AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
COMMISSION FILE NUMBER 0-20570

USA NETWORKS, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 59-2712887
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

152 WEST 57TH STREET
NEW YORK, NEW YORK
(Address of principal executive offices)

10019
(Zip Code)

(212) 314-7300
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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 X No ___

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date.

As of October 30, 1998, there were outstanding 124,041,759 shares of Common
Stock and 31,181,726 shares of Class B Common Stock. The aggregate market value
of the voting stock held by non-affiliates of the Registrant as of October 30,
1998 was $2,138,893,538.

Assuming the conversion, as of October 30, 1998, of all equity securities
of the Registrant and its affiliates convertible into or exchangeable for Common
Stock, the Registrant would have had outstanding 330,114,686 shares of Common
Stock with an aggregate market value of $7,427,580,435.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

USA NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

- ----------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ----------------------
1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------
(In thousands, except per share data)

NET REVENUES
Networks and television production........ $281,302 $ -- $ 757,305 $ --
Electronic retailing...................... 261,183 236,706 776,418 743,893
Ticketing operations...................... 89,134 67,331 283,538 67,331
Internet services......................... 5,934 3,330 14,467 8,511
Broadcasting and other.................... 2,961 18,889 35,289 51,758
-------- -------- ---------- --------
Total net revenues................ $640,514 $326,256 $1,867,017 $871,493
-------- -------- ---------- --------
Operating costs and expenses:
Cost of sales............................. 192,531 156,041 533,190 464,159
Program costs............................. 153,618 -- 412,541 --
Other costs............................... 185,758 121,827 597,328 273,316
Depreciation and amortization............. 58,605 25,703 163,712 67,194
-------- -------- ---------- --------
Total operating costs and
expenses........................ 590,512 303,571 1,706,771 804,669
-------- -------- ---------- --------
Operating income.................. 50,002 22,685 160,246 66,824
-------- -------- ---------- --------
Other income (expense):
Interest income........................... 4,097 1,460 11,807 3,973
Interest expense.......................... (25,875) (8,611) (94,704) (22,101)
Gain on disposition of broadcast
stations............................... 9,247 -- 84,187 --
Miscellaneous............................. (3,452) (3,023) (19,707) (9,283)
-------- -------- ---------- --------
(15,983) (10,174) (18,417) (27,411)
-------- -------- ---------- --------
Earnings before income taxes and minority
interest.................................. 34,019 12,511 141,829 39,413
Income tax expense.......................... (16,619) (9,078) (72,792) (29,753)
Minority interest........................... (22,249) 83 (42,996) 98
-------- -------- ---------- --------
NET EARNINGS (LOSS)......................... $ (4,849) $ 3,516 $ 26,041 $ 9,758
======== ======== ========== ========
Net earnings (loss) per common share........
Basic.................................. $ (.03) $ .03 $ .19 $ .10
======== ======== ========== ========
Diluted................................ $ (.03) $ .03 $ .14 $ .09
======== ======== ========== ========
Weighted average shares outstanding......... 155,017 110,020 138,355 102,016
======== ======== ========== ========
Weighted average diluted shares
outstanding............................... 155,017 118,994 280,242 108,174
======== ======== ========== ========

The accompanying notes are an integral part of these statements.

1
3

USA NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

- ----------------------------------------------------------------------------------------------
SEPTEMBER 30,
------------------------ DECEMBER 31,
ASSETS 1998 1997 1997
- ----------------------------------------------------------------------------------------------
(In thousands)

CURRENT ASSETS
Cash and cash equivalents........................... $ 292,231 $ 106,121 $ 116,036
Accounts and notes receivable, net.................. 286,237 98,364 96,867
Inventories, net.................................... 445,425 155,844 151,100
Deferred income taxes............................... 37,067 33,714 39,956
Other current assets, net........................... 27,028 13,381 16,723
---------- ---------- ----------
Total current assets...................... 1,087,988 407,424 420,682

