITIONS. In addition to the terms defined above, the following
terms, when used in this Agreement, have the following meanings:

     "Affiliate" means, with respect to any Person, any Person that directly or
indirectly Controls, is Controlled by, or is under common Control with such
Person, and "Control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

     "Agreement" has the meaning specified in the preamble to this Agreement.

     "Board" means the board of directors of the Company.

     "Business Day" means any day other than Saturday, Sunday or a day on which
banking institutions in Denver, Colorado, are required or authorized to be
closed.

     "Account" means the account established and maintained by the Company for
the Executive pursuant to Section 2 of this Agreement.


     "Committee" has the meaning specified in the recitals to this Agreement.

     "Company" has the meaning specified in the preamble to this Agreement.

     "Deferred Amount" means U.S. $50,000 per annum.

     "Determination Date" means the last day of the calendar year in which the
Termination Date occurs.

     "Executive" has the meaning specified in the preamble to this Agreement.

     "Investment Return" means, as to the daily balance in the Account, 8% per
annum, compounded quarterly as of the end of each calendar quarter.

     "Person" means a human being or a corporation, partnership, limited
liability company, trust, unincorporated organization, association or other
entity.

     "Termination Date" means the date on which the Executive ceases to be a
"covered employee" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended.

     2. ACCOUNT. The Company will establish and maintain, in the name of the
Executive, an account (the "Account") to which the Company will credit (i) the
Deferred Amount in quarterly installments of U.S. $12,500 at the end of each
calendar quarter beginning on March 31, 2004 and continuing until the date
specified in Section 3, and (ii) the Investment Return for each calendar
quarter. Within 30 days after the end of each calendar year during the term of
this Agreement, the Company will provide to the Executive a statement setting
forth all credits to the Account during such calendar year and the balance in
the Account as of the end of such calendar year.

     3. TERMINATION. No installments of the Deferred Amount will be credited to
the Account subsequent to the Termination Date, but the Executive will be
entitled to a credit for a partial installment for the period from the most
recent calendar quarter-end preceding the Termination Date to the Termination
Date. In any event, the Investment Return will be credited to the Account
through the Determination Date. Within 30 days following the Determination Date,
the Company will deliver to the Executive cash equal to the balance in the
Account as of the Determination Date, less the amount of all federal, state and
other governmental withholding tax requirements imposed upon the Company.

     4. BENEFITS PAYABLE FROM GENERAL ASSETS. Amounts payable hereunder will be
paid exclusively from the general assets of the Company, and the Executive will
not have any claim, right, security interest, or other interest in any fund,
trust, account, insurance contract, or asset of the Company from which payments
may be made. The Company's liability for the payment of benefits hereunder will
be evidenced only by this Agreement.

                                       2


     5. NO TRUST. Nothing contained in this Agreement and no action taken
pursuant to the provisions of this Agreement will create or be construed to
create a trust of any kind, or a fiduciary relationship between Executive and
the Company. Notwithstanding the foregoing, the Company may elect to establish a
separate trust to accumulate funds to discharge its obligations hereunder, but
the Executive will have no rights, title or interest in any such trust. However,
payments from any such trust will be deemed to be payments by the Company under
this Agreement.

     6. ALIENATION. No right or benefit under this Agreement will be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and
any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge
the same will be void. No right or benefit hereunder or under this Agreement
will in any manner be liable for or subject to the debts, contracts, liabilities
or torts of the Person entitled to such benefit.

     7. ADMINISTRATION; CLAIMS PROCEDURE. The administration, construction and
interpretation of this Agreement will be vested in the Committee. The Executive
or his legal representative will submit any claim under this Agreement in
writing to the Committee.

     8. NOTICE. Any notice or other communication with respect to this Agreement
will be in writing and will be addressed as follows:

                     If to the Company:

                     Liberty Media Corporation
                     12300 Liberty Boulevard
                     Englewood, Colorado 80112
                     Attn: Charles Y. Tanabe
                     Facsimile: 720-875-5382

                     If to Executive:

                     Robert R. Bennett
                     xxxxxxxxxxxxxxxxx
                     xxxxxxxxxxxxxxxxx
                     xxxxxxxxxxxxxxxxx

Any notice or other communication will be deemed to have been given (a) on the
date of receipt if personally delivered, (b) the date of receipt, if sent by
registered or certified U.S. mail, postage prepaid, or five days after being
sent by U.S. mail, postage prepaid, (c) one Business Day after receipt, if sent
by confirmed facsimile or telecopier transmission or (d) one Business Day after
having been sent by a nationally recognized courier service. In computing time
periods, the day of the notice will be included.

                                       3


     9. AMENDMENT. This Agreement may be amended from time to time only by a
written instrument signed by the Company and the Executive.

     10. EXECUTIVE'S EMPLOYMENT. Nothing contained in this Agreement, and no
action of the Company, the Committee or the Board with respect hereto, will
confer or be construed to confer on the Executive any right to continue in the
employ of the Company or any of its Affiliates or interfere in any way with the
right of the Company or any employing Affiliate to terminate the Executive's
employment at any time, with or without cause, subject to the provisions of any
employment agreement between the Executive and the Company or any employing
Affiliate.

     11. GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the internal laws of the State of Colorado. Each party hereby
irrevocably submits to the general jurisdiction of the state and federal courts
located in the State of Colorado in any action to interpret or enforce this
Agreement, and irrevocably waives any objection to jurisdiction such party may
have based on inconvenience of the forum.

     12. CONSTRUCTION. References in this Agreement to "this Agreement" and the
words "herein," "hereof," "hereunder" and similar terms include all Exhibits
appended hereto. The word "include" and all variations thereof are used in an
illustrative sense and not in a limiting sense. The headings of the sections of
this Agreement have been included for convenience of reference only, are not to
be considered a part hereof and will in no way modify or restrict any of the
terms or provisions hereof.

     13. DUPLICATE ORIGINALS. The Company and the Executive may sign any number
of copies of this Agreement. Each signed copy will be an original, but all of
them together represent the same agreement.

     14. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between the Company and
the Executive regarding the subject matter hereof. The Executive and the Company
hereby declare and represent that no promise or agreement not herein expressed
has been made and that this Agreement contains the entire agreement between the
parties hereto with respect to the deferred compensation arrangement described
herein and replaces and makes null and void any prior agreements between the
Executive and the Company regarding such deferred compensation arrangement. This
Agreement will be binding upon, and inure to the benefit of, the parties and
their respective heirs, successors and assigns.

