10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended September 30, 2008
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File No. 000-17436

CKX, INC.

(Exact name of Registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		27-0118168 (I.R.S. Employer Identification Number)

650 Madison Avenue

New York, New York 10022

(Address of Principal Executive Offices and Zip Code)

Registrant’s Telephone Number, Including Area Code:

(212) 838-3100

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.01 Per Share

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of November 6, 2008, there were 97,456,855 shares of the registrant’s common stock outstanding.

CKX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)


	September 30,			December 31,
	2008			2007
	(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	99,789		$	50,947
Receivables, net of allowance for doubtful accounts of $490 at September 30, 2008 and $832 at December 31, 2007		66,086			42,231
Due from related party		337			999
Inventories, net of allowance for obsolescence of $783 at September 30, 2008 and $627 at December 31, 2007		2,006			2,092
Prepaid expenses and other current assets		6,002			5,337
Investment in FXRE		—			6,175
Deferred tax assets		1,429			1,293

Total current assets		175,649			109,074
Property and equipment — net		47,348			43,989
Long-term receivables		3,484			1,607
Loans to related parties		1,765			7,931
Deferred production costs		438			635
Other assets		22,980			19,223
Goodwill		148,691			160,454
Other intangible assets — net		163,586			181,872
Deferred tax assets		2,025			670

TOTAL ASSETS	$	565,966		$	525,455

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	23,964		$	14,987
Accrued expenses		27,196			20,448
Accrued dividend		—			6,175
Current portion of long-term debt		548			652
Income taxes payable		21,460			6,226
Deferred revenue		17,850			12,009

Total current liabilities		91,018			60,497
Long-term liabilities:
Long-term debt		101,933			102,418
Deferred revenue		3,874			2,778
Other long-term liabilities		3,816			4,216
Deferred tax liabilities		35,058			38,083

Total liabilities		235,699			207,992

Minority interest		5,256			4,757
Redeemable restricted common stock — 1,672,170 shares outstanding at September 30, 2008 and December 31, 2007		23,002			23,002
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, authorized 75,000,000 shares:
Series B — 1,491,817 shares outstanding		22,825			22,825
Series C — share outstanding		—			—
Common stock, $0.01 par value: authorized 200,000,000 shares, 95,620,610 shares issued and outstanding at September 30, 2008 and 95,402,757 issued and outstanding at December 31, 2007		956			954
Additional paid-in-capital		376,703			374,665
Accumulated deficit		(91,912	)		(123,746	)
Accumulated other comprehensive income (loss)		(6,563	)		15,006

Total stockholders’ equity		302,009			289,704

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	565,966		$	525,455

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

CKX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(amounts in thousands, except share and per share data)


	Three Months			Three Months
	Ended			Ended
	September 30, 2008			September 30, 2007

Revenue	$	96,977		$	99,069
Operating expenses:
Cost of sales		49,940			43,566
Selling, general and administrative expenses		20,761			21,818
Corporate expenses		3,605			5,456
Depreciation and amortization		5,322			5,658
Merger and distribution-related costs		272			1,490
Other (income) expense		(5,631	)		884

Total operating expenses		74,269			78,872

Operating income		22,708			20,197
Interest income		297			545
Interest expense		(1,320	)		(2,084	)

Income before income taxes, equity in earnings of affiliates and minority interest		21,685			18,658
Income tax expense		12,152			4,256

Income before equity in earnings of affiliates and minority interest		9,533			14,402
Equity in earnings of affiliates		299			514
Minority interest		(688	)		(1,032	)

Income from continuing operations		9,144			13,884
Loss from discontinued operations		—			(7,451	)

Net income		9,144			6,433
Dividends on preferred stock		(456	)		(456	)

Net income available to common stockholders	$	8,688		$	5,977

Basic income per share:
Income from continuing operations	$	0.09		$	0.14
Loss from discontinued operations		—			(0.07	)
Dividends on preferred stock		—			(0.01	)

Basic income per share:	$	0.09		$	0.06

Diluted income per share:
Income from continuing operations	$	0.09		$	0.14
Loss from discontinued operations		—			(0.07	)
Dividends on preferred stock		—			(0.01	)

Diluted income per share:	$	0.09		$	0.06

Average number of common shares outstanding:
Basic		97,054,680			96,985,517
Diluted		97,060,937			97,087,081

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

CKX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(amounts in thousands, except share and per share data)


	Nine Months			Nine Months
	Ended			Ended
	September 30, 2008			September 30, 2007

Revenue	$	250,724		$	220,998
Operating expenses:
Cost of sales		100,321			80,035
Selling, general and administrative expenses		57,921			62,284
Corporate expenses		11,906			14,137
Depreciation and amortization		16,411			16,756
Merger and distribution-related costs		1,955			4,251
Other (income) expense		(5,790	)		1,249

Total operating expenses		182,724			178,712

Operating income		68,000			42,286
Interest income		1,402			1,088
Interest expense		(4,361	)		(3,423	)

Income before income taxes, equity in earnings of affiliates and minority interest		65,041			39,951
Income tax expense		32,032			18,170

Income before equity in earnings of affiliates and minority interest		33,009			21,781
Equity in earnings of affiliates		1,956			1,115
Minority interest		(1,763	)		(1,786	)

Income from continuing operations		33,202			21,110
Loss from discontinued operations		—			(8,430	)

Net income		33,202			12,680
Dividends on preferred stock		(1,368	)		(1,368	)

Net income available to common stockholders	$	31,834		$	11,312

Basic income per share:
Income from continuing operations	$	0.34		$	0.22
Loss from discontinued operations		—			(0.09	)
Dividends on preferred stock		(0.01	)		(0.01	)

Basic income per share:	$	0.33		$	0.12

Diluted income per share:
Income from continuing operations	$	0.34		$	0.22
Loss from discontinued operations		—			(0.09	)
Dividends on preferred stock		(0.01	)		(0.01	)

Diluted income per share:	$	0.33		$	0.12

Average number of common shares outstanding:
Basic		97,042,732			96,865,595
Diluted		97,087,326			96,979,322

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

CKX, INC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)


	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2008			2007

Cash flows from operating activities:
Net income	$	33,202		$	12,680
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		16,411			16,756
Impact on cash of discontinued operations		—			8,430
Unrealized foreign currency gains and losses		(4,667	)		1,249
Share-based payments		2,041			989
Equity in earnings of affiliates, net of cash received		(617	)		971
Deferred income taxes		(3,571	)		(6,567	)
Non-cash interest expense		499			987
Provision for inventory and accounts receivable allowance		229			446
Minority interest		1,763			1,786
Changes in operating assets and liabilities:
Receivables		(25,788	)		(27,109	)
Inventory		(87	)		(97	)
Prepaid expenses		(665	)		(4,691	)
Prepaid income taxes		—			7,014
Other assets		3,386			(664	)
Accounts payable and accrued expenses		17,037			15,940
Deferred revenue		6,937			(4,893	)
Income taxes payable		15,234			10,614
Other		(382	)		(185	)

Net cash provided by operating activities		60,962			33,656

Cash flows from investing activities:
Investment in and loan to FXRE		—			(108,307	)
Purchases of property and equipment		(6,013	)		(9,428	)
Other		—			(1,750	)

Net cash used in investing activities		(6,013	)		(119,485	)

Cash flows from financing activities:
Borrowings under revolving credit facility for acquisition of FXLR		—			100,000
Debt issuance costs for amending the revolving credit facility		—			(92	)
Exercise of warrants		—			243
Distributions to minority interest shareholders		(1,275	)		(1,450	)
Principal payments on debt		(589	)		(589	)
Dividends paid on preferred stock		(1,368	)		(1,368	)

Net cash (used in) provided by financing activities		(3,232	)		96,744

Effect of exchange rate changes on cash		(2,875	)		1,187

Net increase in cash and equivalents		48,842			12,102

Cash and cash equivalents — beginning of period		50,947			36,610

Cash and cash equivalents — end of period	$	99,789		$	48,712

Supplemental cash flow data:
Cash paid during the period for:
Interest	$	4,146		$	2,644
Income taxes		20,726			6,061

CKX, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS


1.	Overview

General

CKX, Inc. (the “Company” or “CKX”) is engaged in the ownership, development and commercial utilization of entertainment content. Our primary assets and operations include the rights to the name, image and likeness of Elvis Presley and the operation of Graceland, the rights to the name, image and likeness of Muhammad Ali and proprietary rights to the IDOLS television brand, including the American Idol series in the United States and local adaptations of the IDOLS television show format which, collectively with American Idol, air in over 100 countries around the world.

The financial information in this report for the nine months ended September 30, 2008 and 2007 has not been audited, but in the opinion of management all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly such information have been included. The operating results for the nine months ended September 30, 2008 and 2007 are not necessarily indicative of the results to be expected for the full year due to the seasonal nature of some of the Company’s businesses. The financial statements included herein should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.


2.	Merger Agreement

On June 1, 2007, the Company entered into an Agreement and Plan of Merger (as amended on August 1, 2007, September 27, 2007, January 23, 2008 and May 27, 2008, the “Merger Agreement”) with 19X, Inc., a Delaware corporation (“19X” or “Parent”), and 19X Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Under the terms of the Merger Agreement, 19X had agreed to acquire CKX at a price of $12.00 per share in cash. 19X was initially formed for an unrelated purpose and has had no operations or business other than as contemplated by the Merger Agreement, including the related financings. Robert F.X. Sillerman, Chairman and Chief Executive Officer of CKX, and Simon R. Fuller, a director of CKX and the Chief Executive Officer of 19 Entertainment Limited, a wholly owned subsidiary of CKX, are the sole current stockholders of 19X.

On November 1, 2008, 19X, Inc. delivered a letter to the Board of Directors of the Company terminating the Merger Agreement. Pursuant to the terms of the Merger Agreement, 19X is required to pay a termination fee of $37,500,000. 19X has notified the Company that, as permitted under the Merger Agreement, it has elected to pay $37,000,000 of the termination fee by delivery of 3,339,350 shares of CKX common stock, at the assumed valuation provided for in the Merger Agreement of $11.08 per share, with the remainder of the termination fee ($500,000) to be paid in cash. 19X has further confirmed that the termination fee will be paid in full within thirty (30) days of the November 1 termination date.

Affiliated Elements of Transaction

As described above, 19X is owned and controlled by Robert F.X. Sillerman, our Chairman and Chief Executive Officer, and Simon R. Fuller, a director of CKX and the Chief Executive Officer of 19 Entertainment Limited, a wholly-owned subsidiary of CKX.


3.	Transactions Involving FX Real Estate and Entertainment Inc. and FX Luxury Realty, LLC

During 2007, the Company engaged in a series of transactions with FX Real Estate and Entertainment Inc. (“FXRE”) [NASDAQ: FXRE] and FX Luxury Realty, LLC (“FXLR”), each of which is described below.

FXRE holds its assets and conducts its limited operations through its subsidiary, FXLR, and its subsidiaries. FXRE owns 17.72 contiguous acres of land located on the southeast corner of Las Vegas Boulevard and Harmon

Avenue in Las Vegas, Nevada, referred to herein as the Park Central site. The Park Central site is currently occupied by a motel and several commercial and retail tenants. FXRE has announced that it intends to continue the properties’ commercial leasing activities while it considers its plans to redevelop the site. As described elsewhere herein, FXLR, entered into license agreements with Elvis Presley Enterprises, Inc. (“EPE”), an 85%-owned subsidiary of the Company, and Muhammad Ali Enterprises LLC (the “Ali Business”), an 80%-owned subsidiary of the Company, which allow FXLR to use the intellectual property and certain other assets associated with Elvis Presley and Muhammad Ali in the development of real estate and other entertainment attraction based projects. In addition, the license agreement with EPE grants FXLR the right to develop one or more hotels as part of the master plan of EPE to redevelop the Graceland property and surrounding areas in Memphis, Tennessee. In addition to the Park Central site and the development of one or more Elvis Presley-themed hotels at or near Graceland in Memphis, Tennessee, FXRE intends to develop hotels and attractions worldwide, including Elvis Presley and Muhammad Ali-themed projects pursuant to the aforementioned license agreements.

FXRE, through direct and indirect wholly owned subsidiaries, also owns 1,410,363 shares of common stock of Riviera Holdings Corporation [AMEX:RIV], a company that owns and operates the Riviera Hotel & Casino in Las Vegas, Nevada and the Blackhawk Casino in Blackhawk, Colorado.

Investments in FX Luxury Realty and FX Real Estate and Entertainment Inc. and Distributions to CKX Stockholders

On June 1, 2007, the Company acquired 50% of the newly issued common membership interests in FXLR. The consideration for the acquired interests was $100 million, paid in cash at closing. Transaction costs totaled $2.1 million. The Company funded the $100 million purchase price with proceeds from a drawdown under the Credit Facility (as defined). At the time of CKX’s investment in FXLR, FXLR owned a 50% interest in entities (the “Metroflag Entities”) that collectively own and control the Park Central site and had entered into a binding agreement to acquire the other 50% of such entities. The acquisition of the remaining 50% of the Metroflag Entities, which gave FXLR 100% ownership and control of the Park Central site, closed on July 6, 2007.

On September 26, 2007, CKX and other members of FXLR entered into a Contribution and Exchange Agreement pursuant to which each member of FXLR contributed its common membership interests in FXLR to FXRE in exchange for shares of common stock of FXRE and FXLR became a subsidiary of FXRE. As a result of this reorganization, all references to FXRE for the periods prior to the date of the reorganization shall refer to FXLR and its consolidated subsidiaries. For all periods subsequent to the date of the reorganization, all references to FXRE shall refer to FXRE and its consolidated subsidiaries, including FXLR.