PROPERTY, PLANT AND EQUIPMENT
Computer and broadcast equipment.................... 203,240 140,136 145,701
Buildings and leasehold improvements................ 94,179 83,618 83,851
Furniture and other equipment....................... 68,009 36,199 39,498
---------- ---------- ----------
365,428 259,953 269,050
Less accumulated depreciation and amortization.... (152,238) (113,433) (120,793)
---------- ---------- ----------
213,190 146,520 148,257
Land................................................ 15,944 17,365 16,602
Projects in progress................................ 19,607 9,806 15,262
---------- ---------- ----------
248,741 173,691 180,121
OTHER ASSETS
Intangible assets, net.............................. 6,352,103 1,857,803 1,862,128
Cable distribution fees, net ($41,765, $37,462, and
$46,459, respectively, to related parties)........ 97,596 104,137 111,292
Long-term investments ($3,068, $17,267, and $7,510,
respectively, in related parties.................. 66,364 33,576 47,926
Notes and accounts receivable, net of current
portion ($4,695, $843, and $843, respectively,
from related parties)............................. 78,901 11,552 11,854
Inventories, net.................................... 202,117 -- --
Deferred income taxes............................... 72,704 5,592 3,541
Deferred charges and other, net..................... 60,443 43,530 33,252
---------- ---------- ----------
$8,266,957 $2,637,305 $2,670,796
========== ========== ==========

The accompanying notes are an integral part of these statements.

2
4

USA NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

- ----------------------------------------------------------------------------------------------
SEPTEMBER 30,
------------------------ DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997 1997
- ----------------------------------------------------------------------------------------------
(In thousands)

CURRENT LIABILITIES
Current maturities of long-term obligations......... $ 68,564 $ 11,263 $ 12,918
Accounts payable, trade............................. 165,576 107,577 111,214
Accounts payable, client accounts................... 84,664 103,687 73,887
Obligations for program rights and film costs....... 275,996 -- --
Cable distribution fees payable ($18,578, $8,474 and
$19,091, respectively, to related parties)........ 28,862 32,314 43,553
Deferred gain on CitySearch Transaction............. 65,802 -- --
Other accrued liabilities........................... 384,097 96,394 118,169
---------- ---------- ----------
Total current liabilities................. 1,073,561 351,235 359,741

LONG-TERM OBLIGATIONS (net of current maturities)... 748,101 428,754 448,346
OBLIGATIONS FOR PROGRAM RIGHTS AND FILM COSTS, net
of current........................................ 346,563 -- --
OTHER LONG-TERM LIABILITIES......................... 52,630 50,423 43,132
MINORITY INTEREST................................... 3,589,338 365,355 372,223
COMMITMENTS AND CONTINGENCIES....................... -- -- --
STOCKHOLDERS' EQUITY
Preferred stock -- $.01 par value; authorized
15,000,000 shares; no shares issued and
outstanding....................................... -- -- --
Common stock -- $.01 par value; authorized
800,000,000 shares; issued and outstanding
123,994,918; 87,293,722; and 87,430,586 shares,
respectively...................................... 1,240 872 874
Class B -- convertible common stock -- $.01 par
value; authorized, 200,000,000 shares; issued and
outstanding, 31,181,726; 24,455,294; and
24,455,294 shares, respectively................... 312 244 244
Additional paid-in capital.......................... 2,533,708 1,556,031 1,558,037
Accumulated deficit................................. (77,560) (106,904) (103,601)
Unrealized gain in available for sale securities.... 7,476 -- --
Foreign currency translation........................ (1,723) -- --
Unearned compensation............................... (1,691) (3,707) (3,202)
Note receivable from key executive for common stock
issuance.......................................... (4,998) (4,998) (4,998)
---------- ---------- ----------
Total stockholders' equity................ 2,456,764 1,441,538 1,447,354
========== ========== ==========
$8,266,957 $2,637,305 $2,670,796
========== ========== ==========

The accompanying notes are an integral part of these statements.

3
5

USA NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
- --------------------------------------------------------------------------------

CLASS B
CONVERTIBLE ADDITIONAL FOREIGN
COMMON COMMON PAID-IN ACCUMULATED UNREALIZED CURRENCY
TOTAL STOCK STOCK CAPITAL DEFICIT GAINS TRANSLATION
- -------------------------------------------------------------------------------------------------------------------------
(In thousands)