     15. SEVERABILITY. Whenever possible each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement will be prohibited or invalid under such
law, such provision will be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision of this
Agreement.

                                       4


     16. EXECUTIVE'S ACCEPTANCE. The Executive will signify acceptance of the
terms and conditions of this Agreement by signing in the space provided at the
end hereof and returning a signed copy to the Company.


                                        LIBERTY MEDIA CORPORATION


                                        By:
                                           -------------------------------------
                                           Charles Y. Tanabe
                                           Senior Vice President


                                        ACCEPTED:


                                        ----------------------------------------
                                        Robert R. Bennett

                                       5

EX-10.24

                                                                   EXHIBIT 10.24

                         DEFERRED COMPENSATION AGREEMENT

     THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") is made as of October
15, 2004, by and between LIBERTY MEDIA CORPORATION, a Delaware corporation ("the
Company"), and Robert R. Bennett (the "Executive").

                                    RECITALS

     The Executive is an employee of the Company. The Incentive Plan Committee
of the Board (the "Committee") has determined that it would be in the interest
of the Company and its stockholders to award to the Executive the benefits
provided herein to provide the Executive with additional remuneration for
services rendered, to encourage the Executive to remain in the employ of the
Company or its Affiliates and to increase the Executive's personal interest in
the continued success and progress of the Company and its Affiliates.

                                    AGREEMENT

     In consideration of the mutual promises and covenants contained in this
Agreement, and intending to be legally bound, the Company and the Executive
agree as follows:

     1. DEFINITIONS. In addition to the terms defined above, the following
terms, when used in this Agreement, have the following meanings:

     "Affiliate" means, with respect to any Person, any Person that directly or
indirectly Controls, is Controlled by, or is under common Control with such
Person, and "Control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

     "Agreement" has the meaning specified in the preamble to this Agreement.

     "Board" means the board of directors of the Company.

     "Business Day" means any day other than Saturday, Sunday or a day on which
banking institutions in Denver, Colorado, are required or authorized to be
closed.

     "Account" means the account established and maintained by the Company for
the Executive pursuant to Section 2 of this Agreement.



     "Committee" has the meaning specified in the recitals to this Agreement.

     "Company" has the meaning specified in the preamble to this Agreement.

     "Deferred Amount" means U.S. $1,000,000.

     "Determination Date" means the last day of the calendar year in which the
Termination Date occurs.

     "Executive" has the meaning specified in the preamble to this Agreement.

     "Investment Return" means, as to the daily balance in the Account, 8% per
annum, compounded quarterly as of the end of each calendar quarter.

     "Person" means a human being or a corporation, partnership, limited
liability company, trust, unincorporated organization, association or other
entity.

     "Termination Date" means the date on which the Executive ceases to be a
"covered employee" of the Company or any Affiliate of the Company within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.

     2. ACCOUNT. The Company will establish and maintain, in the name of the
Executive, an account (the "Account") to which the Company will credit (i) the
Deferred Amount as of July 1, 2004, and (ii) the Investment Return for each
calendar quarter beginning on or after July 1, 2004 and ending on or before the
Determination Date. Within 30 days after the end of each calendar year during
the term of this Agreement, the Company will provide to the Executive a
statement setting forth the all credits to the Account during such calendar year
and the balance in the Account as of the end of such calendar year.

     3. PAYMENT FOLLOWING TERMINATION. Within 30 days following the
Determination Date, the Company will deliver to the Executive cash equal to the
balance in the Account as of the Determination Date, less the amount of all
federal, state and other governmental withholding tax requirements imposed upon
the Company.

     4. BENEFITS PAYABLE FROM GENERAL ASSETS. Amounts payable hereunder will be
paid exclusively from the general assets of the Company, and the Executive will
not have any claim, right, security interest, or other interest in any fund,
trust, account, insurance contract, or asset of the Company from which payments
may be made. The Company's liability for the payment of benefits hereunder will
be evidenced only by this Agreement.


                                       2


     5. NO TRUST. Nothing contained in this Agreement and no action taken
pursuant to the provisions of this Agreement will create or be construed to
create a trust of any kind, or a fiduciary relationship between Executive and
the Company; provided, however, if the Company establishes a separate trust to
accumulate funds to discharge its obligations hereunder, Executive will have no
rights, title or interest in any such trust. However, payments from any such
trust will be deemed to be payments by the Company under this Agreement.

     6. ALIENATION. No right or benefit under this Agreement will be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and
any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge
the same will be void. No right or benefit hereunder or under this Agreement
will in any manner be liable for or subject to the debts, contracts,
liabilities, or torts of the Person entitled to such benefit.

     7. ADMINISTRATION; CLAIMS PROCEDURE. The administration, construction and
interpretation of this Agreement will be vested in the Committee. The Executive
or his legal representative will submit any claim under this Agreement in
writing to the Committee.

     8. NOTICE. Any notice or other communication with respect to this Agreement
will be in writing and will be addressed as follows:

                    If to the Company:

                    Liberty Media Corporation
                    12300 Liberty Boulevard
                    Englewood, Colorado 80112
                    Attn: Charles Y. Tanabe, Esq.
                    Facsimile: 720-875-5382

                    If to the Executive:

                    Robert R. Bennett
                    xxxxxxxxxxxxxxxxxx
                    xxxxxxxxxxxxxxxxxx
                    xxxxxxxxxxxxxxxxxx

Any notice or other communication will be deemed to have been given (a) on the
date of receipt if personally delivered, (b) the date of receipt, if sent by
registered or certified U.S. mail, postage prepaid, or five days after being
sent by U.S. mail, postage prepaid, (c) one Business Day after receipt, if sent
by confirmed facsimile or telecopier transmission or (d) one Business Day after
having been sent by a nationally recognized courier service. In computing time
periods, the day of the notice will be included.

                                       3


     9. AMENDMENT. This Agreement may be amended from time to time only by a
written instrument signed by the Company and the Executive.

     10. EXECUTIVE'S EMPLOYMENT. Nothing contained in this Agreement, and no
action of the Company, the Committee or the Board with respect hereto, will
confer or be construed to confer on the Executive any right to continue in the
employ of the Company or any of its Affiliates or interfere in any way with the
right of the Company or any employing Affiliate to terminate the Executive's
employment at any time, with or without cause, subject to the provisions of any
employment agreement between the Executive and the Company or any employing
Affiliate.