Also on September 26, 2007, CKX acquired an additional 0.742% of the outstanding capital stock of FXRE for a price of $1.5 million.

As a condition to the Merger Agreement, as amended, CKX agreed to distribute to its stockholders all of its shares of common stock of FXRE to allow current CKX stockholders to share directly in the continued growth and exploitation of the existing Elvis Presley and Muhammad Ali intellectual property rights and assets in the capital intensive development opportunities to be pursued by us in accordance with the terms of the license agreements described below. The distribution of shares occurred through a series of dividends, in which the Company declared and transferred into three trusts, for the benefit of its stockholders, dividends consisting of a total of 48% of the outstanding shares of common stock of FXRE payable to CKX stockholders as of the record date (as described below). The first dividend, on June 18, 2007, was valued at approximately $50.3 million, or 50% of the then value of CKX’s investment in FXLR (taking into account transaction costs). The second dividend, on September 27, 2007, was valued at approximately $40.9 million, leaving CKX with an investment of $6.2 million at December 31, 2007 representing its remaining 2% ownership interest in FXRE.

On December 21, 2007, the Company declared a dividend with respect to its remaining 2% ownership interest in FXRE and set the record date of December 31, 2007 for the distribution of all of the shares of FXRE stock held by CKX and the three distribution trusts to the CKX stockholders. The Company recorded a $2.2 million gain on the distribution of the final 2% interest in FXRE to the Company’s shareholders. The gain represents the difference

between the Company’s cost basis in the shares and the trading price of FXRE on January 10, 2008, the first day of trading in FXRE stock.

On January 10, 2008, CKX and the distribution trusts delivered to each stockholder of CKX two shares of FXRE common stock for every ten shares of CKX common or preferred stock held by such stockholder on the record date. The total number of shares of FXRE common stock distributed to CKX stockholders was 19,743,349.

FXRE Financial Condition

FXRE’s independent registered public accounting firm issued an audit report dated March 3, 2008 pertaining to FXRE’s consolidated financial statements for the year ended December 31, 2007 that contains an explanatory paragraph expressing substantial doubt as to FXRE’s ability to continue as a going concern due to the need to secure additional capital in order to pay obligations as they become due.

FXRE has announced that it does not currently have the capital necessary to pay the required annual license fees and to satisfy other funding obligations under the EPE and Ali Business license agreements described below under “License Agreements.” FXRE’s ability to pay future royalties to EPE and the Ali Business and to satisfy other funding obligations under the EPE and Ali Business license agreements is dependent on FXRE successfully raising capital in the future. FXRE is highly leveraged and its ability to raise capital in the future will be dependent upon a number of factors including, among others, prevailing market conditions. There can be no assurance that FXRE will be able to complete a financing on terms that are favorable to its business or at all.

On September 29, 2008 FXRE announced that as a result of the dislocation and turbulence in the capital markets, it is reviewing its originally proposed program for the redevelopment of its Las Vegas properties. While no definitive determination has been made, it is unlikely that the program originally proposed will be undertaken. FXRE has stated that it intends to continue the properties’ commercial leasing activities pending any such definitive determination.

On October 3, 2008, FXRE announced that it became aware that as of September 30, 2008, it’s subsidiaries that own its Las Vegas properties were out of compliance with the debt-to-loan value ratio covenants set forth in its loan agreements. FXRE has notified the lenders under the loan of such noncompliance with these debt-to-loan value ratios as required under the terms of the loan agreements. Under the terms of the loan agreements, FXRE has until November 14, 2008 to regain compliance with these ratios by voluntarily prepaying approximately $26 million of the loan’s outstanding principal amount. Alternatively, FXRE may regain compliance by obtaining a waiver or modification of the loan’s financial covenants. FXRE’s failure to regain compliance with these financial covenants by any of these means would constitute an event of default under the loan. FXRE has announced that it does not have capital adequate to make such a payment at this time. FXRE would need to secure additional financing in order to prepay such amount and there can be no guarantee that such financing will be available on favorable terms. In addition, there can be no guarantee that any waiver or modification of the loan covenants, if necessary, can be obtained.

Accounting for the Investment and Distributions

The Company consolidated FXRE from the date of the Company’s investment (June 1, 2007) through September 26, 2007 (date of the second distribution to trust, as noted above). Subsequent to September 26, 2007, the Company accounted for its 2% investment in FXRE under the cost method because the Company had no significant continuing involvement. Upon the January 10, 2008 distribution and the third dividend described above, CKX’s ownership interest in FXRE was fully divested and no investment was recorded by CKX subsequent to such date. The operating results from June 1, 2007 to September 26, 2007 of FXRE are reflected as discontinued operations in the accompanying condensed consolidated financial statements because the distribution of the FXRE shares to the CKX shareholders qualifies as a spin-off under Accounting Principles Board Opinion 29, Accounting for Non-monetary Transactions, and Financial Accounting Standards Board Statement No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

License Agreements

Simultaneous with our investment in FXRE, EPE entered into a worldwide license agreement with FXRE, granting FXRE the exclusive right to utilize Elvis Presley-related intellectual property in connection with the development, ownership and operation of Elvis Presley-themed hotels, casinos and certain other real estate-based projects and attractions around the world. FXRE also entered into a worldwide license agreement with the Ali Business, granting FXRE the right to utilize Muhammad Ali-related intellectual property in connection with Muhammad Ali-themed hotels and certain other real estate-based projects and attractions.

Under the terms of the license agreements, FXRE is required to pay to EPE and the Ali Business an amount equal to 3% of the gross revenue generated at the properties that incorporate the Elvis Presley and Muhammad Ali intellectual property, as applicable, and 10% of gross revenues generated from the sale of related merchandise. FXRE is required to pay a guaranteed annual minimum royalty during each year of the agreement, which amount is recoupable against royalties paid during such year as described above. The aggregate guaranteed minimum royalty due for 2007 was $10.0 million. The initial payments (for 2007) under the license agreements were due on the earlier of the completion of FXRE’s rights offering described elsewhere herein, or April 1, 2008. As the initial payments were made after December 1, 2007, however, FXRE was required to pay EPE and the Ali Business interest at the then current prime rate as quoted in the Wall Street Journal plus 3% if the payment was made from December 1, 2007 through December 31, 2007, plus 3.5% if paid from January 1, 2008 through January 31, 2008, plus 4.0% if paid from February 1, 2008 through February 29, 2008 or plus 4.5% if paid from and after March 1, 2008. The 2007 aggregate royalty amount of $10.0 million, plus the related interest of $0.4 million, was paid by FXRE on April 1, 2008. The guaranteed annual minimum royalty payment of $10.0 million for 2008 is due no later than January 30, 2009.

Notwithstanding payment by FXRE of the initial $10.0 million license payment in April 2008, CKX has not yet recorded any related royalty revenue as, per the Company’s revenue recognition policy, revenue from multiple element licensing arrangements is recognized only when all the conditions of the arrangements tied to the licensing payments to CKX are met. CKX will begin to record revenue under the license agreements when it completes the transfer to FXRE of the land designated as the site of the first hotel to be built by FXRE as part of the Graceland redevelopment plan, thereby satisfying the last of the material elements tied to payment of the fees.

For the month of June, 2007, FXRE recorded royalty expense of $1.4 million, representing one month of the 2007 guaranteed annual minimum royalty payments under the license agreements with EPE and the Ali Business. CKX did not record any related royalty revenue at that time as, per the Company’s revenue recognition policy, collection of the fee was not reasonably assured because it was dependent on FXRE successfully completing a capital raising event and the multiple element licensing conditions had not been met. The FXRE royalty expense was eliminated in consolidation.

As referenced above under “FXRE Financial Condition,” FXRE has announced that it does not currently have the capital necessary to pay the required annual license fees and to satisfy other funding obligations under the EPE and Ali Business license agreements. FXRE’s ability to pay future royalties to EPE and the Ali Business and to satisfy other funding obligations under the EPE and Ali Business license agreements is dependent on FXRE successfully raising capital in the future. FXRE is highly leveraged and its ability to raise capital in the future will be dependent upon a number of factors including, among others, prevailing market conditions. There can be no assurance that FXRE will be able to complete a financing on terms that are favorable to its business or at all.

Discontinued Operations

The Company has consolidated FXRE from the date of the Company’s investment (June 1, 2007) through September 26, 2007 (date of the second distribution to trust, as noted above). Subsequent to September 26, 2007 and through the distribution of its 2% ownership interest on January 10, 2008, the Company accounted for its 2% ownership interest under the cost method of accounting because the Company had no significant continuing involvement. The operating results of FXRE are reflected as discontinued operations in the accompanying financial statements because the distribution of the FXRE shares to the CKX shareholders qualifies as a spin-off under Accounting Principles Board Opinion 29, Accounting for Non-monetary Transactions, and Financial Accounting Standards No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. The results of operations

presented as discontinued operations for the three months ended September 30, 2007 and the period from June 1, 2007 to September 30, 2007 are summarized below (in thousands):


	Three Months			Period from
	Ended			June 1, 2007 to
	September 30,			September 30,
	2007			2007

Revenue	$	1,346		$	1,346
Total costs and expenses, net of minority interest share		(8,283	)		(6,802	)
Equity in losses of unconsolidated subsidiaries		(514	)		(2,974	)
Income taxes		—			—

Loss from discontinued operations, net of income taxes	$	(7,451	)	$	(8,430	)

CKX Loan to FXRE

On September 26, 2007, CKX entered into a Line of Credit Agreement with FXRE pursuant to which CKX agreed to loan up to $7.0 million to FXRE, $6.0 million of which was drawn down on September 26, 2007 and was evidenced by a promissory note dated September 26, 2007. The loan accrued interest at LIBOR plus 600 basis points and was payable upon the earlier of (i) two years and (ii) the consummation by FXRE of an equity raise at or above $90.0 million. The loan was secured by a pledge of an aggregate of 972,762 shares of FXRE common stock held by Mr. Sillerman and Messrs. Paul Kanavos and Brett Torino, both of whom are principals of Flag and officers of FXRE. On April 17, 2008, FXRE paid all amounts outstanding under the loan, the Line of Credit Agreement terminated and the shares subject to the pledge referenced above were released.

Shared Services Agreement

CKX is party to a shared services agreement with FXRE, pursuant to which certain of our employees, including members of senior management, provide services for FXRE, and certain of FXRE’s employees, including members of senior management, may provide services for CKX. The services provided pursuant to the shared services agreement include management, legal, accounting and administrative. The agreement expires on December 31, 2010 and can be extended or terminated with ninety days notice by either party.

Charges under the shared services agreement are made on a quarterly basis and are determined by taking into account a number of factors, including but not limited to, the overall type and volume of services provided, the individuals involved, the amount of time spent by such individuals and their current compensation rate with the Company with which they are employed. Each quarter, representatives of the parties meet to (i) determine the net payment due from one party to the other for provided services performed by the parties during the prior calendar quarter, and (ii) prepare a report in reasonable detail with respect to the provided services so performed, including the value of such services and the net payment due. The parties use their reasonable, good-faith efforts to determine the net payments due in accordance with the factors described in above.

Because the shared services agreement with CKX constitutes an agreement with a related party, the agreement was reviewed and approved by the independent members of the Company’s Board of Directors. In addition, the agreement was reviewed and approved by a special committee of independent members of the Board of Directors of FXRE formed to evaluate and approve certain related party transactions.

For the nine months ended September 30, 2008, CKX has billed FXRE $1.3 million for professional services, primarily accounting and legal services, performed under the shared services agreement. As of October 17, 2008, no amounts are outstanding. $1.0 million in accrued shared service costs charged to FXRE in 2007 were paid to the Company on April 22, 2008.

For the three and nine month periods ended September 30, 2007, CKX billed FXRE $0.2 million and $0.3 million, respectively, for professional services, primarily accounting and legal services. This expense for the CKX billing was eliminated in consolidation.

As referenced above under “FXRE Financial Condition,” FXRE’s ability to satisfy its obligations as they come due, which may include making future payments under the shared services agreement, is dependent on FXRE successfully raising capital in the future. FXRE is highly leveraged and its ability to raise capital in the future will be

dependent upon a number of factors including, among others, prevailing market conditions. There can be no assurance that FXRE will be able to complete a financing on terms that are favorable to its business or at all.


4.	Accounting Policies

During the nine months ended September 30, 2008, there have been no significant changes to the Company’s accounting policies and estimates as disclosed in the Company’s Form 10-K for the year ended December 31, 2007.

Impact of Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of SFAS 157 are effective for the Company beginning after January 1, 2008 for financial assets and liabilities and after January 1, 2009 for non-financial assets and liabilities. The Company adopted SFAS 157 for financial assets and liabilities on January 1, 2008. The adoption of this standard had no impact on the Company’s financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), providing companies with an option to report selected financial assets and liabilities at fair value. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of asset and liabilities. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Effective January 1, 2008 the Company elected to not report any of its assets and liabilities which were covered by SFAS 159 at fair value.

On December 4, 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”) and Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”). These new standards will significantly change the accounting for and reporting of business combination transactions and noncontrolling (minority) interests in consolidated financial statements. SFAS 141(R) and SFAS 160 are required to be adopted simultaneously and are effective for the first annual reporting period beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of SFAS 141(R) will change the Company’s accounting treatment for business combinations on a prospective basis beginning January 1, 2009. The Company has completed its assessment of the impact of SFAS No. 160 on its financial statements following adoption and has concluded that the statement will not have a significant impact on the Company’s financial statements.