BALANCE AT JANUARY 1, 1998...... $1,447,354 $ 874 $244 $1,558,037 $(103,601) $ -- $ --
Comprehensive Income:
Net earnings for the nine
months ended September 30,
1998......................... 26,041 -- -- -- 26,041 -- --
Increase in unrealized gains in
available for sale
securities................... 7,476 -- -- -- -- 7,476 --
Foreign currency translation... (1,723) -- -- -- -- -- (1,723)
----------
Comprehensive income....... 31,794
----------
Issuance of common stock upon
exercise of stock options...... 5,388 5 -- 5,383 -- -- --
Income tax benefit related to
stock options exercised........ 2,381 -- -- 2,381 -- -- --
Issuance of stock in connection
with Universal Transaction..... 302,154 71 76 302,007 -- -- --
Issuance of stock in connection
with Ticketmaster tax-free
merger......................... 467,035 160 -- 466,875 -- -- --
Issuance of stock in connection
with conversion of
debentures..................... 199,147 122 -- 199,025 -- -- --
Conversion of Class B
Convertible Common Stock to
Common Stock................... -- 8 (8) -- -- -- --
Amortization of unearned
compensation related to stock
options and equity
participation plans............ 1,511 -- -- -- -- -- --
---------- ------ ---- ---------- --------- ------- -------
BALANCE AT SEPTEMBER 30, 1998... $2,456,764 $1,240 $312 $2,533,708 $ (77,560) $ 7,476 $(1,723)
========== ====== ==== ========== ========= ======= =======

NOTE
RECEIVABLE
FROM KEY
EXECUTIVE
FOR
COMMON
UNEARNED STOCK
COMPENSATION ISSUANCE

BALANCE AT JANUARY 1, 1998...... $(3,202) $(4,998)
Comprehensive Income:
Net earnings for the nine
months ended September 30,
1998......................... -- --
Increase in unrealized gains in
available for sale
securities................... -- --
Foreign currency translation... -- --
Comprehensive income.......
Issuance of common stock upon
exercise of stock options...... -- --
Income tax benefit related to
stock options exercised........ -- --
Issuance of stock in connection
with Universal Transaction..... -- --
Issuance of stock in connection
with Ticketmaster tax-free
merger......................... -- --
Issuance of stock in connection
with conversion of
debentures..................... -- --
Conversion of Class B
Convertible Common Stock to
Common Stock................... -- --
Amortization of unearned
compensation related to stock
options and equity
participation plans............ 1,511 --
------- -------
BALANCE AT SEPTEMBER 30, 1998... $(1,691) $(4,998)
======= =======

The accompanying notes are an integral part of these statements.

4
6

USA NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

- ----------------------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
- ----------------------------------------------------------------------------------------
(In thousands)

Cash flows from operating activities:
Net earnings................................................ $ 26,041 $ 9,758
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization............................. 147,829 52,798
Amortization of cable distribution fees................... 15,883 14,327
Amortization of program rights and film costs............. 358,688 --
Payment for program rights and film costs................. (335,001) --
Deferred income taxes..................................... 9,309 15,462
Equity in losses of unconsolidated affiliates............. 16,104 9,257
Gain on disposition of broadcast stations and other
assets................................................. (84,187) --
Minority interest......................................... 42,996 (98)
Non-cash stock compensation............................... 3,892 1,623
Non-cash interest......................................... 4,800 3,163
Changes in current assets and liabilities:
Accounts receivable.................................... (112,685) (13,521)
Inventories............................................ (86,067) (49,310)
Accounts payable....................................... 67,191 23,636
Accrued liabilities.................................... 57,712 (36,115)
Other, net................................................ 14,226 (13,377)
----------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 146,731 17,603
----------- ---------
Cash flows from investing activities:
Acquisition of Universal Transaction, net of cash
acquired............................................... (1,297,233) --
Acquisitions, net of cash acquired........................ (85,555) --
Capital expenditures...................................... (64,240) (30,601)
Increase in long-term investments......................... (25,631) (14,786)
Proceeds from long-term notes receivable.................. (2,997) 5,635
Proceeds from disposition of broadcast stations........... 356,769 --
Payment of merger and financing costs..................... (29,972) (6,349)
----------- ---------
NET CASH USED IN INVESTING ACTIVITIES............. (1,148,859) (46,101)
----------- ---------
Cash flows from financing activities:
Borrowings................................................ 1,641,380 231,142
Principal payments on long-term obligations............... (1,198,565) (243,784)
Cash acquired in the Ticketmaster Transaction............. -- 89,663
Cash acquired in the CitySearch Transaction............... 7,877 --
Redemption of minority interest in SF Broadcasting........ (81,664) --
Proceeds from issuance of common stock and LLC shares..... 811,018 14,992
----------- ---------
NET CASH PROVIDED BY (USED) IN FINANCING
ACTIVITIES..................................... 1,180,046 92,013
----------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................... (1,723) --
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 176,195 63,515
Cash and cash equivalents at beginning of period............ 116,036 42,606
----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 292,231 $ 106,121
=========== =========

The accompanying notes are an integral part of these statements.