     11. GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the internal laws of the State of Colorado. Each party hereby
irrevocably submits to the general jurisdiction of the state and federal courts
located in the State of Colorado in any action to interpret or enforce this
Agreement, and irrevocably waives any objection to jurisdiction such party may
have based on inconvenience of the forum.

     12. CONSTRUCTION. References in this Agreement to "this Agreement" and the
words "herein," "hereof," "hereunder" and similar terms include all Exhibits
appended hereto. The word "include" and all variations thereof are used in an
illustrative sense and not in a limiting sense. The headings of the sections of
this Agreement have been included for convenience of reference only, are not to
be considered a part hereof and will in no way modify or restrict any of the
terms or provisions hereof.

     13. PENDING LEGISLATION. As of the date of this Agreement, Congress has
approved the American Jobs Creation Act of 2004 (the "Bill"). If the Bill is
enacted into law, certain provisions of the Bill will impose new requirements
with respect to the deferral of income recognition under nonqualified deferred
compensation plans. The Company and the Executive believe and intend that the
provisions of current law, rather than the provisions of the Bill, will govern
the arrangement under this Agreement. However, if the Bill is enacted into law
and the parties determine in good faith that the provisions of the Bill are
applicable to this Agreement, the Company and the Executive will cooperate in
amending this Agreement in the manner and to the extent necessary to cause it to
comply with the provisions of the Bill while preserving, to the maximum extent
possible, the economic arrangement set forth in this Agreement.

     14. DUPLICATE ORIGINALS. The Company and the Executive may sign any number
of copies of this Agreement. Each signed copy will be an original, but all of
them together represent the same agreement.

     15. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between the Company and
the Executive regarding the subject matter hereof. The Executive and the Company
hereby declare and represent that no promise or agreement not herein expressed
has been made and that this Agreement contains the entire agreement between the
parties hereto with respect to the deferred compensation

                                       4


arrangement described herein and replaces and makes null and void any prior
agreements between the Executive and the Company regarding such deferred
compensation arrangement. This Agreement will be binding upon, and inure to the
benefit of, the parties and their respective heirs, successors and assigns.

     16. SEVERABILITY. Whenever possible each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement will be prohibited or invalid under such
law, such provision will be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision of this
Agreement.

     17. EXECUTIVE'S ACCEPTANCE. The Executive will signify acceptance of the
terms and conditions of this Agreement by signing in the space provided at the
end hereof and returning a signed copy to the Company.


                                        LIBERTY MEDIA CORPORATION


                                        By:
                                           -------------------------------------
                                           Charles Y. Tanabe
                                           Senior Vice President



                                        ACCEPTED:


                                        ----------------------------------------
                                        Robert R. Bennett

                                       5

EX-21

                                                                      EXHIBIT 21

                             AS OF DECEMBER 31, 2004

A TABLE OF SUBSIDIARIES OF LIBERTY MEDIA CORPORATION IS SET FORTH BELOW,
INDICATING AS TO EACH THE STATE OR JURISDICTION OF ORGANIZATION AND THE NAMES
UNDER WHICH SUCH SUBSIDIARIES DO BUSINESS. SUBSIDIARIES NOT INCLUDED IN THE
TABLE ARE INACTIVE OR, CONSIDERED IN THE AGGREGATE AS A SINGLE SUBSIDIARY, WOULD
NOT CONSTITUTE A SIGNIFICANT SUBSIDIARY.

        A B C D E F G H I J K L M N



                                                                                                                    State/Country
        Name                                                                                                        of Formation
        ----                                                                                                        -------------
                                                                                                                 
        1227844 Ontario Ltd.                                                                                        CANADA (Ontario)
        A.F. Associates, Inc.                                                                                       DE
        AEI Collingham Holdings Co. Ltd.                                                                            CAYMAN
        AEI France S.P.R.L.                                                                                         FRANCE
        AEI Holding Inc.                                                                                            CAYMAN
        AEI Music Eastern Europe B.V.                                                                               NETHERLANDS
        AEI Music Europe BV                                                                                         NETHERLANDS
        AEI Music Network, Inc.                                                                                     WA
        AEI Reditune Music BV                                                                                       NETHERLANDS
        AEI Satellite Media Polska                                                                                  POLAND
        AEI Satellite Media Spo.                                                                                    CZECH REPUBLIC
        AFA Products Group, Inc.                                                                                    NJ
        Affiliate  Marks Investments, Inc.                                                                          DE
        Affiliate Investment, Inc.                                                                                  DE
        Affiliate Relations Holdings, Inc.                                                                          DE
        Affiliate Sales & Marketing, Inc.                                                                           DE
        Animal Planet, L.P.                                                                                         DE
        Aries Pictures LLC                                                                                          CO
        Ascent Entertainment Group, Inc.                                                                            DE
        Ascent Media Creative Services, Inc. [dba Enciore Video; Riot; E-Finish]                                    CA
        Ascent media Creative Sound Services, Inc.                                                                  NY
        Ascent Media Debt, Inc.                                                                                     DE
        Ascent Media Group Limited                                                                                  UK
        Ascent Media Group, Inc. [dba Visiontext]                                                                   DE
        Ascent Media Holdings Limited                                                                               UK
        Ascent Media Holdings Ltd.                                                                                  SINGAPORE
        Ascent Media Limited                                                                                        UK
        Ascent Media Management Services, Inc.[dba Level 3 Post; Digital Transform]                                 DE
        Ascent Media Network Services Europe Limited                                                                UK
        Ascent Media Network Services, Inc.                                                                         CA




        A B C D E F G H I J K L M N



                                                                                                                    State/Country
        Name                                                                                                        of Formation
        ----                                                                                                        -------------
                                                                                                                 