5.	Comprehensive Income

The following table is a reconciliation of the Company’s net income to comprehensive income for the three and nine months ended September 30, 2008 and 2007, respectively (in thousands):


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2008			2007		2008			2007

Net income	$	9,144		$	6,433	$	33,202		$	12,680
Other comprehensive income:
Foreign currency translation adjustments		(21,807	)		5,009		(21,569	)		10,120

Comprehensive income (loss)	$	(12,663	)	$	11,442	$	11,633		$	22,800

Foreign currency translation adjustments result from the conversion of 19 Entertainment’s financial statements.


6.	Earnings Per Share/Common Shares Outstanding

Earnings per share is computed in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per share is calculated by dividing net income (loss) applicable to common stockholders by the weighted-average number of shares outstanding during the period. Diluted earnings per share includes the determinants of basic earnings per share and, in addition, gives effect to potentially dilutive common shares. The diluted earnings per share calculations exclude the impact of the conversion of 1,491,817 shares of Series B Convertible Preferred shares

and the impact of employee share-based stock plan awards that would be anti-dilutive. 763,650 and 540,500 shares were excluded from the calculation of diluted earnings per share due to stock plan awards that were anti-dilutive, for the three months ended September 30, 2008 and 2007, respectively. 722,450 and 540,500 shares were excluded from the calculation of diluted earnings per share due to stock plan awards that were anti-dilutive, for the nine months ended September 30, 2008 and 2007, respectively.

The following table shows the reconciliation of the Company’s basic common shares outstanding to the Company’s diluted common shares outstanding for the three and nine month’s ended September 30, 2008 and 2007:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007

Basic common shares outstanding (including redeemable restricted common stock)		97,054,680		96,985,517		97,042,732		96,865,595
Incremental shares for assumed exercise of stock options (and warrants in 2007)		6,257		101,564		44,594		113,727

Diluted common shares outstanding (including redeemable restricted common stock)		97,060,937		97,087,081		97,087,326		96,979,322


7.	Intangible Assets and Goodwill

Intangible assets as of September 30, 2008 consist of (dollar amounts in thousands):


	Weighted
	Average		Gross					Net
	Remaining		Carrying		Accumulated			Carrying
	Useful Life		Amount		Amortization			Amount

Definite Lived Intangible Assets:
Presley record, music publishing, film and video rights		11.3 years	$	28,900	$	(6,868	)	$	22,032
Other Presley intangible assets		13.4 years		13,622		(4,945	)		8,677
19 Entertainment IDOLS television programming, merchandising and sponsorship relationships		3.5 years		73,629		(36,182	)		37,447
19 Entertainment other artist management, recording, merchandising, and sponsorship relationships		0.9 year		15,383		(12,631	)		2,752
MBST artist contracts, profit participation rights and other intangible assets		3.2 years		4,270		(2,356	)		1,914

			$	135,804	$	(62,982	)	$	72,822

The gross carrying amount of intangible assets of $135.8 million as of September 30, 2008 in the table above differs from the amount of $144.6 million as of December 31, 2007 in the table below due to foreign currency movements of $8.8 million.


	Balance at
	September 30,
	2008

Indefinite Lived Intangible Assets:
Presley and Ali trademarks, publicity rights and other intellectual property	$	90,764

Intangible assets as of December 31, 2007 consist of (dollar amounts in thousands):


	Gross					Net
	Carrying		Accumulated			Carrying
	Amount		Amortization			Amount

Definite Lived Intangible Assets:
Presley record, music publishing, film and video rights	$	28,900	$	(5,408	)	$	23,492
Other Presley intangible assets		13,622		(3,990	)		9,632
19 Entertainment IDOLS television programming, merchandising and sponsorship relationships		80,879		(30,930	)		49,949
19 Entertainment other artist management, recording, merchandising, and sponsorship relationships		16,898		(11,347	)		5,551
MBST artist contracts, profit participation rights and other intangible assets		4,270		(1,786	)		2,484

	$	144,569	$	(53,461	)	$	91,108


	Balance at
	December 31,
	2007

Indefinite Lived Intangible Assets:
Presley and Ali trademarks, publicity rights and other intellectual property	$	90,764

Amortization expense for definite lived intangible assets was $14.1 million and $14.8 million for the nine months ended September 30, 2008 and 2007, respectively. At September 30, 2008, the projected annual amortization expense for definite lived intangible assets for the next five years, assuming no further acquisitions or dispositions, is as follows (dollar amounts in thousands):


For the three months ending December 31, 2008	$	4,500
For the years ending December 31, 2009		16,700
2010		15,900
2011		14,800
2012		5,600

Goodwill as of September 30, 2008 consists of (dollar amounts in thousands):


			2008
			Foreign
	Balance at		Currency						Balance at
	December 31,		Translation			Other			September 30,
	2007		Adjustment			Adjustments			2008

Presley royalties and licensing	$	14,413	$	—		$	—		$	14,413
Presley Graceland operations		10,166		—			—			10,166
19 Entertainment		121,328		(10,817	)		(946	)		109,565
MBST		10,097		—			—			10,097
Ali Business		4,450		—			—			4,450

Total	$	160,454	$	(10,817	)	$	(946	)	$	148,691

A portion of the Company’s long-term deferred tax asset reversed during the nine months ended September 30, 2008. As this was related to the purchase of 19 Entertainment Group, there was a decrease in the valuation allowance, offset by a decrease in goodwill, of $0.9 million.

The Company accounts for impairment of long-lived assets in accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). The Company will perform its annual impairment analysis in the fourth quarter. Given the present volatility and disruption in the world financial markets and the weakening of the global economy, the Company’s annual impairment testing may identify impairments of long-lived assets which would be recorded in the fourth quarter


8.	Debt

At September 30, 2008, the Company had $2.4 million outstanding under a subordinated promissory note issued in connection with the acquisition of the Presley Business, which bears interest at the rate of 5.385% per annum. The principal and interest under the note are payable in equal annual installments of principal and interest of $550,000 each, with the final installment of principal and interest due and payable on February 7, 2013.

The Company is party to a revolving credit agreement (the “Credit Facility”) with various lenders. The total availability under the Credit Facility was reduced from $150.0 million to $141.7 million in October 2008 due to the bankruptcy of Lehman Commercial Paper, Inc., a subsidiary of Lehman Brothers, Inc. As of September 30, 2008, the Company had drawn down $100.0 million on the Credit Facility, the proceeds of which were used in June 2007 to make the investment in FXRE described elsewhere herein. A commitment fee of 0.50% on the daily unused portion of the Credit Facility is payable monthly in arrears. The $100.0 million outstanding at September 30, 2008 bears interest at LIBOR plus 150 basis points resulting in an effective annual interest rate at September 30, 2008 of 3.99%. Deferred financing fees are included in other assets on the accompanying condensed consolidated balance sheet and are amortized over the remaining term of the agreement, which ends on May 24, 2011.

The Credit Facility contains covenants that regulate the Company’s and its subsidiaries’ incurrence of debt, disposition of property and capital expenditures. The Company and its subsidiaries were in compliance with all financial loan covenants as of September 30, 2008.


9.	Stockholders’ Equity

During the nine months ended September 30, 2007, 1,096,377 warrants with an exercise price of $2.00 per share were exercised. Of these, warrants representing 121,314 shares of common stock were exercised for cash resulting in cash proceeds to the Company of $0.2 million, and warrants representing 975,063 shares of common stock were exercised pursuant to a net cash settlement feature which resulted in the issuance of 813,227 shares of common stock. During the nine months ended September 30, 2007, 500,000 warrants with an exercise price of $10.00 per share were exercised pursuant to a net cash settlement feature which resulted in the issuance of 147,348 shares of common stock.

The Company has no outstanding warrants as of September 30, 2008.

Share-based compensation expense was $2.0 million for the nine months ended September 30, 2008 as compared to $1.0 million for the nine months ended September 30, 2007. The increase is due primarily to a 2008 restricted stock grant to Simon Fuller of 200,000 shares of the Company’s common stock.


10.	Income Taxes

In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at the time. The Company’s effective tax rate is based on expected income, statutory rates, available tax credits and permanent differences applicable to the Company in the various jurisdictions in which the Company operates.

For the nine months ended September 30, 2008, the Company recorded a provision for income taxes of $32.0 million, reflecting the Company’s estimated 2008 effective tax rate of 50.0% and a one time adjustment in the second quarter of $0.6 million to the rate applied to the unremitted earnings of unconsolidated affiliates, a deferred tax liability, as well as a third quarter benefit of $1.1 million related to the filing of the 2007 federal tax return.

For the nine months ended September 30, 2007, the Company recorded a provision for income taxes of $18.2 million. The provision is comprised of $19.1 million, reflecting the Company’s estimated 2007 effective tax rate of 47.8%, $1.5 million expense in the first quarter related to a change in the expected historical UK income tax filing position, a second quarter benefit of $0.3 million related to a change in the deferred taxes effective tax rate, due to a change in New York State Tax law, a third quarter benefit of $0.9 million related to a change in the deferred taxes effective tax rate, due to changes in the United Kingdom and Michigan tax laws, and a third quarter benefit of $1.2 million related to the filing of the 2006 federal tax return.

The increase in the 2008 effective tax rate relates primarily to a decrease in the net foreign tax credit CKX is able to take on its foreign source income.

For the three months ended September 30, 2008, the Company recorded a provision for income taxes of $12.2 million. The provision is comprised of $13.3 million reflecting the general tax provision for the quarter offset by a third quarter benefit of $1.1 million related to the filing of the 2007 federal tax return.

For the three months ended September 30, 2007, the Company recorded a provision for income taxes of $4.3 million. The provision is comprised of $6.4 million reflecting the effective tax rate for the quarter, offset by a benefit of $0.9 million related to a change in the deferred taxes effective tax rate, due to changes in the United Kingdom and Michigan tax laws, and a benefit of $1.2 million related to the filing of the 2006 federal tax return.

A portion of the Company’s long-term deferred tax asset reversed during the three months ended September 30, 2008. As this was related to the purchase of 19 Entertainment Group, there was a decrease in the valuation allowance, offset by a decrease in goodwill, of $0.3 million.

The Company adopted the provisions of Financial Standards Accounting Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”) an interpretation of FASB Statement No. 109 (“SFAS 109”) on January 1, 2007. The liability is carried in taxes payable. The Company does not expect any reasonably possible material changes to the estimated amount of liability associated with its uncertain tax positions through September 30, 2009. If all the uncertain tax positions were settled with the taxing authorities there would be no material effect on the effective tax rate.

The Company generally recognizes accrued interest and penalties related to uncertain tax positions through income tax expense. As of September 30, 2008, the Company had approximately $0.4 million accrued for the payment of tax-related interest and penalties. This amount has not significantly changed since December 31, 2007.

Open tax years related to federal filings are for the years ended December 31, 2005, 2006 and 2007. In October 2008 the Internal Revenue Service provided notice to the Company that it intends to begin an audit of the Company for the year ended December 31, 2006. Open tax years for state and local jurisdictions are not considered to have a material impact on the financial statements in the event of an examination. New York State is auditing the tax years ended June 30, 2004 and March 17, 2005 for 19 Entertainment Inc. New York State has also initiated an audit of CKX Inc.’s sales tax for the period March 1, 2002 through February 29, 2008. It should be noted that CKX, Inc. did not exist prior to February 2005.

The United Kingdom’s Revenue & Customs (“HMRC”) has reviewed the historic 19 Entertainment Ltd. UK group through December 2005. HMRC usually has 24 months from the end of the accounting period to review and query each return.


11.	Commitments and Contingencies

On August 17, 2006, the Company announced that, together with its subsidiaries, Elvis Presley Enterprises, Inc. and Elvis Presley Enterprises LLC, it has reached an agreement with Cirque du Soleil and MGM MIRAGE (“MGM”) to create a permanent Elvis Presley show at MGM’s CityCenter hotel/casino, which is currently under construction in Las Vegas. The Elvis Presley Cirque du Soleil show is expected to open with the CityCenter hotel/casino in December 2009. The show is being developed and will operate in a partnership jointly owned by Cirque du Soleil and the Company. The partnership is a variable interest entity as defined by Financial Accounting Standards Board Interpretation No. 46(R), Consolidation of Variable Interest Entities. The Company is not the primary beneficiary of the partnership and therefore accounts for its investment under the equity method of accounting. The Company’s maximum exposure to loss as a result of its involvement with the partnership is its funding for the show, which is its investment in the partnership. CKX and Cirque du Soleil have each agreed to pay one-half of the creative development and production costs of the show. CKX expects its portion of the investment to be approximately $24 million, with the largest amount expected to be funded in the later stages of development. We estimate that we will incur expenditures for the development of the show of approximately $5.0 million in 2008, of which $2.6 million was incurred during the nine months ended September 30, 2008. This amount was recorded within other assets on the accompanying condensed consolidated balance sheet.

There are various lawsuits and claims pending against the Company. The Company believes that any ultimate liability resulting from these actions or claims will not have a material adverse effect on the Company’s results of operations, financial condition or liquidity.

A lawsuit was filed in the Delaware Chancery Court against the Company, its directors, 19X and 19X Acquisition Corp (the “Defendants”) on or about December 14, 2007. The complaint was filed by a purported stockholder of the Company and seeks class action status to represent all of the Company’s public stockholders. The complaint alleges that the sale price is too low and that the Company’s directors have therefore breached their fiduciary duties by approving the transaction.

The lawsuit seeks a preliminary and permanent injunction preventing the Defendants from consummating the merger. Alternatively, if the merger is consummated, the complaint seeks rescission or recessionary damages in an unspecified amount. Finally, the complaint seeks “Class compensatory damages” in an unspecified amount, as well as the costs and disbursements of the action, experts’ fees and the fees of plaintiff’s attorneys.