5
7

USA NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A -- COMPANY HISTORY AND BASIS OF PRESENTATION

COMPANY HISTORY

USA Networks, Inc. (the "Company" or "USAi"), formerly known as HSN, Inc.,
is a holding company, the subsidiaries of which are engaged in diversified media
and electronic commerce businesses.

In December 1996, the Company consummated mergers with each of Home
Shopping Network, Inc. ("Home Shopping") and Savoy Pictures Entertainment, Inc.
("Savoy") (the "Mergers"). In July 1997, the Company acquired a controlling
interest in Ticketmaster Group, Inc. ("Ticketmaster"). On June 24, 1998, the
Company completed its acquisition of Ticketmaster in a tax-free merger, pursuant
to which each outstanding share of Ticketmaster common stock not owned by the
Company was exchanged for 1.126 shares of common stock, par value $.01 per
share, of USAi (" Common Stock"). The acquisition of the controlling interest
and the tax-free merger are referred to as the "Ticketmaster Transaction".

On February 12, 1998, the Company acquired USA Networks, a New York general
partnership, consisting of cable television networks USA Network and The Sci-Fi
Channel ("Networks"), as well as the domestic television production and
distribution businesses of Universal Studios ("Studios USA") from Universal
Studios, Inc. ("Universal"), an entity controlled by The Seagram Company Ltd.
("Seagram"), and the Company changed its name to USA Networks, Inc. (the
"Universal Transaction") -- See Note C.

Following the Universal Transaction, the Company engages in five principal
areas of business:

- NETWORKS AND TELEVISION PRODUCTION, which includes Networks and Studios
USA. Networks operates the USA Network and The Sci-Fi Channel cable
networks and Studios USA produces and distributes television programming.

- ELECTRONIC RETAILING, consisting primarily of the Home Shopping Network
and America's Store, which are engaged in the electronic retailing
business.

- TICKETING OPERATIONS, which primarily represents Ticketmaster, the
leading provider of automated ticketing services in the U.S.

- INTERNET SERVICES, which represents the Company's on-line retailing
networks business.

- BROADCASTING, which owns and operates television stations.

BASIS OF PRESENTATION

The interim Condensed Consolidated Financial Statements of the Company are
unaudited and should be read in conjunction with the audited Consolidated
Financial Statements and Notes thereto for the year ended December 31, 1997.

In the opinion of the Company, all adjustments necessary for a fair
presentation of such Condensed Consolidated Financial Statements have been
included. Such adjustments consist of normal recurring items. Interim results
are not necessarily indicative of results for a full year. The interim Condensed
Consolidated Financial Statements and Notes thereto are presented as permitted
by the Securities and Exchange Commission and do not contain certain information
included in the Company's audited Consolidated Financial Statements and Notes
thereto.

The Condensed Consolidated Financial Statements include the operations of
Networks and Studios USA from the date of acquisition on February 12, 1998.

Certain amounts in the Condensed Consolidated Financial Statements for the
quarter and nine months ended September 30, 1997 have been reclassified to
conform to the 1998 presentation.

6
8
USA NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

See the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 for a summary of significant accounting policies.

CONSOLIDATION

The Condensed Consolidated Financial Statements include the accounts of the
Company and all wholly-owned and voting-controlled subsidiaries. All significant
intercompany transactions and accounts have been eliminated.

Investments in which the Company owns a 20%, but less than a controlling
voting interest and where it can exercise significant influence over the
operations of the investee, are accounted for using the equity method. All other
investments are accounted for using the cost method. The Company periodically
evaluates the recoverability of investments recorded under the cost method and
recognizes losses if a decline in value is determined to be other than
temporary.