        Ascent Media Pte. Ltd.                                                                                      SINGAPORE
        Ascent Media Systems and Technology Services, LLC                                                           DE
        Associated Information Services Corporation                                                                 DE
        Associated PCN Company
        Associated PCN Holding Corporation                                                                          DE
        Background Music BV                                                                                         NETHERLANDS
        BDTV II Inc.                                                                                                DE
        BDTV III Inc.                                                                                               DE
        BDTV Inc.                                                                                                   DE
        BDTV IV, Inc.                                                                                               DE
        BET Movies/STARZ!3, LLC                                                                                     DE
        CDirect Mexico I, Inc.                                                                                      DE
        CDirect Mexico II, Inc.                                                                                     DE
        Chinese Movie and Drama Channel Venture LLC                                                                 CO
        Commerce Technologies, Inc.                                                                                 NY
        Communication Capital Corp.                                                                                 DE
        Company 3 New York, Inc.                                                                                    DE
        Company 3, Inc.                                                                                             DE
        CVN Companies, Inc.                                                                                         MN
        CVN Direct Marketing Corp.                                                                                  MN
        CVN Distribution Co., Inc.                                                                                  MN
        CVN Management, Inc.                                                                                        MN
        CVN Michigan, Inc.                                                                                          MN
        Diamonique Corporation                                                                                      NJ
        DMX Music                                                                                                   GERMANY
        DMX Music Australia Pty Limited                                                                             AUSTRALIA
        DMX Music Canada, Inc.                                                                                      BC
        DMX Music Choice Investment Co.                                                                             UK
        DMX Music Germany GmbH                                                                                      GERMANY
        DMX Music GmbH & Co.                                                                                        GERMANY
        DMX Music Ltd.                                                                                              UK
        DMX Music UK Ltd.                                                                                           UK
        DMX Music, Inc.                                                                                             DE
        DMX-Europe N.V.                                                                                             NETHERLANDS
        Dry Creek Productions LLC                                                                                   CO
        Encore Asia, Inc.                                                                                           CO
        Encore Australia Management, Inc.                                                                           DE




        A B C D E F G H I J K L M N



                                                                                                                    State/Country
        Name                                                                                                        of Formation
        ----                                                                                                        -------------
                                                                                                                 
        Encore International Newco, Inc.                                                                            CO
        Encore International, Inc.                                                                                  CO
        Encore London Limited                                                                                       UK
        Equipment OCV, Inc.                                                                                         DE
        ER Development International, Inc.                                                                          PA
        ER Marks, Inc.                                                                                              DE
        EZShop International, Inc.                                                                                  DE
        Fine Music Servicos de Programacao Ltd.                                                                     BRAZIL
        Four Media Company [dba Digital Image, Image Laboratory; Method; Todd Studios Burbank; Todd Burbank;
          Stream]                                                                                                   DE
        Four Media Company Canada Ltd.                                                                              BC
        Goosetray Investments Ltd.                                                                                  MAURITIUS
        Group W Broadcast Pte. Ltd.                                                                                 SINGAPORE
        Health Ventures Partners G.P.                                                                               PA
        Hotel Digital Network Inc.                                                                                  CA
        Hotelevision, Inc                                                                                           DE
        IC Marks, Inc.                                                                                              DE
        IM Experience, Inc.                                                                                         PA
        Influence Marketing Corp [dba QVC @ theMall]                                                                NOVA SCOTIA
        Influence Marketing Services, Inc.                                                                          CANADA (Ontario)
        Ingenius                                                                                                    CO
        Innovative Retailing, Inc.                                                                                  DE
        Interactive Technology Acquisitions, Inc.                                                                   DE
        Interactive Technology Holdings, L.L.C.                                                                     DE
        iQVC GmbH                                                                                                   GERMANY
        KSI, Inc.                                                                                                   DE
        LBTW I, Inc.                                                                                                CO
        LBTW II, Inc.                                                                                               CO
        LBTW III, Inc.                                                                                              CO
        LDIG Aloy, Inc.                                                                                             DE
        LDIG Cars, Inc.                                                                                             DE
        LDIG Film, Inc.                                                                                             DE
        LDIG Financing LLC                                                                                          DE
        LDIG Food, Inc.                                                                                             DE
        LDIG Gamenet, Inc.                                                                                          DE
        LDIG House, Inc.                                                                                            DE
        LDIG ICTV Corp.                                                                                             DE
        LDIG Koz, Inc.                                                                                              DE
        LDIG Music Online, Inc.                                                                                     DE




        A B C D E F G H I J K L M N



                                                                                                                    State/Country
        Name                                                                                                        of Formation
        ----                                                                                                        -------------
                                                                                                                 
        LDIG NL, Inc.                                                                                               DE
        LDIG Online Retail, Inc.                                                                                    DE
        LDIG Order, Inc.                                                                                            DE
        LDIG OTV, Inc.                                                                                              DE
        LDIG Respond, Inc.                                                                                          DE
        LDIG UGON, Inc.                                                                                             DE
        LDIG, LLC                                                                                                   DE
        Liberty Academic Systems Holdings, Inc.                                                                     CO
        Liberty AEG, Inc.                                                                                           DE
        Liberty Aero, LLC                                                                                           DE
        Liberty AGI, LLC                                                                                            DE
        Liberty Animal, Inc.                                                                                        DE
        Liberty Associated Holdings LLC                                                                             DE
        Liberty Associated, Inc.                                                                                    DE
        Liberty ATCL, Inc.                                                                                          CO
        Liberty Auction Holdings LLC                                                                                DE
        Liberty Auction, Inc.                                                                                       DE
        Liberty BBandnow Holdings, LLC                                                                              DE
        Liberty BBandnow, Inc.                                                                                      DE
        Liberty BETI, Inc.                                                                                          DE
        Liberty Broadband Interactive Television, Inc.                                                              DE
        Liberty Centennial Holdings, Inc.                                                                           DE
        Liberty Challenger, LLC                                                                                     DE
        Liberty Citation, Inc.                                                                                      DE
        Liberty CM, Inc.                                                                                            DE
        Liberty CNBC, Inc.                                                                                          CO
        Liberty Court II, Inc.                                                                                      CO
        Liberty Court, Inc.                                                                                         WY
        Liberty Crown, Inc.                                                                                         DE
        Liberty CSG Cash, LLC                                                                                       DE
        Liberty CSG Warrants, LLC                                                                                   DE
        Liberty Denver Arena LLC                                                                                    DE
        Liberty Equator, Inc.                                                                                       DE
        Liberty ETC Holdings, LLC                                                                                   DE
        Liberty ETC, LLC                                                                                            DE
        Liberty EVNT, Inc.                                                                                          DE
        Liberty Family Preferred, LLC                                                                               DE
        Liberty Finance LLC                                                                                         DE
        Liberty Geonet, Inc.                                                                                        DE




        A B C D E F G H I J K L M N



                                                                                                                    State/Country
        Name                                                                                                        of Formation
        ----                                                                                                        -------------
                                                                                                                 