On or about February 1, 2008, another summons and complaint was filed in the Delaware Chancery Court against the Defendants, by another purported shareholder of the Company. The complaint is identical to the complaint filed on December 14, 2007.

The two cases were consolidated and on April 18, 2008, plaintiffs filed a consolidated amended complaint.

In order to resolve the litigation and avoid further cost and delay, CKX and the individual defendants, without admitting any wrongdoing, signed a memorandum of understanding on May 27, 2008 reflecting a tentative settlement agreement with the plaintiffs and memorializing the amended terms to the Merger Agreement and the related management cooperation agreement, as requested by counsel for the plaintiffs in the litigation.

In light of the termination of the merger transaction (see note 2, Merger Agreement), the settlement will not be concluded and it is anticipated that the lawsuit will be dismissed without prejudice.


12.	Segment Information

The Company currently has four reportable segments: Presley Business — Royalties and Licensing, Presley Business — Graceland Operations, 19 Entertainment and the Ali Business. These designations have been made as the discrete operating results of these segments are reviewed by the Company’s chief operating decision maker to assess performance and make operating decisions. For 2008, the operating results of MBST are reported as part of Corporate and Other for segment purposes. For 2007, the operating results of both MBST and FXLR are reported as part of Corporate and Other for segment purposes. These designations have been made as the discrete operating results of these segments were reviewed by the Company’s chief operating decision maker to assess performance and make operating decisions. All inter-segment transactions have been eliminated in the condensed consolidated financial statements.

The Company evaluates its operating performance based on several factors, including a financial measure of operating income before non-cash depreciation of tangible assets and non-cash amortization of intangible assets and non-cash compensation (which we refer to as “OIBDAN”). The Company considers OIBDAN to be an important indicator of the operational strengths and performance of our businesses and the critical measure the chief operating decision maker (CEO) uses to manage and evaluate our businesses, including the ability to provide cash flows to service debt. However, a limitation of the use of OIBDAN as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue in our businesses or stock-based compensation expense. Accordingly, OIBDAN should be considered in addition to, not as a substitute for, operating income, net income and other measures of financial performance reported in accordance with US GAAP as OIBDAN is not a GAAP equivalent measurement.


	Presley Business
	Royalties and		Graceland		19					Corporate
Segment Information	Licensing		Operations		Entertainment		Ali Business			and Other			Total
	(Amounts in thousands)

Three months ended September 30, 2008:
Revenue	$	5,242	$	12,554	$	76,721	$	383		$	2,077		$	96,977

Operating income (loss)	$	1,632	$	2,830	$	21,606	$	(24	)	$	(3,336	)	$	22,708

Depreciation and amortization	$	645	$	566	$	3,866	$	15		$	230		$	5,322

OIBDAN	$	2,286	$	3,417	$	26,155	$	(5	)	$	(2,906	)	$	28,947

Three months ended September 30, 2007:
Revenue	$	5,097	$	15,923	$	75,172	$	1,345		$	1,532		$	99,069

Operating income (loss)	$	2,362	$	4,245	$	20,032	$	441		$	(6,883	)	$	20,197

Depreciation and amortization	$	645	$	534	$	4,237	$	15		$	227		$	5,658

OIBDAN	$	3,013	$	4,801	$	24,335	$	460		$	(6,419	)	$	26,190

Nine months ended September 30, 2008:
Revenue	$	13,370	$	29,464	$	201,086	$	2,849		$	3,955		$	250,724

Operating income (loss)	$	5,728	$	4,106	$	72,145	$	573		$	(14,552	)	$	68,000

Depreciation and amortization	$	1,936	$	1,681	$	12,059	$	45		$	690		$	16,411

OIBDAN	$	7,692	$	5,848	$	85,526	$	630		$	(13,244	)	$	86,452

Nine months ended September 30, 2007:
Revenue	$	14,189	$	32,916	$	165,206	$	4,638		$	4,049		$	220,998

Operating income (loss)	$	4,954	$	4,671	$	49,825	$	1,845		$	(19,009	)	$	42,286

Depreciation and amortization	$	1,936	$	1,552	$	12,548	$	37		$	683		$	16,756

OIBDAN	$	6,912	$	6,274	$	62,558	$	1,894		$	(17,607	)	$	60,031

Asset Information:
Segment assets at September 30, 2008	$	85,160	$	75,777	$	201,504	$	58,968		$	144,557		$	565,966

Segment assets at December 31, 2007	$	83,324	$	72,846	$	230,696	$	60,053		$	78,536		$	525,455

Below is a reconciliation of the Company’s OIBDAN to net income:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
	(Amounts in thousands)

OIBDAN	$	28,947		$	26,190		$	86,452		$	60,031
Depreciation and amortization		(5,322	)		(5,658	)		(16,411	)		(16,756	)
Non-cash compensation		(917	)		(335	)		(2,041	)		(989	)
Interest income		297			545			1,402			1,088
Interest expense		(1,320	)		(2,084	)		(4,361	)		(3,423	)
Equity in earnings of affiliates		299			514			1,956			1,115
Income tax expense		(12,152	)		(4,256	)		(32,032	)		(18,170	)
Minority interest		(688	)		(1,032	)		(1,763	)		(1,786	)
Discontinued operations		—			(7,451	)		—			(8,430	)

Net income	$	9,144		$	6,433		$	33,202		$	12,680


13.	Related Party Transactions

Please see note 2, Merger Agreement.

Please see note 3, Transactions Involving FX Real Estate and Entertainment Inc. and FX Luxury Realty, LLC.

On September 29, 2008, the Company made a loan to The Promenade Trust in the amount of approximately $0.5 million. The Promenade Trust holds the Company’s Series B Convertible Preferred Stock and is the owner of the minority equity interest in the Presley Business. The loan, which bore interest at the rate of 2.38% per annum, was settled on November 7, 2008.

***********************

FORWARD LOOKING STATEMENTS

In addition to historical information, this Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words “believe,” “expect,” “will,” “anticipate,” “intend,” “estimate,” “project,” “assume” or other similar expressions, although not all forward-looking statements contain these identifying words. All statements in this Quarterly Report regarding our future strategy, future operations, projected financial position, estimated future revenue, projected costs, future prospects, and results that might be obtained by pursuing management’s current plans and objectives are forward-looking statements. You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this Quarterly Report was filed with the Securities and Exchange Commission (“SEC”). We expressly disclaim any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our stockholders.


Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the historical financial statements and footnotes of the registrant included in its Annual Report on Form 10-K for the year ended December 31, 2007. Our future results of operations may change materially from the historical results of operations reflected in our historical financial statements.

General

We are engaged in the ownership, development and commercial utilization of entertainment content, including the rights to the name, image and likeness of Elvis Presley and the operations of Graceland, the rights to the name, image and likeness of Muhammad Ali and proprietary rights to the IDOLS television brand, including the American Idol series in the United States and local adaptations of the IDOLS television show format which, collectively, air in over 100 countries around the world. Our existing properties generate recurring revenues across multiple entertainment platforms, including music and television; sponsorship; licensing and merchandising; artist management; themed attractions and touring/live events.

The Company owns an 85% interest in the Presley Business. The former owner of the Presley Business maintains a 15% interest in the business, is entitled to certain future distributions and has other contractual rights. The Company owns an 80% interest in the Ali Business. The former owner of the Ali Business maintains a 20% interest in the business and is entitled to certain future distributions and has other contractual rights.

Merger Agreement

On June 1, 2007, we entered into an Agreement and Plan of Merger (as amended on August 1, 2007, September 27, 2007, January 23, 2008 and May 27, 2008, the “Merger Agreement”) with 19X, Inc., a Delaware corporation (“19X” or “Parent”), and 19X Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Under the terms of the Merger Agreement, 19X had agreed to acquire CKX at a price of $12.00 per share in cash. 19X was initially formed for an unrelated purpose and has had no operations or business other than as contemplated by the Merger Agreement, including the related financings. Robert F.X. Sillerman, Chairman and Chief Executive Officer of CKX, and Simon R. Fuller, a director of CKX and the Chief Executive Officer of 19 Entertainment Limited, a wholly owned subsidiary of CKX, are the sole current stockholders of 19X.

Affiliated Elements of Transaction

Approval Process

Our Board of Directors, acting upon the unanimous recommendation of a special committee comprised entirely of independent directors (the “Special Committee”), (except for directors affiliated with 19X, who abstained) unanimously approved the Merger Agreement and recommended that our stockholders adopt the Merger Agreement and approve the Merger. The Special Committee engaged Houlihan, Lokey, Howard & Zukin, Inc. (“Houlihan Lokey”) to serve as independent financial advisor to the Special Committee. On June 1, 2007, Houlihan Lokey delivered an opinion to the Special Committee and the Board of Directors that as of the date of the opinion, the Merger

Consideration to be received by holders of the Company’s common stock was fair from a financial point of view to such holders (other than holders of common Stock that are affiliated with 19X). On September 27, 2007, Houlihan Lokey delivered another opinion to the Special Committee and the Board of Directors that, as of the date of the opinion, the revised Merger Consideration to be received by holders of CKX’s common stock was fair from a financial point of view to such holders (other than holders of common stock that are affiliated with 19X). On May 27, 2008, Houlihan Lokey delivered a third opinion to the Special Committee and the Board of Directors that, as of the date of the opinion, the revised Merger Consideration to be received by holders of CKX’s common stock was fair from a financial point of view to such holders (other than holders of common stock that are affiliated with 19X).

Transactions Involving FX Real Estate and Entertainment Inc. and FX Luxury Realty, LLC


	*Investments in FX Luxury Realty and FX Real Estate and Entertainment Inc. and Distributions to CKX Stockholders*

On June 1, 2007, the Company acquired 50% of the newly issued common membership interests in FX Luxury Realty, LLC (“FXLR”). The consideration for the acquired interests was $100 million, paid in cash at closing. Transaction costs totaled $2.1 million. The Company funded the $100 million purchase price with proceeds from a drawdown under the Credit Facility (as defined). At the time of CKX’s investment in FXLR, FXLR owned a 50% interest in entities (the “Metroflag Entities”) that collectively own and control the Park Central Property and had entered into a binding agreement to acquire the other 50% of such entities. The acquisition of the remaining 50% of the Metroflag Entities, which gave FXLR 100% ownership and control of the Park Central Property, closed on July 6, 2007.

As a condition to the Merger Agreement as executed on June 1, 2007, as amended, CKX agreed to distribute to its stockholders the equity it purchased in FXLR through a distribution of shares of FXRE common stock (which shares would be received prior to the distribution through an exchange of FXLR interests for FXRE shares) to allow current CKX stockholders to share directly in the continued growth and exploitation of the existing Elvis Presley and Muhammad Ali intellectual property rights and assets in the capital intensive development opportunities to be pursued by us in accordance with the terms of the license agreements described below. The distribution of shares occurred through a series of dividends, in which the Company declared and transferred into three trusts, for the benefit of its stockholders, dividends consisting of a total of 48% of the outstanding shares of common stock of FXRE payable to CKX stockholders as of the record date (as described below). The first dividend, on June 18, 2007, was valued at approximately $50.3 million, or 50% of the then value of CKX’s investment in FXLR (taking into account transaction costs). The second dividend, on September 27, 2007, was valued at approximately $40.9 million, leaving CKX with an investment of $6.2 million at December 31, 2007 representing its remaining 2% ownership interest in FXRE.

Also on September 26, 2007, CKX acquired an additional 0.742% of the outstanding capital stock of FXRE for a price of $1.5 million.

On December 21, 2007, the Company declared a dividend with respect to its remaining 2% ownership interest in FXRE and set the record date of December 31, 2007 for the distribution of all of the shares of FXRE stock held by CKX and the three distribution trusts to the CKX stockholders. In 2007, the Company recorded a $2.2 million gain on the distribution of the final 2% interest in FXRE to the Company’s shareholders. The gain represents the difference between the Company’s cost basis in the shares and the trading price of FXRE on January 10, 2008, the first day of trading in FXRE stock.

FXRE Financial Condition

Accounting for the Investment and Distributions

License Agreements

Simultaneous with the CKX investment in FXRE, FXRE entered into a worldwide license agreement with Elvis Presley Enterprises, Inc. (“EPE”), a 85% owned subsidiary of CKX, granting FXRE the exclusive right to utilize Elvis Presley-related intellectual property in connection with the development, ownership and operation of Elvis Presley-themed hotels, casinos and certain other real estate-based projects and attractions around the world. FXRE also entered into a worldwide license agreement with Muhammad Ali Enterprises LLC, a 80% owned subsidiary of CKX (the “Ali Business”), granting FXRE the right to utilize Muhammad Ali-related intellectual property in connection with Muhammad Ali-themed hotels and certain other real estate-based projects and attractions.

due for 2007 was $10.0 million. The initial payment (for 2007) under the license agreement was due on the earlier of the completion of FXRE’s previously announced rights offering described elsewhere herein or April 1, 2008, provided that if the initial payment was made after December 1, 2007, it bears interest at the then current prime rate as quoted in The Wall Street Journal plus 3% per annum between December 1, 2007 and December 31, 2007, plus 3.5% per annum from January 1, 2008 through January 31, 2008, plus 4.0% from February 1, 2008 through February 29, 2008, and plus 4.5% from and after March 1, 2008. The 2007 royalty amount of $10.0 million, plus the related interest of $0.4 million, was paid on April 1, 2008. The guaranteed annual minimum royalty payment of $10.0 million for 2008 is due no later than January 30, 2009.