REVENUE RECOGNITION

Networks and Television Production

Television production revenues are recognized as completed episodes are
delivered. Generally, television programs are first licensed for network
exhibition and foreign syndication, and subsequently for domestic syndication,
cable television and home video. Certain television programs are produced and/or
distributed directly for initial exhibition by local television stations,
advertiser-supported cable television, pay television and/or home video.
Television production advertising revenues (i.e., sales of advertising time
received by Studios USA in lieu of cash fees for the licensing of program
broadcast rights to a broadcast station ("barter syndication")) are recognized
upon both the commencement of the license period of the program and the sale of
advertising time pursuant to non-cancelable agreements, provided that the
program is available for its first broadcast. Foreign minimum guaranteed amounts
are recognized as revenues on the date of the license agreement, provided the
program is available for exhibition.

Networks advertising revenue is recognized in the period in which the
advertising commercials are aired on cable networks. Provisions are recorded
against advertising revenues for audience under deliveries ("makegoods").
Affiliate fees are recognized in the period during which the programming is
provided.

EARNINGS PER SHARE

Basic earnings per share ("Basic EPS") excludes dilution and is computed by
dividing net income by the weighted average number of common shares outstanding
during the period. Diluted earnings per share ("Diluted EPS") reflects the
potential dilution that could occur if stock options and other commitments to
issue common stock were exercised resulting in the issuance of common stock that
would share in the earnings of the Company.

COMPREHENSIVE INCOME

Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). The
new rules establish standards for the reporting of comprehensive income and its
components in financial statements. Comprehensive income consists of net income
and other gains and losses affecting stockholders' equity that, under generally
accepted accounting principles, are excluded from net income. For the Company,
such items consist of unrealized gains and losses on marketable equity
investments and foreign currency translation gains and losses. The adoption of
SFAS 130 did not have a material effect on the Company's primary financial
statements, but did affect the presentation of the accompanying Condensed
Consolidated Statement of Stockholders' Equity.

7
9
USA NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

FILM COSTS

Film costs consist of direct production costs and production overhead, less
accumulated amortization. Development roster (and related costs) and abandoned
story and development costs are charged to production overhead. Film costs are
stated at the lower of unamortized cost or estimated net realizable value on a
production-by-production basis.

Generally, the estimated ultimate costs of completed television productions
are amortized, and participation expenses are accrued, for each production in
the proportion that current period revenue recognized bears to the estimated
future revenue to be received from all sources. Amortization and accruals are
made under the individual film forecast method. Estimated ultimate revenues and
costs are reviewed quarterly and revisions to amortization rates or write-downs
to net realizable value are made as required.

Film costs, net of amortization, classified as current assets include the
portion of unamortized costs of television program productions allocated to
network, first run syndication and initial international distribution markets.
The allocated portion of released film costs expected to be recovered from
secondary markets or other exploitation is reported as a noncurrent asset. Other
costs relating to television productions, such as television program development
costs, in-process productions and the television program library, are classified
as noncurrent assets.

PROGRAM RIGHTS

License agreements for program material are accounted for as a purchase of
program rights. The asset related to the program rights acquired and the
liability for the obligation incurred are recorded at their net present value
when the license period begins and the program is available for its initial
broadcast. The asset is amortized primarily based on the estimated number of
airings. Amortization is computed generally on the straight-line basis as
programs air; however, when management estimates that the first airing of a
program has more value than subsequent airings, an accelerated method of
amortization is used. Other costs related to programming, which include program
assembly, commercial integration and other costs, are expensed as incurred.
Management periodically reviews the carrying value of program rights and records
write-offs, as warranted, based on changes in programming usage.

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
footnotes thereto. Actual results could differ from those estimates.

Significant estimates underlying the accompanying Condensed Consolidated
Financial Statements and Notes include the inventory carrying adjustment, sales
return accrual, allowance for doubtful accounts, recoverability of intangibles
and other long-lived assets, management's forecast of anticipated revenues from
the distribution of television product in order to evaluate the ultimate
recoverability of film inventory and amortization of program usage.

RECENTLY ISSUED PRONOUNCEMENTS

During fiscal 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131") was issued. SFAS 131 requires disclosure of financial and descriptive
information about an entity's reportable operating segments under the
"management approach" as defined in the Statement. The Company will adopt SFAS
131 as of December 31, 1998. The impact of adoption of this standard on the
Company's financial statements is not expected to be material.