        Liberty GI II, Inc.                                                                                         DE
        Liberty GI, Inc.                                                                                            DE
        Liberty GIC. Inc.                                                                                           CO
        Liberty HSN II, Inc.                                                                                        DE
        Liberty IATV Events, Inc.                                                                                   DE
        Liberty IATV Holdings, Inc.                                                                                 DE
        Liberty IATV, Inc.                                                                                          DE
        Liberty IB2, LLC                                                                                            DE
        Liberty ICGX, Inc.                                                                                          DE
        Liberty IDTC 2, Inc.                                                                                        DE
        Liberty IDTC 3, Inc.                                                                                        DE
        Liberty IDTC 4, Inc.                                                                                        DE
        Liberty IDTC, Inc.                                                                                          DE
        Liberty IDTel Holdings, Inc.                                                                                DE
        Liberty IDTel, Inc.                                                                                         DE
        Liberty IDTMED, Inc.                                                                                        DE
        Liberty International B-L LLC                                                                               DE
        Liberty Java, Inc.                                                                                          CO
        Liberty KI, Inc.                                                                                            DE
        Liberty KV Holdings, Inc.                                                                                   DE
        Liberty KV Partners I, LLC                                                                                  DE
        Liberty Lightspan Holdings, Inc.                                                                            CO
        Liberty Livewire LLC                                                                                        DE
        Liberty LQ VII, LLC                                                                                         DE
        Liberty LSAT II, Inc.                                                                                       DE
        Liberty LSAT, Inc.                                                                                          DE
        Liberty LWR, Inc.                                                                                           DE
        Liberty MCNS Holdings, Inc.                                                                                 CO
        Liberty MicroUnity Holdings, Inc.                                                                           CO
        Liberty MLP, Inc.                                                                                           CO
        Liberty N2P II, Inc.                                                                                        DE
        Liberty N2P III, Inc.                                                                                       DE
        Liberty N2P, Inc.                                                                                           DE
        Liberty NC II, Inc.                                                                                         DE
        Liberty NC III, Inc.                                                                                        DE
        Liberty NC IV, Inc.                                                                                         DE
        Liberty NC IX, Inc.                                                                                         DE
        Liberty NC V, Inc.                                                                                          DE
        Liberty NC VI, Inc.                                                                                         DE




        A B C D E F G H I J K L M N



                                                                                                                    State/Country
        Name                                                                                                        of Formation
        ----                                                                                                        -------------
                                                                                                                 
        Liberty NC VII, Inc.                                                                                        DE
        Liberty NC VIII, Inc.                                                                                       DE
        Liberty NC XII, Inc.                                                                                        DE
        Liberty NC XIII, Inc.                                                                                       DE
        Liberty NC, Inc.                                                                                            DE
        Liberty NEA, Inc.                                                                                           DE
        Liberty Next, Inc.                                                                                          DE
        Liberty NP, Inc.                                                                                            DE
        Liberty Online Health KI Holdings, Inc.                                                                     CO
        Liberty Online Health RN Holdings, Inc.                                                                     CO
        Liberty PCLN, Inc.                                                                                          DE
        Liberty PL2, Inc.                                                                                           DE
        Liberty PL3, LLC                                                                                            DE
        Liberty Prime, Inc.                                                                                         DE
        Liberty Programming Company LLC                                                                             DE
        Liberty Property Holdings, Inc.                                                                             DE
        Liberty QS, Inc.                                                                                            DE
        Liberty QVC Holding, LLC                                                                                    DE
        Liberty QVC, Inc.                                                                                           CO
        Liberty Replay, Inc.                                                                                        DE
        Liberty Satellite & Technology, Inc.                                                                        DE
        Liberty Satellite, LLC                                                                                      DE
        Liberty SMTRK of Texas, Inc.                                                                                CO
        Liberty SMTRK, LLC                                                                                          DE
        Liberty Sportsouth, Inc.                                                                                    GA
        Liberty Tower, Inc.                                                                                         DE
        Liberty TP Holdings, Inc.                                                                                   DE
        Liberty TP Investment, LLC                                                                                  DE
        Liberty TP LLC                                                                                              DE
        Liberty TP Management, Inc.                                                                                 DE
        Liberty TSAT, Inc.                                                                                          DE
        Liberty VF, Inc.                                                                                            DE
        Liberty Virtual I/O, Inc.                                                                                   CO
        Liberty WDIG, Inc.                                                                                          DE
        Liberty WF Holdings LLC                                                                                     DE
        Liberty WF, Inc.                                                                                            DE
        Liberty Wireless 1, Inc.                                                                                    DE
        Liberty Wireless 10, Inc.                                                                                   DE
        Liberty Wireless 11, Inc.                                                                                   DE




        A B C D E F G H I J K L M N



                                                                                                                    State/Country
        Name                                                                                                        of Formation
        ----                                                                                                        -------------
                                                                                                                 
        Liberty Wireless 2, Inc.                                                                                    DE
        Liberty Wireless 3, Inc.                                                                                    DE
        Liberty Wireless 4, Inc.                                                                                    DE
        Liberty Wireless 5, Inc.                                                                                    DE
        Liberty Wireless 6, Inc.                                                                                    DE
        Liberty Wireless 7, Inc.                                                                                    DE
        Liberty Wireless 8, Inc.                                                                                    DE
        Liberty Wireless 9, Inc.                                                                                    DE
        Liberty XMSR, Inc.                                                                                          DE
        LMC Animal Planet, Inc.                                                                                     CO
        LMC Bay Area Sports, Inc.                                                                                   CO
        LMC BET Holdings LLC                                                                                        DE
        LMC BET, Inc.                                                                                               CO
        LMC Capital LLC                                                                                             DE
        LMC Denver Arena, Inc.                                                                                      DE
        LMC Discovery, Inc.                                                                                         CO
        LMC IATV Events, LLC                                                                                        DE
        LMC Information Services, LLC                                                                               DE
        LMC Request, Inc.                                                                                           CO
        LMC Silver King, Inc.                                                                                       CO
        LMC Southeast Sports, Inc.                                                                                  CO
        LMC USA IX, Inc.                                                                                            DE
        LMC USA VIII, Inc.                                                                                          DE
        LMC USA XI, Inc.                                                                                            DE
        LMC USA XII, Inc.                                                                                           DE
        LMC USA XIII, Inc.                                                                                          DE
        LMC USA XIV, Inc.                                                                                           DE
        LMC USA XV, Inc.                                                                                            DE
        LMC Wireless 1, LLC                                                                                         DE
        LMC Wireless 2, LLC                                                                                         DE
        LMC Wireless 2, LLC                                                                                         DE
        LMC Wireless 3, LLC                                                                                         DE
        LMC Wireless 4, LLC                                                                                         DE
        LMC Wireless 5, LLC                                                                                         DE
        LMC Wireless 6, LLC                                                                                         DE
        LMC Wireless Holdings, Inc.                                                                                 DE
        LMC Wireless IV, LLC                                                                                        DE
        LMC/LSAT Holdings, Inc.                                                                                     DE
        LQ I, Inc.                                                                                                  CO