The Company has not yet recorded any related royalty revenue, as per the Company’s revenue recognition policy, revenue from multiple element arrangements is recognized only when all of the conditions of the arrangement are met. CKX will begin to record revenue under the license agreements when it completes the transfer to FXRE of the land designated as the site of the first hotel to be built by FXRE as part of the Graceland redevelopment plan, thereby satisfying the last of the material elements tied to payment of the fees.

CKX Loan to FXRE

On September 26, 2007, CKX entered into a Line of Credit Agreement with FXRE pursuant to which CKX agreed to loan up to $7.0 million to FXRE, $6.0 million of which was drawn down on September 26, 2007 and was evidenced by a promissory note dated September 26, 2007. The loan accrued interest at LIBOR plus 600 basis points and was payable upon the earlier of (i) two years and (ii) the consummation by FXRE of an equity raise at or above $90.0 million. The loan was secured by a pledge of an aggregate of 972,762 shares of FXRE common stock held by Mr. Sillerman and certain other members of Flag. On April 17, 2008, FXRE repaid all amounts under the loan, the Line of Credit Agreement terminated and the shares subject to the pledge described above were released.

Affiliated Elements of Transactions

Mr. Sillerman, our Chairman and Chief Executive Officer, also serves as Chairman and Chief Executive Officer of FXRE. Mr. Sillerman owns approximately 29% of the outstanding equity of Flag Luxury Properties (“Flag”), which, prior to the investment in FXLR described above, owned 100% of FXLR and a 50% interest in the Metroflag Entities. Following the January 2008 Distribution, Mr. Sillerman owns approximately 30% of the outstanding common stock of FXRE. Mr. Sillerman had pledged 324,254 shares of his FXRE common stock as security for the CKX loan described above. The loan was repaid on April 17, 2008 and the shares pledged by Mr. Sillerman were released.

Thomas P. Benson, our Chief Financial Officer, also serves as a director and Chief Financial Officer of FXRE.

Approval Process

The Company’s Board of Directors, acting upon the unanimous recommendation of a special committee comprised entirely of independent directors (the “Special Committee”), (except for directors affiliated with FXLR, FXRE and Flag, who abstained) unanimously approved the license agreements and the FXLR Investment. In addition, the Special Committee, acting on authority granted to it by the Board of Directors, unanimously approved the Additional FXRE Equity Investment and the FXRE Loan. The Special Committee engaged Houlihan Lokey to serve as independent financial advisor to the Special Committee. On June 1, 2007, Houlihan Lokey delivered opinions to the Special Committee and the Board of Directors that as of the date of the opinion, the terms of the FXLR Investment and the licenses were fair to the holders of the Company’s common stock (other than holders of common stock that are affiliated with Parent) from a financial point of view. In addition, the terms of the license agreements were approved by the minority equity owners of EPE and the Ali Business.

Shared Services Agreement

We are party to a shared services agreement with FXRE, pursuant to which certain of our employees, including members of senior management, provide services for FXRE, and certain of FXRE’s employees, including members of senior management, may provide services for CKX. The services to be provided pursuant to the shared services agreement are expected to include management, legal, accounting and administrative. The agreement expires on December 31, 2010 and can be extended or terminated with ninety days notice by both parties.

Charges under the shared services agreement are made on a quarterly basis and are determined taking into account a number of factors, including but not limited to, the overall type and volume of services provided, the individuals involved, the amount of time spent by such individuals and their current compensation rate with the company with which they are employed. Each quarter, representatives of the parties will meet to (i) determine the net payment due from one party to the other for provided services performed by the parties during the prior calendar quarter, and (ii) prepare a report in reasonable detail with respect to the provided services so performed, including the value of such services and the net payment due. The parties shall use their reasonable, good-faith efforts to determine the net payments due in accordance with the factors described in above.

For the nine months ended September 30, 2008, CKX has billed FXRE $1.3 million for professional services, primarily accounting and legal services, performed under the shared services agreement. FXRE paid $0.5 million of the 2008 shared service costs to the Company on May 21, 2008 and $0.5 million on August 7, 2008. The $0.3 million outstanding at September 30, 2008 was paid to the Company on October 17, 2008. $1.0 million in accrued shared service costs charged to FXRE in 2007 were paid to the Company on April 22, 2008.

As referenced above under “FXRE Financial Condition,” FXRE’s ability to satisfy obligations as they come due, which may include making future payments under the shared services agreement, is dependent on FXRE successfully raising capital in the future. FXRE is highly leveraged and its ability to raise capital in the future will be dependent upon a number of factors including, among others, prevailing market conditions. There can be no assurance that FXRE will be able to complete a financing on terms that are favorable to its business or at all.

Presley Business

The Presley Business consists of entities which own and/or control the commercial utilization of the name, image and likeness of Elvis Presley, the operation of the Graceland museum and related attractions, as well as revenue derived from Elvis Presley’s television specials, films and certain of his recorded musical works. The Presley Business consists of two reportable segments: Royalties and Licensing — intellectual property, including the licensing of the name, image, likeness and trademarks associated with Elvis Presley, as well as other owned and/or controlled intellectual property and the collection of royalties from certain motion pictures, television specials and recorded musical works and music compositions; and Graceland Operations — the operation of the Graceland museum and related attractions and retail establishments, including Elvis Presley’s Heartbreak Hotel and other ancillary real estate assets.

The Royalties and Licensing segment generates revenue from the exploitation of the name, image and likeness of Elvis Presley, including physical and intellectual property owned or created by Elvis Presley during his life. The primary revenue source of this segment comes from licensing Elvis’ name and likeness for consumer products, commercials and other uses and royalties and other income derived from intellectual property created by Elvis including records, movies, videos and music publishing. Licensing revenue is primarily derived from long-term contracts with terms of one to five years. Although we seek to obtain significant minimum guarantees, our licensing revenue varies based on the actual product sales generated by licensees. The license with FXLR, described

elsewhere herein, is an example of such an agreement. The intellectual property created by Elvis during his lifetime which we own has generally been assigned to third parties for commercial exploitation under long-term agreements.

Although we maintain certain controls over the use of this content and, in certain cases, have rights to terminate these agreements if the third party fails to perform, our revenue from this intellectual property is highly dependant upon the ability of third parties to successfully market the content.

The Graceland Operations segment generates its primary revenue from ticket and merchandise sales and related income from public tours of Graceland as well as from the operation of Elvis Presley’s Heartbreak Hotel and the other ancillary real estate assets. Revenue from Graceland has historically been seasonal with sharply higher numbers of visitors during the spring and summer seasons as compared to the fall and winter seasons.

Most of the Presley Business’ revenue sources are dependant upon the public’s continued interest in Elvis Presley and the intellectual property he created.

Our significant costs to operate the Presley Business include salaries, rent and other general overhead costs. Most of our costs do not vary significantly with our revenue. Our discretionary costs are generally in our marketing and promotions department which we primarily incur to maintain and/or increase the number of visitors to Graceland. We also incur expenses in exploring opportunities to bring Elvis-related attractions to Las Vegas and other strategic locations throughout the world.

19 Entertainment

19 Entertainment generates revenue from the creation and production of entertainment properties. Our primary revenue sources include production and license fees and related ratings and rankings bonuses from television programs, and royalties from the sale of recorded music by artists signed to our record labels. We also derive revenue from the sale of merchandise, sponsorships and tours based on our television programs and recorded music artists, and fee income from management clients.

The majority of our revenue is derived from production and license fees and related performance bonuses from producing and licensing the IDOLS television show format in various countries and ancillary revenue streams from the IDOLS brand. Ancillary revenue from the IDOLS brand is generated through agreements which provide us with the option to sign finalists on the IDOLS television shows to long-term recording contracts, concert tours we produce featuring IDOLS finalists and the sale of sponsorships and merchandise involving the IDOLS brand.

The majority of our IDOLS related revenue is generated through agreements with our global television production and distribution partner, FremantleMedia, and our principal global record label partners Ronagold for seasons American Idol 1 through American Idol 4 and Simco for all seasons subsequent to American Idol 4. Ronagold and Simco are Sony BMG labels. Therefore, we are highly dependent upon the continued ability of these entities to successfully maintain the IDOLS brand and promote our recording artists.

Other than American Idol, which is discussed below, the IDOLS television shows are generally produced or licensed under one year contracts under which each local television network has the right, but not the obligation, to renew the agreement for additional years. Our recording artists are generally signed to long-term recording contracts under which we and Sony BMG have the right, but not the obligation, to require the artist to release a specified number of albums.

Our revenue from the IDOLS brand is also highly dependent upon the continued success of the American Idol series which currently airs on the Fox television network in the United States, and local adaptations of the IDOLS television show which air around the world. Our revenue is also dependent upon the continued success and productivity of our recording artists and management clients. A portion of our revenue from the American Idol series is dependent upon the number of hours of programming we deliver. The seventh broadcast season aired 52.5 hours during 2008. In 2007 we aired 49 hours. On November 28, 2005, 19 Entertainment entered into a series of agreements with Fox, FremantleMedia and Sony BMG/Simco, related to the American Idol television program. Under the terms of the agreements, Fox has guaranteed at least one more season of American Idol (2009), with an automatic renewal for up to two additional seasons upon the show achieving certain minimum ratings in 2009 and potentially 2010. Additional terms of the agreements call for Fox to order a minimum of 37 hours and a maximum of

45 hours of American Idol programming each season (though 19 Entertainment and FremantleMedia can agree to produce additional hours) and to pay 19 Entertainment and FremantleMedia an increased license fee per season. Fox also agreed to make an annual payment to 19 Entertainment tied to the most recent recording agreement with Sony BMG.

19 Entertainment’s revenue is seasonal in nature, reflecting the timing of our television shows and tours in various markets. Historically, 19 Entertainment generated higher revenue during the first three quarters of the calendar year, which corresponds to the dates our American Idol and So You Think You Can Dance series air on Fox in the United States. 19 Entertainment’s revenues reflect its contractual share of the IDOLS television revenue representing producer, format and licensing fees as well as ratings and ratings bonuses and sponsorship fees and do not include the revenues earned or the production costs incurred directly by our production and distribution partner, FremantleMedia. 19 Entertainment records all of the television and sponsorship revenue for So You Think You Can Dance and our operating expenses include the contractual share that we distribute to our production partners.

Our significant costs to operate 19 Entertainment include salaries and other compensation, royalties, tour expenses, rents and general overhead costs. Our discretionary costs include salary and overhead costs incurred in the development of new entertainment content.

Ali Business

The Ali Business consists of the commercial exploitation of the name, image, likeness and intellectual property of Muhammad Ali, primarily through endorsement and licensing arrangements.

The primary revenue source comes from licensing Muhammad Ali’s name and likeness for consumer products, commercials and other uses. Licensing revenue is primarily derived from long-term contracts with terms of one to five years. The license with FXLR, described elsewhere herein, is an example of such an agreement. Although we seek to obtain significant minimum guarantees, our licensing revenue varies based on the actual product sales generated by licensees. The intellectual property that is owned by the Company is licensed to third parties for commercial exploitation under long-term agreements. Although we maintain certain controls over the use of this content and, in certain cases, have rights to terminate these agreements if the third party fails to perform, our revenue from this intellectual property is highly dependant upon the ability of third parties to successfully market the content. Most of our revenue sources are dependant upon the public’s continued interest in Muhammad Ali and associated intellectual property. The Ali Business also generates revenue from sports memorabilia signings performed by Mr. Ali.

Our significant costs to operate the Ali Business include commissions, salaries and other general overhead costs. With the exception of commissions, most of our costs do not vary significantly with our revenue.

Other

MBST is a full service management company representing an array of leading entertainers including Robin Williams, Billy Crystal and Woody Allen.

MBST earns revenue through arrangements with artists that result in MBST receiving a percentage of the artists’ performance revenue, from consulting fees paid by advisory clients and from participations in films it has produced. Executives and other employees of MBST are also actively involved in developing and implementing revenue enhancement opportunities for the Company’s other entertainment content and assets.

Our significant costs to operate MBST include salaries, rent and general overhead costs. Most of these costs do not vary significantly with our revenue.

Use of OIBDAN

We evaluate our operating performance based on several factors, including a financial measure of operating income (loss) before non-cash depreciation of tangible assets and non-cash amortization of intangible assets and non-cash compensation (which we refer to as “OIBDAN”). The Company considers OIBDAN to be an important indicator of the operational strengths and performance of our businesses and the critical measure the chief operating

decision maker (CEO) uses to manage and evaluate our businesses, including the ability to provide cash flows to service debt. However, a limitation of the use of OIBDAN as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue in our businesses or stock-based compensation expense. Accordingly, OIBDAN should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) and other measures of financial performance reported in accordance with US GAAP as OIBDAN is not a GAAP equivalent measurement.

We have reconciled OIBDAN to operating income in the following consolidated operating results table for the Company for the three and nine months ended September 30, 2008 and 2007.

Consolidated Operating Results Three Months Ended September 30, 2008

Compared to Three Months Ended September 30, 2007


	Three Months		Three Months
	Ended		Ended
	September 30, 2008		September 30, 2007			Variance
	(In thousands)

Revenue	$	96,977	$	99,069		$	(2,092	)
Operating expenses		74,269		78,872			(4,603	)
Other income (expense)		5,631		(884	)		6,515
Operating income		22,708		20,197			2,511
Income tax expense		12,152		4,256			7,896
Income from continuing operations		9,144		13,884			(4,740	)
Net income		9,144		6,433			2,711

Operating income	$	22,708	$	20,197		$	2,511
Depreciation and amortization		5,322		5,658			(336	)
Non-cash compensation		917		335			582

OIBDAN	$	28,947	$	26,190		$	2,757

Revenue decreased $2.1 million in 2008 due to declines at the Presley Business and Muhammad Ali Enterprises, which were partially offset by higher revenue at 19 Entertainment primarily due to an increase in broadcast hours for So You Think You Can Dance, partially offset by the timing of revenue from American Idol. Lower operating expenses of $4.6 million for the three months ended September 30, 2008 resulted from lower corporate expenses and merger and distribution-related costs and decreased expenses at the Presley Business. Other income in 2008 of $5.6 million is due to foreign exchange gains at 19 Entertainment resulting from a strengthening of the U.S. dollar compared to the U.K. pound; the prior period included other expense of $0.9 million of foreign exchange losses.