8
10
USA NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

NOTE C -- BUSINESS ACQUISITIONS

UNIVERSAL TRANSACTION

In connection with the Universal Transaction, USAi paid Universal
approximately $4.1 billion in the form of a cash payment of approximately $1.6
billion, a portion of which ($300 million plus interest) was deferred until no
later than June 30, 1998, and an effective 45.8% interest in the Company through
shares of common stock, par value $.01 per share, of the Company (the "Common
Stock") and Class B common stock, par value $.01 per share, of the Company (the
"Class B Common Stock"), and shares ("LLC Shares") of a newly formed limited
liability company ("USANi LLC") which are exchangeable (subject to regulatory
restrictions) into shares of Common Stock and Class B Common Stock. At the
closing of the Universal Transaction, USAi contributed its Home Shopping
business to USANi LLC, a subsidiary of USAi. Simultaneously with this
transaction, the remaining 1,178,322 shares of Class B Common Stock,
contingently issuable to Liberty Media Corporation ("Liberty") in connection
with the Mergers, were issued.

The Investment Agreement, as amended and restated as of December 18, 1997,
among the Company, Home Shopping, Universal and Liberty (the "Investment
Agreement"), relating to the Universal Transaction also contemplated that, on or
prior to June 30, 1998, the Company and Liberty, a subsidiary of
Tele-Communications, Inc. ("TCI"), would complete a transaction involving a $300
million cash investment, plus an interest factor, by Liberty in the Company
through the purchase of Common Stock or LLC Shares. The transaction closed on
June 30, 1998 with Liberty making a cash payment of $308.5 million in exchange
for 15,000,000 LLC shares.

The Universal Transaction has been accounted for using the purchase method
of accounting. The purchase price of $4.1 billion including expenses, has been
preliminarily allocated to the assets acquired and liabilities assumed based on
their respective fair values at the date of purchase. The fair value of the
assets acquired and liabilities assumed are summarized below, along with the
excess of the purchase price, including expenses, over the fair value of net
assets, which has been assigned to goodwill.

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
(In thousands)

Current assets.............................................. $ 431,955
Non-current assets.......................................... 329,549
Goodwill.................................................... 4,157,720
Current liabilities......................................... 408,254
Non-current liabilities..................................... 395,439

TICKETMASTER TRANSACTION

In connection with the Ticketmaster tax-free merger, the Company issued
15,967,200 shares of USAi Common Stock to the public shareholders of
Ticketmaster and converted 3.6 million options to acquire Ticketmaster common
stock into options to acquire USAi Common Stock for a total consideration of
$467.7 million, which has been preliminarily allocated to intangible assets.

CITYSEARCH TRANSACTION

On September 28, 1998, pursuant to an Amended and Restated Agreement and
Plan of Reorganization among CitySearch, Inc. ("CitySearch"), the Company,
Ticketmaster and certain of its subsidiaries, the Company merged the online
ticketing operations of Ticketmaster ("Ticketmaster Online") into a subsidiary
of CitySearch, a publisher of local city guides on the Web (the "CitySearch
Merger"), to create Ticketmaster Online-CitySearch, Inc. ("TMCS"). The Company
had acquired Ticketmaster Online as part of the Ticketmaster Transaction and has
preliminarily allocated to Ticketmaster Online a total of $154.8 million of the
goodwill resulting from the Company's acquisition of Ticketmaster. The
CitySearch Merger was accounted for using the "reverse purchase" method of
accounting, pursuant to which Ticketmaster Online was treated as the acquiring
entity for accounting purposes, and the portion of the assets and liabilities of
CitySearch acquired were recorded at their respective fair values under the
purchase method of accounting.

9
11
USA NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

Prior to the CitySearch Merger, the Company owned approximately 11.8% of
CitySearch, which it had purchased for total consideration of $23.0 million.
Pursuant to the CitySearch Merger, the Company acquired 50.7% of CitySearch in
exchange for an effective 35.2% interest in Ticketmaster Online. The total
purchase price for the acquisition of the additional CitySearch interest was
approximately $120.9 million, substantially all of which was allocated to
goodwill which will be amortized over three years.

In connection with the CitySearch Merger, on October 2, 1998, the Company
commenced a Tender Offer to acquire from other TMCS stockholders up to 2,924,339
shares of TMCS common stock. The Company purchased 1,997,502 TMCS shares
pursuant to the Tender Offer, which was completed on November 3, 1998,
representing an additional 3.1% interest in CitySearch, for total consideration
of $17.3 million. Following the completion of the Tender Offer, the Company
beneficially owns approximately 67.9% of TMCS outstanding shares. The CitySearch
Merger and Tender Offer are referred to as the "CitySearch Transaction".