        A B C D E F G H I J K L M N



                                                                                                                    State/Country
        Name                                                                                                        of Formation
        ----                                                                                                        -------------
                                                                                                                 
        LQ II, Inc.                                                                                                 CO
        LQ III, Inc.                                                                                                DE
        LQ IV, Inc.                                                                                                 DE
        LQ V, Inc.                                                                                                  DE
        LQ VI, Inc.                                                                                                 DE
        LSAT Astro LLC                                                                                              DE
        LSAT Astro LLC                                                                                              DE
        LTP Wireless 1, LLC                                                                                         DE
        LTWX I, Inc.                                                                                                CO
        LTWX II, Inc.                                                                                               CO
        LTWX III, Inc.                                                                                              CO
        LTWX IV, Inc.                                                                                               CO
        LTWX V, Inc.                                                                                                CO
        MacNeil/Lehrer Productions [gp]                                                                             NY
        Maxide Acquisition, Inc.                                                                                    DE
        MediaView LLC                                                                                               CO
        OCV Iberia, SA
        On Command Argentina, SRL
        On Command Canada, Inc.
        On Command Corporation                                                                                      DE
        On Command Development Corporation                                                                          DE
        On Command Video Corporation                                                                                DE
        ONCO-HTV, Inc.                                                                                              DE
        One Post Limited                                                                                            UK
        Pioneer Studios, Inc.                                                                                       DE
        Project Discovery, Inc.                                                                                     DE
        Puerto Rico Video Entertainment Corporation                                                                 DE
        Purple Demon, Inc.                                                                                          NY
        Q Fit, Inc.                                                                                                 DE
        Q The Music, Inc.                                                                                           DE
        Q2, Inc.                                                                                                    NY
        QC Marks, Inc.                                                                                              DE
        QDirect Ventures, Inc.                                                                                      DE
        QExhibits, Inc.                                                                                             DE
        QFlight, Inc.                                                                                               DE
        QHealth, Inc.                                                                                               DE
        QK Holdings, Inc.                                                                                           DE
        QS Holdings, Inc.                                                                                           DE




        A B C D E F G H I J K L M N



                                                                                                                    State/Country
        Name                                                                                                        of Formation
        ----                                                                                                        -------------
                                                                                                                 
        QVC                                                                                                         GREAT BRITAIN
        QVC Britain                                                                                                 ENGLAND
        QVC Britain I Limited                                                                                       ENGLAND
        QVC Britain I, Inc.                                                                                         DE
        QVC Britain II, Inc.                                                                                        DE
        QVC Britain III, Inc.                                                                                       DE
        QVC Call Center GmbH & Co. KG                                                                               GERMANY
        QVC Call Center Verwaltungs-GmbH                                                                            GERMANY
        QVC Chesapeake, Inc.                                                                                        VA
        QVC China Domain Limited                                                                                    HONG KONG
        QVC China, Inc.                                                                                             DE
        QVC de Mexico de S. de R.L. de C.V.                                                                         MEXICO
        QVC Delaware, Inc.                                                                                          DE
        QVC Deutschland GmbH                                                                                        GERMANY
        QVC eDistribution Inc. & Co. KG                                                                             GERMANY
        QVC EDV-Service GmbH                                                                                        GERMANY
        QVC eService Inc. & Co. KG                                                                                  GERMANY
        QVC Germany I, Inc.                                                                                         DE
        QVC Germany II, Inc.                                                                                        DE
        QVC Grundstucksverwaltungs GmbH                                                                             GERMANY
        QVC Handel GmbH                                                                                             GERMANY
        QVC Handel GmbH                                                                                             GERMANY
        QVC Holdings, Inc.                                                                                          DE
        QVC International, Inc.                                                                                     DE
        QVC Investment, Inc.                                                                                        CO
        QVC Japan Holdings, Inc.                                                                                    DE
        QVC Japan Services, Inc.                                                                                    DE
        QVC Japan, Inc.                                                                                             JAPAN
        QVC Local, Inc.                                                                                             DE
        QVC Mexico II, Inc.                                                                                         DE
        QVC Mexico III, Inc.                                                                                        DE
        QVC Mexico, Inc.                                                                                            DE
        QVC Middle East, Inc.                                                                                       DE
        QVC of Thailand, Inc.                                                                                       DE
        QVC Productworks, Inc.                                                                                      DE
        QVC Properties, Inc.                                                                                        BRITAIN
        QVC Publishing, Inc.                                                                                        DE
        QVC Realty, Inc.                                                                                            PA
        QVC Rocky Mount, Inc.                                                                                       NC




        A B C D E F G H I J K L M N



                                                                                                                    State/Country
        Name                                                                                                        of Formation
        ----                                                                                                        -------------
                                                                                                                 