Presley Business — Royalties and Licensing

The following table provides a breakdown of Presley Business — Royalties and Licensing revenue, cost of sales, selling, general and administrative expenses and OIBDAN for the three months ended September 30, 2008 and 2007:


	Three Months			Three Months
	Ended			Ended
	September 30,			September 30,
	2008			2007			Variance
	(In thousands)

Revenue	$	5,242		$	5,097		$	145
Cost of sales		(1,406	)		(438	)		(968	)
Selling, general and administrative expense, excluding non-cash compensation		(1,550	)		(1,646	)		96

OIBDAN	$	2,286		$	3,013		$	(727	)


OIBDAN	$	2,286		$	3,013		$	(727	)
Depreciation and amortization		(645	)		(645	)		—
Non-cash compensation		(9	)		(6	)		(3	)

Operating income	$	1,632		$	2,362		$	(730	)

The increase in royalties and licensing revenue was due to the distribution of “Elvis: Viva Las Vegas” DVD documentary (“Elvis Viva DVD”) for $1.8 million offset by lower sales of a limited edition collectible DVD box set of Elvis movies launched in 2007 of $1.0 million, lower royalties from the 2004 release of digitally enhanced videos and DVDs of “’68 Special” and “Aloha from Hawaii” of $0.4 million and a slight net decrease in other royalties of $0.3 million. Royalties and licensing cost of sales increased $1.0 million due to cost of production of the Elvis Viva DVD. Royalties and licensing selling, general and administrative expenses decreased by $0.1 million primarily due to $0.5 million of lower advertising and marketing costs for the DVD box set, partially offset by higher costs related to the Elvis Viva DVD of $0.4 million and higher licensing costs.

Presley Business — Graceland Operations

The following table provides a breakdown of the Presley Business — Graceland Operations revenue, cost of sales, selling, general and administrative expenses and OIBDAN for the three months ended September 30, 2008 and 2007:


	Three Months			Three Months
	Ended			Ended
	September 30,			September 30,
	2008			2007			Variance
	(In thousands)

Revenue	$	12,554		$	15,923		$	(3,369	)
Cost of sales		(2,019	)		(3,650	)		1,631
Selling, general and administrative expense, excluding non-cash compensation		(7,118	)		(7,472	)		354

OIBDAN	$	3,417		$	4,801		$	(1,384	)


OIBDAN	$	3,417		$	4,801		$	(1,384	)
Depreciation and amortization		(566	)		(534	)		(32	)
Non-cash compensation		(21	)		(22	)		1

Operating income	$	2,830		$	4,245		$	(1,415	)

Tour and exhibit revenue of $4.7 million in the three months ended September 30, 2008 accounted for $0.5 million of the decrease in Graceland Operations revenue. This decrease resulted from a 16% decline in attendance to 175,159 in 2008 from 209,346 in 2007, partially offset by a 9% increase in per visitor spending. The increase in visitor spending was due to price increases and an increase in the number of visitors choosing premium package tours. The attendance decline is due to the significant increase in visitors in the 2007 quarter for the

commemoration of the 30^th anniversary of Elvis Presley’s death and the impact of higher gas prices and weak economic conditions on discretionary consumer travel. Retail operations revenue of $4.8 million in the three months ended September 30, 2008 accounted for $1.4 million of the decrease in Graceland Operations revenue. The decline was the result of the lower attendance and lower per visitor spending on merchandise in comparison to 2007 which benefited from the 30^th anniversary. Other revenue, primarily hotel room revenue, event revenue and ancillary real estate income of $3.0 million for the three months ended September 30, 2008, accounted for the remaining $1.5 million decrease in Graceland Operations revenue principally due to higher 2007 revenue related to 30th anniversary events, including the Elvis 30^th anniversary concert.

Graceland Operations cost of sales decreased by $1.6 million in the three months ended September 30, 2008 compared to 2007 due to a decrease in cost of $0.9 million related to 2007 30^th anniversary events and lower cost of sales related to reduced revenue and cost improvements. Graceland Operations selling, general and administrative expenses decreased $0.4 million in the three months ended September 30, 2008 due to a $0.2 million decrease in professional services, a decrease of $0.4 million of costs related to 2007 30^th anniversary events and a $0.3 million decrease in salaries and other variable expenses due to lower attendance offset by a provision of $0.5 million for estimated losses due to the early termination of the sublease of a property leased by the Presley Business in downtown Memphis.

19 Entertainment

The following tables provide a breakdown of 19 Entertainment’s revenue, cost of sales, selling, general and administrative expenses and other costs, OIBDAN and operating income for the three months ended September 30, 2008 and 2007:


Three Months Ended September 30, 2008	Revenue		Cost of Sales
	(In thousands)

American Idol (including television production, foreign syndication, sponsorship, merchandise and touring)	$	28,156	$	(11,380	)	$	16,776
Other IDOLS television programs (including license fees and sponsorship)		4,544		(178	)		4,366
So You Think You Can Dance and other television productions		32,201		(26,220	)		5,981
Recorded music, management clients and other		11,820		(8,677	)		3,143

	$	76,721	$	(46,455	)	$	30,266
Selling, general and administrative expenses, excluding non-cash compensation							(9,742	)
Other income							5,631

OIBDAN						$	26,155


OIBDAN						$	26,155
Depreciation and amortization							(3,866	)
Non-cash compensation							(683	)

Operating income						$	21,606


Three Months Ended September 30, 2007	Revenue		Cost of Sales
	(In thousands)

American Idol (including television production, foreign syndication, sponsorship, merchandise and touring)	$	33,015	$	(10,369	)	$	22,646
Other IDOLS television programs (including license fees and sponsorship)		4,406		(228	)		4,178
So You Think You Can Dance and other television productions		27,462		(22,472	)		4,990
Recorded music, management clients and other		10,289		(5,903	)		4,386

	$	75,172	$	(38,972	)	$	36,200
Selling, general and administrative expenses, excluding non-cash compensation							(10,981	)
Other costs							(884	)

OIBDAN						$	24,335


OIBDAN						$	24,335
Depreciation and amortization							(4,237	)
Non-cash compensation							(66	)

Operating income						$	20,032

Revenue for 19 Entertainment was $76.7 million for the three months ended September 30, 2008, an increase of $1.5 million over the prior period. Operating expenses for 19 Entertainment, including amortization of intangible assets of $3.6 million, were $60.7 million, an increase of $6.5 million over the prior year. 19 Entertainment’s revenue is seasonal in nature, reflecting the timing of our television shows and tours in various markets.

American Idol revenue declined $4.8 million due primarily to timing of tape sales and ancillary revenue; approximately $4.8 million of the variance represents revenue recorded in the first half of 2008 as compared to the third quarter of 2007. Touring revenue declined $1.7 million due to fewer dates. New sponsorship and licensing deals contributed $1.4 million in additional revenue. Other IDOLS revenue of $4.5 million increased slightly over the prior year period.

So You Think You Can Dance contributed $4.7 million to the increase in revenue reflecting 1.5 additional hours over the prior year period and increased sponsorship revenue. Other television programming, including the new series Little Britain USA on HBO, which was co-produced with MBST, contributed an incremental $3.0 million over the prior year, offsetting a non-recurring television project in 2007.

Music revenue declined $0.3 million due to the timing and sales of album releases by former American Idol contestants. Management revenue increased $1.8 million due to strong sponsorship and licensing revenues and the timing of new ventures.

Operating expenses, including cost of sales, selling, general and administrative expenses, depreciation and amortization and non-cash compensation, increased $6.4 million for the three months ended September 30, 2008 over the prior period. The increased costs are primarily due to the increase in broadcast hours for So You Think You Can Dance and higher development costs for new projects, including Little Britain America, partially offset by reduced music royalties and selling, general and administrative expenses.

Other income of $5.6 million reflects foreign exchange gains resulting from a strengthening of the U.S. dollar compared to the U.K. pound. Other expense of $0.9 million in the prior year period reflects currency exchange losses.

Ali Business

The Ali Business contributed $0.4 million and $1.3 million of revenue for the three months ended September 30, 2008 and 2007, respectively. The decrease in revenue is primarily due to a reduction in memorabilia signings by Mr. Ali in the third quarter of 2008 as well as fewer licensing deals in 2008 as compared to the prior period. Operating expenses for the same periods were $0.4 million and $0.9 million, respectively. OIBDAN declined to $(0.1) million from $0.5 million in the prior period.

Corporate and Other

MBST

MBST contributed $2.1 million and $1.5 million in revenue for the three months ended September 30, 2008 and 2007, respectively. The revenue increase over the prior period is due to MBST’s profit share from the HBO series Little Britain USA, which MBST co-produced with 19 Entertainment, which partially offset revenue declines due to the timing and number of other client projects. Operating expenses, including acquisition-related amortization expenses of $0.2 million in each period, were $1.5 million and $1.4 million for the three months ended September 30, 2008 and 2007, respectively. OIBDAN was $0.8 million and $0.3 million for the three months ended September 30, 2008 and 2007, respectively.

Corporate Expenses and Other Costs

The Company incurred corporate overhead expenses of $3.6 million and $5.5 million for the three months ended September 30, 2008 and 2007, respectively. The decrease of $1.9 million reflects decreased employee, consulting and legal costs.

Merger and distribution-related costs incurred in three months ended September 30, 2008 and 2007 were $0.3 million and $1.5 million, respectively. These costs primarily include the costs of the Special Committee of the Board of Directors formed to review the Merger and other merger-related costs, including legal and accounting costs.

Interest Income/Expense

The Company had interest expense of $1.3 million and $2.1 million in the three months ended September 30, 2008 and 2007, respectively. The decrease in interest expense is primarily due to a reduction in the average borrowing rate on the revolving credit facility from 6.95% to 4.10%. The Company had interest income of $0.3 million and $0.5 million in the three months ended September 30, 2008 and 2007, respectively.

Income Taxes

The increase in the 2008 effective tax rate relates primarily to a decrease in the net foreign tax credit CKX is able to take on its foreign source income.

September 30, 2009. If all the uncertain tax positions were settled with the taxing authorities there would be no material effect on the effective tax rate.

Equity in Earnings of Affiliates

The Company recorded $0.3 million and $0.5 million of earnings in unconsolidated affiliates for the three months ended September 30, 2008 and 2007, respectively, related to the Company’s investment in Beckham Brands Limited. The decrease is due to the timing of payments from certain marketing deals.

Minority Interest

Minority interest expense of $0.7 million and $1.0 million for the three months ended September 30, 2008 and 2007, respectively, reflect shares in the net income of the Presley Business and the Ali Business related to the equity interests retained by the former owners.

Consolidated Operating Results for the Nine Months Ended September 30, 2008

Compared to the Nine Months Ended September 30, 2007


	Nine Months		Nine Months
	Ended		Ended
	September 30, 2008		September 30, 2007			Variance
	(In thousands)

Revenue	$	250,724	$	220,998		$	29,726
Operating expenses		182,724		178,712			4,012
Other income (expense)		5,790		(1,249	)		7,039
Operating income		68,000		42,286			25,714
Income tax expense		32,032		18,170			13,862
Income from continuing operations		33,202		21,110			12,092
Net income		33,202		12,680			20,522

Operating income	$	68,000	$	42,286		$	25,714
Depreciation and amortization		16,411		16,756			(345	)
Non-cash compensation		2,041		989			1,052

OIBDAN	$	86,452	$	60,031		$	26,421

Revenue growth of $29.7 million in 2008 was driven primarily by 19 Entertainment, which had higher television production and sponsorship revenue for American Idol, an increase in the broadcast hours from So You Think You Can Dance and increases in music and management revenue, which offset lower revenue for the Presley Business and the Ali Business. Higher operating expenses of $4.0 million for the nine months ended September 30, 2008 resulted from higher overall costs at 19 Entertainment to support revenue growth and new projects and the increased broadcast hours for So You Think You Can Dance, partially offset by decreased expenses at the Presley Business and

lower corporate expenses and merger and distribution related costs. Other income in 2008 of $5.8 million is due to foreign exchange gains at 19 Entertainment resulting from a strengthening of the U.S. dollar compared to the U.K. pound; the prior year period included other expense of $1.2 million of currency exchange losses.

Presley Business — Royalties and Licensing

The following table provides a breakdown of Presley Business — Royalties and Licensing revenue, cost of sales, selling, general and administrative expenses and OIBDAN for the nine months ended September 30, 2008 and 2007:


	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2008			2007			Variance
	(In thousands)

Revenue	$	13,370		$	14,189		$	(819	)
Cost of sales		(1,718	)		(1,302	)		(416	)
Selling, general and administrative expense, excluding non-cash compensation		(3,960	)		(5,975	)		2,015

OIBDAN	$	7,692		$	6,912		$	780


OIBDAN	$	7,692		$	6,912		$	780
Depreciation and amortization		(1,936	)		(1,936	)		—
Non-cash compensation		(28	)		(22	)		(6	)

Operating income	$	5,728		$	4,954		$	774

The decrease in royalties and licensing revenue was due to lower sales of a limited edition collectible DVD box set of Elvis movies launched in 2007 of $2.6 million and lower royalties from the release of digitally enhanced videos and DVDs of “68 Special” and “Aloha from Hawaii” of $0.9 million partially offset by the distribution of Elvis Viva DVD documentary of $1.8 million and a net increase in other royalties of $0.9 million. Royalties and licensing cost of sales increased $0.4 million due to $1.1 million of production and manufacturing costs for the Elvis Viva DVD offset by lower cost of sales of the DVD box set of $0.7 million. Royalties and licensing selling, general and administrative expenses decreased by $2.0 million primarily due to lower advertising and marketing costs for the DVD box set, including upfront costs to produce an infomercial in the prior year.