In connection with the CitySearch Transaction, the Company recorded a
deferred gain of $65.8 million by exchanging a 35.2% interest in Ticketmaster
Online with a basis of $55.1 million for a 50.7% interest in CitySearch, which
had a fair value of $120.9 million. The gain was deferred because the
stockholders of CitySearch have various put options on their TMCS stock to USAi,
which put options terminate upon the completion of a qualified initial public
offering, as defined. This gain will be recognized at the time of the completion
of the TMCS initial public offering.

The following unaudited pro forma condensed consolidated financial
information for the three month and nine month periods ended September 30, 1998
and 1997, is presented to show the results of the Company, as if the Universal
Transaction, the Ticketmaster Transaction, the CitySearch Transaction and the
sale of the SF Broadcasting televisions stations (See Note J) all occurred at
the beginning of the periods presented. The pro forma results include certain
adjustments, including increased amortization related to goodwill, the reduction
of programming costs for fair value adjustments related to purchase accounting
and the elimination of intercompany revenues and expenses, and are not
necessarily indicative of what the results would have been had those
transactions actually occurred on the aforementioned dates.

- --------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------------
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------
(In thousands, except per share data)

Net revenues..................................... $643,247 $600,364 $2,008,570 $1,816,386
Net earnings (loss).............................. $(19,734) $(20,061) $ (8,080) $ (75,774)
======== ======== ========== ==========
Basic earnings (loss) per common share........... $ (.13) $ (.13) $ (.05) $ (.53)
======== ======== ========== ==========
Diluted earnings (loss) per common share......... $ (.13) $ (.13) $ (.05) $ (.53)
======== ======== ========== ==========

NOTE D -- CREDIT FACILITIES AND CONVERTIBLE SUBORDINATED DEBENTURES

On February 12, 1998, the Company, and certain of its subsidiaries,
including USANi LLC as borrower, entered into a new $1.6 billion credit facility
(the "New Facility") with a $40.0 million sub-limit for letters of credit. The
New Facility was used to finance the Universal Transaction and to refinance the
Company's existing facility. The New Facility consists of a $600.0 million
revolving credit facility, a $750.0 million Tranche A Term Loan and a $250.0
million Tranche B Term Loan. On August 5, 1998, the Company repaid the Tranche B
Term Loan in its entirety. The revolving credit facility and the Tranche A Term
Loan mature on December 31, 2002. The New Facility is guaranteed by, and secured
by stock in, substantially all of the Company's material subsidiaries. The
interest rate on borrowings under the New Facility is tied to an alternate base
rate or the London InterBank Rate, in each case, plus an applicable margin. The
interest rate under the New Facility was 6.62% at September 30, 1998. As of
September 30, 1998, there was $750.0 million in outstanding borrowings under the
New Facility and $599.9 million was available for borrowing after taking into
account outstanding letters of credit.

10
12
USA NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

As of March 1, 1998, the 5 7/8% Convertible Subordinated Debentures were
converted into 7,499,022 shares of Common Stock.

In connection with the acquisition of the remaining interest in
Ticketmaster as of June 24, 1998, the Company repaid all amounts outstanding
under the Ticketmaster Credit Agreement using proceeds from the New Facility.

In connection with the sale of the SF Broadcasting television stations on
July 16, 1998, the Company repaid all amounts outstanding under the SF
Broadcasting Credit Facility using proceeds from the sale.

NOTE E -- INCOME TAXES

The Company's effective tax rates of 48.9% and 51.3% for the quarter and
nine months ended September 30, 1998, respectively, are higher than the
statutory rate due primarily to non-deductible goodwill and other acquired
intangibles, losses in non-consolidated foreign joint ventures, and state income
taxes. During the remainder of 1998, the Company's effective tax rate is
expected to be higher than the statutory rate as a result of the items mentioned
above.

NOTE F -- CONSOLIDATED STATEMENTS OF CASH FLOWS

SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998:

- ----------------------------------------------------------------------------
(In thousands)

ACQUISITION OF NETWORKS AND STUDIOS USA
Acquisition price.................................... $ 4,115,531
Less: Amount paid in cash............................ (1,300,983)
-----------
Total non-cash consideration......................... $ 2,814,548
===========
Components of non-cash consideration:
Deferred purchase price liability.................... $ 300,000
Issuance of Common Shares and Class B Shares......... 277,898
Issuance of USANi LLC Shares......................... 2,236,650
-----------
$ 2,814,548
===========

Exchange of Minority Interest in USANi LLC for Deferred
Purchase Price Liability, including interest.......... $ 304,636
===========

As of March 1, 1998 the 5 7/8% Convertible Subordinated Debentures were
converted to 7,499,022 shares of Common Stock.