        QVC RS Naples, Inc.                                                                                         FL
        QVC San Antonio, Inc.                                                                                       TX
        QVC Satellite, Ltd                                                                                          JAPAN
        QVC St. Lucie, Inc.                                                                                         FL
        QVC Studio GmbH                                                                                             GERMANY
        QVC Virginia, Inc.                                                                                          VA
        QVC, Inc.                                                                                                   DE
        QVC-QRT, Inc.                                                                                               DE
        Rediffusion Music Ltd.                                                                                      UK
        Reditune Achergrondmuzlirk en Reklame BV                                                                    NETHERLANDS
        Request Holdings, Inc.                                                                                      DE
        RS Marks, Inc.                                                                                              DE
        RS Myrtle Beach, Inc.                                                                                       SC
        RTV Associates, L.P. (lp)                                                                                   DE
        Rushes PostProduction Limited                                                                               UK
        Rushes Television S.A. de C.V.                                                                              MEXICO
        Satellite MGT, Inc.                                                                                         DE
        SEG Investments, Inc.                                                                                       DE
        Servicios Administrativos de Post Produccion S.A. de C.V.                                                   MEXICO
        SonicNet, Inc.                                                                                              DE
        Sound One Corporation                                                                                       NY
        Spectradyne International, Inc.                                                                             DE
        Starz Entertainment Group LLC                                                                               CO
        SVC Television Limited                                                                                      UK
        TATV, Inc.                                                                                                  DE
        TBH Marks, Inc.                                                                                             DE
        TCI Cathay TV, Inc.                                                                                         CO
        TEMPO Sound, Inc.                                                                                           OK
        The Box Music Network S.L.                                                                                  SPAIN
        The Box Worldwide-Europe, B.V.                                                                              NETHERLANDS
        TOBH, Inc.                                                                                                  DE
        Todd-AO, Espana                                                                                             CA
        TruePosition, Inc.                                                                                          DE
        TSAT Holding 1, Inc.                                                                                        DE
        TSAT Holding 2, Inc.                                                                                        DE
        TVI Limited [dormant]                                                                                       UK
        Video Jukebox Network Europe, Ltd.                                                                          UK
        Virgin Islands Video Entertainment Corporation [dba Hotel Video Services]                                   DE




        A B C D E F G H I J K L M N



                                                                                                                    State/Country
        Name                                                                                                        of Formation
        ----                                                                                                        -------------
                                                                                                                 
        VLG Argentina LLC                                                                                           DE
        VSC MAL CORP.                                                                                               DE
        X*PRESS Electronic Services, Ltd.                                                                           CO
        X*PRESS Information Services, Ltd.                                                                          CO

EX-23.1

                                                                    Exhibit 23.1

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Liberty Media Corporation:

We consent to the incorporation by reference in the following registration
statements of Liberty Media Corporation of our reports dated March 14, 2005,
with respect to the consolidated balance sheets of Liberty Media Corporation as
of December 31, 2004 and 2003, and the related consolidated statements of
operations, comprehensive earnings (loss), stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 2004, and all
related financial statement schedules, management's assessment of the
effectiveness of internal control over financial reporting as of December 31,
2004 and the effectiveness of internal control over financial reporting as of
December 31, 2004, which reports appear in the December 31, 2004 annual report
on Form 10-K of Liberty Media Corporation:


FORM      REGISTRATION STATEMENT NO.       DESCRIPTION
- ----      --------------------------       -----------
                                     
S-8       333-67276                        Liberty Media Corporation 401(k) Savings Plan

S-8       333-67296                        Liberty Media Corporation Incentive Plan

S-3       333-66034 (Post Effective        Liberty Media Corporation $3.0 Billion, shares of Series A Common Stock,
          Amendment No. 1 to Form S-1)     Debt Securities, or Warrants

S-8       333-104154                       Liberty Media Corporation 2002 Non-employee Director Incentive Plan

S-3       333-105006                       Liberty Media Corporation $1.75 Billion, 0.75% Exchangeable Senior
                                           Debentures due 2023

S-3       333-107613                       Liberty Media Corporation 217,709,773 shares of Series A Common Stock and
                                           $225,620,069 Floating Rate Senior Notes due 2006

S-3       333-118758                       Liberty Media Corporation 23,474 shares of Series A Common Stock


As discussed in note 2 to the consolidated financial statements, Liberty Media
Corporation changed its method of accounting for intangible assets in 2002.

KPMG LLP

Denver, Colorado
March 14, 2005

EX-23.2

                                                                    Exhibit 23.2

           CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Nos. 333-66034, 333-107613, 333-118758, 333-105006) and
Form S-8 (Nos. 333-67276, 333-67296, 333-104154) of Liberty Media Corporation of
our report dated February 22, 2005 relating to the financial statements of
Discovery Communications, Inc., which appears in Liberty Media Corporation's
Annual Report on Form 10-K for the year ended December 31, 2004.

PricewaterhouseCoopers LLP
McLean, Virginia
March 11, 2005

EX-31.1

                                                                    EXHIBIT 31.1

                                 CERTIFICATION

I, Robert R. Bennett, certify that:

1.  I have reviewed this annual report on Form 10-K of Liberty Media
    Corporation;

2.  Based on my knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact necessary to
    make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
    this annual report;

3.  Based on my knowledge, the financial statements and other financial
    information included in this annual report fairly present in all material
    respects the financial condition, results of operations and cash flows of
    the registrant as of, and for, the periods presented in this annual report;

4.  The registrant's other certifying officers and I are responsible for
    establishing and maintaining disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
    financial reporting (as defined in Exchange Act Rules 13a-15(f) and
    15d-15(f)) for the registrant and we have:

    a)  designed such disclosure controls and procedures, or caused such
       disclosure controls and procedures to be designed under our supervision,
       to ensure that material information relating to the registrant, including
       its consolidated subsidiaries, is made known to us by others within those
       entities, particularly during the period in which this annual report is
       being prepared;

    b)  designed such internal control over financial reporting, or caused such
       internal control over financial reporting to be designed under our
       supervision, to provide reasonable assurance regarding the reliability of
       financial reporting and the preparation of financial statements for
       external purposes in accordance with generally accepted accounting
       principles;

    c)  evaluated the effectiveness of the registrant's disclosure controls and
       procedures and presented in this annual report our conclusions about the
       effectiveness of the disclosure controls and procedures as of the end of
       the period covered by this annual report based on such evaluation; and

    d)  disclosed in this annual report any change in the registrant's internal
       control over financial reporting that occurred during the registrant's
       most recent fiscal quarter (the registrant's fourth fiscal quarter in the
       case of an annual report) that has materially affected, or is reasonably
       likely to materially affect, the registrant's internal control over
       financial reporting; and

5.  The registrant's other certifying officers and I have disclosed, based on
    our most recent evaluation of internal control over financial reporting, to
    the registrant's auditors and the audit committee of the registrant's board
    of directors (or persons performing the equivalent function):

    a)  all significant deficiencies and material weaknesses in the design or
       operation of internal control over financial reporting which are
       reasonably likely to adversely affect the registrant's ability to record,
       process, summarize and report financial information; and

    b)  any fraud, whether or not material, that involves management or other
       employees who have a significant role in the registrant's internal
       control over financial reporting.