Presley Business — Graceland Operations


	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2008			2007			Variance
	(In thousands)

Revenue	$	29,464		$	32,916		$	(3,452	)
Cost of sales		(4,587	)		(6,493	)		1,906
Selling, general and administrative expense, excluding non-cash compensation		(19,029	)		(20,149	)		1,120

OIBDAN	$	5,848		$	6,274		$	(426	)


OIBDAN	$	5,848		$	6,274		$	(426	)
Depreciation and amortization		(1,681	)		(1,552	)		(129	)
Non-cash compensation		(61	)		(51	)		(10	)

Operating income	$	4,106		$	4,671		$	(565	)

Tour and exhibit revenue of $11.4 million in the nine months ended September 30, 2008 decreased $0.3 million compared to the prior year. This decrease resulted from a 12% decrease in attendance to 430,749 in 2008 from 487,713 in 2007, partially offset by a 10% increase in visitor spending. The increase in visitor spending was due to

price increases and an increase in the number of visitors choosing premium package tours. The attendance decline is due to significant increase in the number of visitors in 2007 for the commemoration of the 30^th anniversary of Elvis Presley’s death and to the impact of higher gas prices and weak economic conditions on discretionary consumer travel in 2008. Retail operations revenue of $11.0 million in the nine months ended September 30, 2008 decreased $1.4 million compared to the prior year. $0.3 million of the decline was due to a change in mail order retail sales to a commission-based operation in the second quarter of 2007. The remaining $1.1 million decline was due to lower sales at Graceland retail stores due to the 12% decrease in attendance. Per-visitor spending was flat when compared with prior year, although historically an anniversary year such as 2007 has significantly higher per-visitor spending than non-anniversary years. Other revenue, primarily hotel room revenue, event revenue and ancillary real estate income, of $7.1 million for the nine months ended September 30, 2008 accounted for the remaining $1.6 million decrease in Graceland Operations revenue principally due to lower event revenue of $1.4 million related to the prior year events, including the Elvis 30th anniversary concert. The remainder was due to lower ancillary real estate revenue.

Graceland Operations cost of sales decreased by $1.9 million in the nine months ended September 30, 2008 compared to the prior year. The decrease was principally due to $0.9 million related to the prior year anniversary events, $0.3 million decline due to the change in mail order retail sales to a commission-based operation and $0.7 million due to lower Graceland retail sales. Graceland Operations selling, general and administrative expenses decreased $1.1 million in the nine months ended September 30, 2008 compared to prior year. The decrease was primarily due to a $0.7 million decrease in professional services and other costs related the development of the Elvis Presley Cirque du Soleil show in Las Vegas, $0.3 million of lower fulfillment and distribution costs for the mail order retail sales business, $0.2 million of lower costs related to prior year anniversary events and $0.4 million decrease in other variable expenses offset by a provision of $0.5 million for estimated losses due to the early termination of the sublease of a property leased by the Presley Business in downtown Memphis.

19 Entertainment


Nine Months Ended September 30, 2008	Revenue		Cost of Sales
	(In thousands)

American Idol (including television production, foreign syndication, sponsorship, merchandise and touring)	$	94,029	$	(21,304	)	$	72,725
Other IDOLS television programs (including license fees and sponsorship)		11,723		(423	)		11,300
So You Think You Can Dance and other television productions		54,737		(46,969	)		7,768
Recorded music, management clients and other		40,597		(24,320	)		16,277

	$	201,086	$	(93,016	)	$	108,070
Selling, general and administrative expenses, excluding non-cash compensation							(28,334	)
Other income							5,790

OIBDAN						$	85,526


OIBDAN						$	85,526
Depreciation and amortization							(12,059	)
Non-cash compensation							(1,322	)

Operating income						$	72,145


Nine Months Ended September 30, 2007	Revenue		Cost of Sales
	(In thousands)

American Idol (including television production, foreign syndication, sponsorship, merchandise and touring)	$	80,388	$	(19,959	)	$	60,429
Other IDOLS television programs (including license fees and sponsorship)		10,762		(374	)		10,388
So You Think You Can Dance and other television productions		46,556		(38,630	)		7,926
Recorded music, management clients and other		27,500		(11,685	)		15,815

	$	165,206	$	(70,648	)	$	94,558
Selling, general and administrative expenses, excluding non-cash compensation							(30,751	)
Other costs							(1,249	)

OIBDAN						$	62,558


OIBDAN						$	62,558
Depreciation and amortization							(12,548	)
Non-cash compensation							(185	)

Operating income						$	49,825

Revenue for 19 Entertainment was $201.1 million for the nine months ended September 30, 2008, an increase of $35.9 million over the prior period. Operating expenses for 19 Entertainment, including amortization expense of intangible assets of $11.1 million, were $134.7 million, an increase of $20.6 million over the prior period. 19 Entertainment’s revenue is seasonal in nature, reflecting the timing of our television shows and tours in various markets.

American Idol 7 aired 52.5 series hours in the U.S. in the nine months ended September 30, 2008 while American Idol 6 aired 49 series hours in the U.S. in the comparable 2007 period. The additional hours of programming along with an increase in guaranteed license fees accounted for $12.8 million in additional revenue. New sponsorship and licensing deals contributed $7.3 million in additional revenue. U.S. television ratings for American Idol declined in 2008 reflecting an overall decline in network television viewing and an increase in the number of broadcast hours. Other IDOLS revenue increased $1.0 million due to increased format sales in foreign markets.

Revenue for So You Think You Can Dance increased due to 37 hours broadcast in the nine months ended September 30, 2008 as compared to 31.5 hours in the comparable 2007 period, and increased sponsorship revenue. Music revenues increased $5.8 million due to strong sales by former American Idol contestants and download revenue of performances from American Idol. Management revenue increased $7.4 million due to increased sponsorship revenues and management fees from the Spice Girls’ reunion tour.

Operating expenses, including cost of sales, selling, general and administrative expenses, depreciation and amortization and non-cash compensation, increased by $20.6 million in the nine months ended September 30, 2008 over the prior period. Cost of sales increased $22.4 million due to the additional hours for So You Think You Can Dance, other television development costs, including Little Britain USA, and higher music royalties to artists. Selling, general and administrative costs decreased $2.4 million due primarily to headcount reductions and costs directed to projects.

Other income of $5.8 million reflects foreign exchange gains resulting from a strengthening of the U.S. dollar compared to the U.K. pound. Other expense of $1.2 million in the prior year period reflects foreign exchange losses.

Ali Business

The Ali Business contributed $2.8 million and $4.6 million of revenue for the nine months ended September 30, 2008 and 2007, respectively. The Ali Business signed fewer significant new licensing deals in 2008 compared to the prior period. The decrease in revenue is also due to a reduction in memorabilia signings by Mr. Ali in 2008. Operating expenses for the same periods were $2.3 million and $2.8 million, respectively. OIBDAN declined to $0.6 million from $1.9 million in the prior period.

Corporate and Other

MBST

MBST contributed $4.0 million in revenue for the nine months ended September 30, 2008 and 2007. 2008 reflects revenue of $0.8 million from the HBO series Little Britain USA, which MBST co-produced with 19 Entertainment, which offset revenue declines due to the timing and number of other client projects. Operating expenses, including acquisition-related amortization expenses of $0.6 million in each period, were $4.6 million for the nine months ended September 30, 2008 and 2007. OIBDAN was $0.1 million for the nine months ended September 30, 2008 and 2007.

Corporate Expenses and Other Costs

The Company incurred corporate overhead expenses of $11.9 million and $14.1 million for the nine months ended September 30, 2008 and 2007, respectively. The decrease of $2.2 million reflects reduced employee, travel, consulting, audit costs and shared service costs charged to FXRE, partially offset by an increase in legal expenses resulting primarily from the settlement of a certain immaterial litigation matter.

Merger and distribution-related costs incurred of $2.0 million and $4.3 million for the nine months ended September 30, 2008 and 2007, respectively, primarily include the costs of the Special Committee of the Board of Directors formed to review the Merger and other merger-related costs, including legal and accounting costs.

Interest Income/Expense

The Company had interest expense of $4.4 million and $3.4 million in the nine months ended September 30, 2008 and 2007, respectively. The increase in interest expense in 2008 reflects the drawdown from the revolving credit facility of $100 million to fund the investment in FXLR on June 1, 2007, partially offset by a reduction in the average borrowing rate from 7.01% to 4.60%. The Company had interest income of $1.4 million and $1.1 million in the nine months ended September 30, 2008 and 2007, respectively; interest income in 2008 includes $0.5 million in interest income from FXRE on the 2007 license payments and the FXRE loan.

Income Taxes

The increase in the 2008 effective tax rate relates primarily to a decrease in the net foreign tax credit CKX is able to take on its foreign source income.

Equity in Earnings of Affiliates

The Company recorded $2.0 million of earnings in unconsolidated affiliates for the nine months ended September 30, 2008 primarily reflecting the Company’s investment in Beckham Brands Limited. The Company recorded $1.1 million of earnings in unconsolidated affiliates for the nine months ended September 30, 2007. The increase is principally related to David Beckham’s marketing contract with the Los Angeles Galaxy and an increase in licensing activity.

Minority Interest

Minority interest expense of $1.8 million for the nine months ended September 30, 2008 and 2007 reflect shares in the net income of the Presley Business and the Ali Business related to the equity interests retained by the former owners.

2008 Financial Outlook

Management believes that attendance at Graceland for the remainder of 2008 will be significantly lower than the levels achieved in 2007 primarily due to the ongoing impact of higher gas prices and the weak economy on discretionary travel.

Management expects that 19 Entertainment’s revenue and OIBDAN for the fourth quarter of 2008 will be lower than the results achieved for the comparable periods in 2007 due to the timing of album releases by former American Idol contestants, several one-time projects in 2007 that will not be repeated and higher development spending on new projects currently under development.

Liquidity and Capital Resources

Revolving Credit Facility — The Company is party to a revolving credit agreement (the “Credit Facility”) with various lenders. Loans under the Credit Facility are guaranteed by all of the Company’s wholly-owned domestic subsidiaries and certain of its wholly-owned foreign subsidiaries. The loans are secured by a pledge of certain assets of the Company and its subsidiary guarantors, including ownership interests in all wholly-owned domestic subsidiaries, substantially all wholly-owned foreign subsidiaries and certain subsidiaries that are not wholly-owned. On June 1, 2007 the Company amended the agreement to increase the amount of the Credit Facility by $25.0 million from its initial $125.0 million to a total of $150.0 million and to permit the investment by the Company in FXRE and the subsequent distribution to the Company’s stockholders of the Company’s equity interest

in FXRE. The total availability under the Credit Facility was reduced from $150.0 million to $141.7 million in September 2008 due to the bankruptcy of Lehman Commercial Paper, Inc., a subsidiary of Lehman Brothers, Inc. As of September 30, 2008, the Company had drawn down $100.0 million on the Credit Facility, with the proceeds used for the investment in FXRE. Additional borrowings under the Credit Facility are available to the Company for general corporate purposes and to finance future acquisitions and joint ventures. Base rate loans under the Credit Facility bear interest at a rate equal to the greater of (i) the prime rate or (ii) the federal funds rate, plus 50 basis points. Eurodollar loans under the Credit Facility bear interest at a rate determined by a formula based on a published Telerate rate, adjusted for the reserve requirements prescribed for eurocurrency funding by a member bank of the Federal Reserve, plus 150 basis points. Any loans under the Credit Facility must be repaid by May 24, 2011. A commitment fee of 0.50% on the daily unused portion of the Credit Facility is payable monthly in arrears. The effective interest rate on these borrowings under the revolving credit agreement as of September 30, 2008 was 3.99%. The Credit Facility requires the Company and its subsidiaries to maintain certain financial covenants, including (a) a maximum debt to EBITDA ratio of 4.5 to 1.0 and (b) a minimum EBITDA to interest expense ratio. Under the terms of the Credit Facility, EBITDA is defined as consolidated net income plus income tax expense, interest expense, depreciation and amortization expense, extraordinary charges and non-cash charges and minus interest income, extraordinary gains and any other non-cash income. The Credit Facility also contains covenants that regulate the Company’s and its subsidiaries’ incurrence of debt, disposition of property and capital expenditures.

The Company was in compliance with all financial loan covenants as of September 30, 2008.

Cash Flow for the nine months ended September 30, 2008 and 2007

Operating Activities

Net cash provided by operating activities was $61.0 million for the nine months ended September 30, 2008, reflecting net income of $33.2 million, which includes depreciation and amortization expenses of $16.4 million and the impact of seasonal changes in working capital levels. The increase in cash flow from operations of $27.3 million in 2008 from the prior year period is due primarily to the increase in net income of $20.5 million and an increase in working capital.

Net cash provided by operating activities was $33.7 million for the nine months ended September 30, 2007, reflecting net income of $12.7 million, which includes depreciation and amortization expenses of $16.8 million, discontinued operations of $8.4 million and the impact of seasonal changes in working capital levels.