Date: March 15, 2005

                                           
/s/ ROBERT R. BENNETT
- ------------------------------------
Robert R. Bennett
President and Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2

                                 CERTIFICATION

I, David J.A. Flowers, certify that:

1.  I have reviewed this annual report on Form 10-K of Liberty Media
    Corporation;

2.  Based on my knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact necessary to
    make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
    this annual report;

3.  Based on my knowledge, the financial statements and other financial
    information included in this annual report fairly present in all material
    respects the financial condition, results of operations and cash flows of
    the registrant as of, and for, the periods presented in this annual report;

4.  The registrant's other certifying officers and I are responsible for
    establishing and maintaining disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
    financial reporting (as defined in Exchange Act Rules 13a-15(f) and
    15d-15(f)) for the registrant and we have:

    a)  designed such disclosure controls and procedures, or caused such
       disclosure controls and procedures to be designed under our supervision,
       to ensure that material information relating to the registrant, including
       its consolidated subsidiaries, is made known to us by others within those
       entities, particularly during the period in which this annual report is
       being prepared;

    b)  designed such internal control over financial reporting, or caused such
       internal control over financial reporting to be designed under our
       supervision, to provide reasonable assurance regarding the reliability of
       financial reporting and the preparation of financial statements for
       external purposes in accordance with generally accepted accounting
       principles;

    c)  evaluated the effectiveness of the registrant's disclosure controls and
       procedures and presented in this annual report our conclusions about the
       effectiveness of the disclosure controls and procedures as of the end of
       the period covered by this annual report based on such evaluation; and

    d)  disclosed in this annual report any change in the registrant's internal
       control over financial reporting that occurred during the registrant's
       most recent fiscal quarter (the registrant's fourth fiscal quarter in the
       case of an annual report) that has materially affected, or is reasonably
       likely to materially affect, the registrant's internal control over
       financial reporting; and

5.  The registrant's other certifying officers and I have disclosed, based on
    our most recent evaluation of internal control over financial reporting, to
    the registrant's auditors and the audit committee of the registrant's board
    of directors (or persons performing the equivalent function):

    a)  all significant deficiencies and material weaknesses in the design or
       operation of internal control over financial reporting which are
       reasonably likely to adversely affect the registrant's ability to record,
       process, summarize and report financial information; and

    b)  any fraud, whether or not material, that involves management or other
       employees who have a significant role in the registrant's internal
       control over financial reporting.

Date: March 15, 2005

                                           
/s/ DAVID J.A. FLOWERS
- ------------------------------------
David J.A. Flowers
Senior Vice President and Treasurer

EX-31.3

                                                                    EXHIBIT 31.3

                                 CERTIFICATION

I, Christopher W. Shean, certify that:

1.  I have reviewed this annual report on Form 10-K of Liberty Media
    Corporation;

2.  Based on my knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact necessary to
    make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
    this annual report;

3.  Based on my knowledge, the financial statements and other financial
    information included in this annual report fairly present in all material
    respects the financial condition, results of operations and cash flows of
    the registrant as of, and for, the periods presented in this annual report;

4.  The registrant's other certifying officers and I are responsible for
    establishing and maintaining disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
    financial reporting (as defined in Exchange Act Rules 13a-15(f) and
    15d-15(f)) for the registrant and we have:

    a)  designed such disclosure controls and procedures, or caused such
       disclosure controls and procedures to be designed under our supervision,
       to ensure that material information relating to the registrant, including
       its consolidated subsidiaries, is made known to us by others within those
       entities, particularly during the period in which this annual report is
       being prepared;

    b)  designed such internal control over financial reporting, or caused such
       internal control over financial reporting to be designed under our
       supervision, to provide reasonable assurance regarding the reliability of
       financial reporting and the preparation of financial statements for
       external purposes in accordance with generally accepted accounting
       principles;

    c)  evaluated the effectiveness of the registrant's disclosure controls and
       procedures and presented in this annual report our conclusions about the
       effectiveness of the disclosure controls and procedures as of the end of
       the period covered by this annual report based on such evaluation; and

    d)  disclosed in this annual report any change in the registrant's internal
       control over financial reporting that occurred during the registrant's
       most recent fiscal quarter (the registrant's fourth fiscal quarter in the
       case of an annual report) that has materially affected, or is reasonably
       likely to materially affect, the registrant's internal control over
       financial reporting; and

5.  The registrant's other certifying officers and I have disclosed, based on
    our most recent evaluation of internal control over financial reporting, to
    the registrant's auditors and the audit committee of the registrant's board
    of directors (or persons performing the equivalent function):

    a)  all significant deficiencies and material weaknesses in the design or
       operation of internal control over financial reporting which are
       reasonably likely to adversely affect the registrant's ability to record,
       process, summarize and report financial information; and

    b)  any fraud, whether or not material, that involves management or other
       employees who have a significant role in the registrant's internal
       control over financial reporting.

Date: March 15, 2005

                                           
/s/ CHRISTOPHER W. SHEAN
- ------------------------------------
Christopher W. Shean
Senior Vice President and Controller

EX-32

                                                                      EXHIBIT 32

                                 CERTIFICATION

           PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
                   (SUBSECTIONS (A) AND (B) OF SECTION 1350,
                  CHAPTER 63 OF TITLE 18, UNITED STATES CODE)

    Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of section 1350, chapter 63 of title 18, United States Code), each of
the undersigned officers of Liberty Media Corporation, a Delaware corporation
(the "Company"), does hereby certify, to such officer's knowledge, that:

    The Annual Report on Form 10-K for the year ended December 31, 2004 (the
"Form 10-K") of the Company fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information
contained in the Form 10-K fairly presents, in all material respects, the
financial condition and results of operations of the Company as of December 31,
2004 and 2003 and for the three years ended December 31, 2004.

                                           
                                              /s/ ROBERT R. BENNETT
                                              -------------------------------------------------------
                                              Robert R. Bennett
Dated: March 15, 2005                         Chief Executive Officer

                                              /s/ DAVID J.A. FLOWERS
                                              -------------------------------------------------------
                                              David J.A. Flowers
                                              Senior Vice President and Treasurer
Dated: March 15, 2005                         (Principal Financial Officer)

                                              /s/ CHRISTOPHER W. SHEAN
                                              -------------------------------------------------------
                                              Christopher W. Shean
                                              Senior Vice President and Controller
Dated: March 15, 2005                         (Principal Accounting Officer)



    The foregoing certification is being furnished solely pursuant to
section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of
section 1350, chapter 63 of title 18, United States Code) and is not being filed
as part of the Form 10-K or as a separate disclosure document.