Investing Activities

Net cash used in investing activities was $6.0 million for the nine months ended September 30, 2008, reflecting capital expenditures related primarily to the purchase of additional land adjacent to Graceland.

Net cash used in investing activities was $119.5 million for the nine months ended September 30, 2007 primarily reflecting the amount, including transaction costs, paid for the investment in FXRE of $102.3 million, the loan to FXRE of $6.0 million and capital expenditures of $9.4 million related primarily to the purchase of additional land adjacent to Graceland.

Financing Activities

Cash used in financing activities was $3.2 million for the nine months ended September 30, 2008. The Company made distributions of $1.3 million to minority interest shareholders, principal payments on notes payable of $0.6 million and dividend payments of $1.4 million to the holder of the Series B Convertible Preferred Stock.

Cash provided by financing activities was $96.7 million for the nine months ended September 30, 2007. The Company borrowed $100.0 million under its revolving credit facility to fund the FXLR acquisition and received $0.2 million of net proceeds from warrant exercises. The Company made distributions to minority interest shareholders of $1.4 million, principal payments on notes payable of $0.6 million and dividend payments of $1.4 million to the holder of the Series B Convertible Preferred Stock. During the nine months ended September 30, 2007, the Company made payments of $0.1 million for costs associated with amending the revolving credit facility.

Uses of Capital

At September 30, 2008, the Company had $102.5 million of debt outstanding and $99.8 million in cash and cash equivalents.

We believe that our current cash on hand together with the $41.7 million available under the Company’s revolving credit facility and cash flow from operations will be sufficient to fund our current operations, including payments of interest and principal due on the Company’s debt, dividends on our Series B Convertible Preferred Stock, mandatory minimum distributions to the minority shareholder in the each of the Presley Business and Ali Business and capital expenditures.

Capital Expenditures

We presently anticipate that our total capital expenditures for 2008, including land purchases and related costs in the vicinity around Graceland, will total approximately $7.0 million. We purchased two parcels of land for $2.4 million in the nine months ended September 30, 2008. We estimate that we will incur expenditures for the development of the Elvis Presley show in Las Vegas with Cirque du Soleil and MGM of approximately $3.6 million in 2008; we incurred $2.6 million in the nine months ended September 30, 2008. These estimates exclude expenditures for the Company’s Graceland re-development projects, the timing and extent of which is not determinable at this time.

We announced preliminary plans to re-develop our Graceland attraction including an expanded visitors center, developing new attractions and merchandising shops and building a new boutique convention hotel. This project is conditioned on a number of factors, including obtaining necessary approvals and concessions from local and state authorities. Although we have not yet determined the exact scope, cost, financing plan and timing of this project, we expect that the re-development of Graceland will take several years and could require a substantial financial investment by the Company. FXRE is expected to fund the cost of any new hotels and related meeting facilities built at Graceland pursuant to the terms of the license agreement it has entered into with EPE.

As referenced above under “Transactions Involving FX Real Estate and Entertainment Inc. and FX Luxury Realty, LLC — FXRE Financial Condition,” FXRE’s ability to satisfy its obligations under the license agreement with EPE, including funding the development of any new hotels and meeting facilities referenced above, is dependent on FXRE successfully raising capital in the future. FXRE is highly leveraged and its ability to raise capital in the future will be dependent upon a number of factors including, among others, prevailing market conditions. There can be no assurance that FXRE will be able to complete a financing on terms that are favorable to its business or at all.

Future Acquisitions

We intend to acquire additional businesses that fit our strategic goals. We expect to finance our future acquisitions of entertainment related businesses from cash on hand, our revolving credit facility, new credit facilities, additional debt and equity offerings, issuance of our equity directly to sellers of businesses and cash flow from operations. However, no assurance can be given that we will be able to obtain adequate financing to complete any potential future acquisitions we might identify.

Dividends

Our Series B Convertible Preferred Stock requires payment of a cash dividend of 8% per annum in quarterly installments. On an annual basis, our total dividend payment on the Series B Convertible Preferred Stock is $1.8 million. If we fail to make our quarterly dividend payments to the holders of the Series B Convertible Preferred Stock on a timely basis, the dividend rate increases to 12% and all amounts owing must be paid within three business days in shares of common stock valued at the average closing price over the previous 30 consecutive trading days. After such payment is made, the dividend rate returns to 8%. All such dividend payments were made on a timely basis.

We have no intention of paying any cash dividends on our common stock for the foreseeable future.

Commitments and Contingencies

There are various lawsuits and claims pending against us and which we have initiated against others. We believe that any ultimate liability resulting from these actions or claims will not have a material adverse effect on our results of operations, financial condition or liquidity.

In addition to our scheduled maturities of debt, obligations to redeem preferred stock and obligations to the seller of the Presley Business, to certain sellers of 19 Entertainment and to the sellers of MBST and the Ali Business, we have future cash obligations under various types of contracts. We lease office space and equipment under long-term operating leases. We have also entered into long-term employment agreements with certain of our executives and other key employees. These employment agreements typically contain provisions that allow us to terminate the contract with good cause

On August 17, 2007, the Company announced that, together with its subsidiaries, Elvis Presley Enterprises, Inc. and Elvis Presley Enterprises LLC, it has reached an agreement with Cirque du Soleil and MGM MIRAGE (“MGM”) to create a permanent Elvis Presley show at MGM’s CityCenter hotel/casino, which is currently under construction in Las Vegas. The Elvis Presley show is expected to open with the CityCenter hotel/casino in December 2009. CKX and Cirque du Soleil have each agreed to pay one-half of the creative development and production costs of the Elvis Presley show. CKX expects its portion of the investment to be approximately $24 million, with the largest amount expected to be funded in the later stages of development. The Company expects to incur expenses of approximately $5.0 million in connection with the show in 2008; $2.6 million was incurred in the nine months ended September 30, 2008.

Annual Impairment Review

Inflation

Inflation has affected the historical performances of the businesses primarily in terms of higher operating costs for salaries and other administrative expenses. Although the exact impact of inflation is indeterminable, we believe that the Presley Business has offset these higher costs by increasing prices at Graceland and for intellectual property licenses and that 19 Entertainment has offset these higher costs by increasing fees charged for its production services and higher royalty and sponsorship rates.

Critical Accounting Policies

During the nine months ended September 30, 2008, there have been no significant changes related to the Company’s critical accounting policies and estimates as disclosed in the Company’s Form 10-K for the year ended December 31, 2007.

is effective for fiscal years beginning after November 15, 2007. Effective January 1, 2008 the Company elected to not report any of its assets and liabilities which were covered by SFAS 159 at fair value.

On December 4, 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”) and Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”). These new standards will significantly change the accounting for and reporting of business combination transactions and noncontrolling (minority) interests in consolidated financial statements. SFAS 141(R) and SFAS 160, respectively, and are expected to be issued by the IASB early in 2008. SFAS 141(R) and SFAS 160 are required to be adopted simultaneously and are effective for the first annual reporting period beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of SFAS 141(R) will change the Company’s accounting treatment for business combinations on a prospective basis beginning January 1, 2009. The Company has completed its assessment of the impact of SFAS No. 160 on its financial statements following adoption and has concluded that the statement will not have a significant impact on the Company’s financial statements.

Off Balance Sheet Arrangements

As of September 30, 2008, we did not have any off balance sheet arrangements as defined in Item 303 (a)(4)(ii) of SEC Regulation S-K.


Item 3.	*Quantitative and Qualitative Disclosure About Market Risk*

We are exposed to market risk arising from changes in market rates and prices, including movements in foreign currency exchange rates, interest rates and the market price of our common stock. To mitigate these risks, we may utilize derivative financial instruments, among other strategies. We do not use derivative financial instruments for speculative purposes.

Interest Rate Risk

We had $102.5 million of total debt outstanding at September 30, 2008, of which $100 million was variable rate debt.

Assuming a hypothetical increase in the Company’s variable interest rate of 100 basis points, our net income for the nine months ended September 30, 2008 would have decreased by approximately $0.4 million.

Any future borrowings under the Company’s revolving credit facility commitment would be variable rate debt and the Company would therefore have exposure to interest rate risk.

Foreign Exchange Risk

We have significant operations outside the United States, principally in the United Kingdom. Some of our foreign operations are conducted in local currencies. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets in which we operate.

Assuming a hypothetical weakening of the U.S. dollar exchange rate with the U.K. pound sterling of 10%, our net income for the nine months ended September 30, 2008 would have decreased by approximately $2.3 million, reflecting an excess of U.K. pound sterling denominated operating expenses over U.K. pound sterling denominated revenue.

As of September 30, 2008, we have not entered into any foreign currency option contracts or other financial instruments intended to hedge our exposure to changes in foreign exchange rates. We intend to continue to monitor our operations outside the United States and in the future may seek to reduce our exposure to such fluctuations by entering into foreign currency option contracts or other hedging arrangements.

19 Entertainment Put Option

In connection with the acquisition of 19 Entertainment, certain sellers of 19 Entertainment entered into a Put and Call Option Agreement that provides them with certain rights whereby, during a short period following the six year

anniversary of the acquisition, these sellers can exercise a put right to sell 1,672,170 shares of the Company’s common stock to the Company at a price equal to $13.18 per share. If the Company’s stock price is below $13.18 per share during the period that the put is exercisable and the sellers exercise this put right, the Company will have exposure to market risk for the amount that $13.18 per share exceeds the then market price of the stock for the number of shares put back to the Company.


Item 4.	*Controls and Procedures*

Evaluation of Disclosure Controls and Procedures

Management, with the participation of the Company’s chief executive officer, Robert F.X. Sillerman, and its chief financial officer, Thomas P. Benson, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15 (e) or 15d-15 (e)) as of September 30, 2008. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of that date, our disclosure controls and procedures were effective to ensure that the material information required to be disclosed by us in the report that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

Changes in Internal Controls over Financial Reporting

No changes in internal control over financial reporting have occurred during the first nine months of 2008 that have materially affected CKX’s internal controls over financial reporting.

Part II — Other Information


Item 1.	*Legal Proceedings*

The two cases were consolidated and on April 18, 2008, plaintiffs filed a consolidated amended complaint.

In light of the termination of the merger transaction (see note 1, Merger Agreement), the settlement will not be concluded and it is anticipated that the lawsuit will be dismissed without prejudice.


Item 1A.	*Risk Factors*

Information concerning certain risks and uncertainties appears in Part I, Item 1A “Risk Factors” of the Company’s 2007 Form 10-K. You should carefully consider these risks and uncertainties before making an

investment decision with respect to shares of our common stock. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

The following is an update to “Item 1A. Risk Factors” set forth in the Form 10-K.

Current economic conditions and the global financial crisis may have an impact on our business and financial condition in ways that we currently cannot predict.

The global economy is currently experiencing a significant contraction, with an almost unprecedented lack of availability of business and consumer credit. This current decrease and any future decrease in economic activity in the United States or in other regions of the world in which we do business could adversely affect our financial condition and results of operations. Continued, and potentially increased, volatility, instability and economic weakness and a resulting decrease in discretionary consumer and business spending may result in a reduction in our revenues, including from sponsorship sales, licensing, Graceland and tour attendance and music sales. We currently cannot predict the extent to which our revenues may be impacted.

In addition, our ability to make acquisitions depends, in part, on the availability of equity and debt financing. Recently, the credit markets and the general economy have been experiencing a period of large-scale turmoil and upheaval. As a result, equity and debt financing from the capital markets is not currently available on acceptable terms and may not be available for some time. This may limit our ability to pursue an acquisition-based strategy.

The company maintains operating bank accounts at a number of financial institutions in the United States and United Kingdom. A significant amount of the Company’s cash balances in the United States are in excess of the government’s Federal Deposit Insurance Corporation (FDIC) insurance limits. The FDIC insures deposits in most banks and savings associations located in the United States. The FDIC protects depositors against the loss of their deposits if an FDIC-insured bank or savings association fails. The balances held in the United Kingdom are not insured or guaranteed by the FDIC or any other governmental agency. We could incur substantial losses if the underlying financial institutions fail or are otherwise unable to return our deposits.


Supplemental Cash Flow Information

The Company had the following non-cash investing and financing activities in the nine months ended September 30, 2008 (in thousands):

Distribution of final 2% ownership interest in FX Real Estate and Entertainment Inc.	$	6,175
Accrued but unpaid Series B Convertible Preferred Stock Dividends		456

The Company had the following non-cash investing and financing activities in the nine months ended September 30, 2007 (in thousands):
Accrued but unpaid Series B Convertible Preferred Stock Dividends	$	456
Dividend of 50% of CKX’s interests in FX Luxury Realty LLC to the Distribution Trusts		93,159


	Part I.	FINANCIAL INFORMATION
	Item 1	Financial Statements
		Condensed Consolidated Balance Sheets at September 30, 2008 (Unaudited)and December 31, 2007	3
		Condensed Consolidated Statements of Operations (Unaudited) for the three months ended September 30, 2008 and 2007	4
		Condensed Consolidated Statements of Operations (Unaudited) for the nine months ended September 30, 2008 and 2007	5
		Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2008 and 2007	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	8
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	42
	Item 4	Controls and Procedures	43

	Part II	OTHER INFORMATION	43
	Item 1	Legal Proceedings	43
	Item 1A.	Risk Factors	43
	Item 6	Exhibits	45
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION


Exhibit
No.			Description

	31	.1	Certification of Principal Executive Officer (Filed herewith).

	31	.2	Certification of Principal Financial Officer (Filed herewith).

	32	.1	Section 1350 Certification of Principal Executive Officer (Filed herewith).

	32	.2	Section 1350 Certification of Principal Financial Officer (Filed herewith).