In connection with the Universal Transaction, the Company issued 1,178,322
shares of Class B Common Stock to Liberty, which represented the remaining
contingently issuable shares in connection with the Mergers.

During the nine months ended September 30, 1998, the Company acquired
computer equipment through a capital lease totaling $15.5 million.

In connection with the acquisition of the remaining interest in
Ticketmaster, the Company issued 15,967,200 shares of Common Stock.

In connection with the sale of the SF Broadcasting television stations, as
part of the total consideration, the Company received a note in the amount of
$25.0 million. This note was transferred to the minority interest shareholder of
SF Broadcasting as part of the redemption of their interest.

11
13
USA NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

In connection with the CitySearch Transaction, the Company exchanged an
effective 35.2% interest in Ticketmaster Online for a 50.7% interest in
CitySearch.

NOTE G -- INVENTORIES

- ------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1998 1997
--------------------- ---------------------
INVENTORIES CONSIST OF CURRENT NONCURRENT CURRENT NONCURRENT
- ------------------------------------------------------------------------------------------------
(In thousands)

Film costs:
Released, less amortization............... $ 70,140 $ 63,408
In process and unreleased................. 14,609 --
Programming costs, net of amortization...... 178,318 134,521
Merchandise held for sale................... 173,121 -- $151,100 $ --
Other....................................... 9,237 4,188 -- --
-------- -------- -------- --------
Total............................. $445,425 $202,117 $151,100 $ --
======== ======== ======== ========

The Company estimates that approximately 90% of unamortized film costs at
September 30, 1998 will be amortized within the next three years.

NOTE H -- SAVOY SUMMARIZED FINANCIAL INFORMATION (UNAUDITED)

The Company has not presented separate financial statements and other
disclosures concerning Savoy because management has determined that such
information is not material to holders of the Savoy Debentures, all of which
have been assumed by the Company as a joint and several obligor. The information
presented is reflected at Savoy's historical cost basis.

- ------------------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
SUMMARIZED OPERATING INFORMATION 1998 1997
- ------------------------------------------------------------------------------------
(In thousands)

Net revenue............................................ $33,938 $ 50,816
Operating expenses..................................... 36,432 52,063
Operating loss......................................... (2,494) (8,309)
Net earnings(loss)..................................... 35,118 (6,534)

- -----------------------------------------------------------------------------------------------
SEPTEMBER 30,
------------------- DECEMBER 31,
SUMMARY BALANCE SHEET INFORMATION 1998 1997 1997
- -----------------------------------------------------------------------------------------------
(In thousands)

Current assets........................................ $ 29,140 $ 39,777 $ 31,898
Non-current assets.................................... 132,440 289,171 289,381
Current liabilities................................... 9,156 33,563 32,836
Non-current liabilities............................... 55,900 116,360 110,470
Minority interest..................................... -- 119,091 119,427

For the nine months ended September 30, 1998, the Net earnings line
includes an after-tax gain on the sale of the SF Broadcasting television
stations totalling $36.3 million, which has been eliminated in the consolidation
of the Company's financial statements. Amounts include the operations of SF
Broadcasting through July 16, 1998 the date on which the Company sold the SF
Broadcasting television stations -- See Note J.
12
14
USA NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

NOTE I -- PROGRAM RIGHTS AND FILM COSTS

As of September 30, 1998, the liability for program rights, representing
future payments to be made under program contract agreements amounted to $554.0
million. Annual payments required are $62.2 million for the remainder of 1998,
$176.8 million in 1999, $113.4 million in 2000, $66.9 million in 2001, $49.9
million in 2002 and $84.8 million in 2003 and thereafter. Amounts representing
interest are $24.0 million and the present value of future payments is $530.0
million.

As of September 30, 1998, the liability for film costs amounted to $91.6
million. Annual payments are $68.9 million in 1998 and $22.7 million in 1999.

Unrecorded commitments for program rights consist of programs for which the
license period has not yet begun or the program is not yet available to air. As
of September 30, 1998, the unrecorded commitments amounted to $664.3 million.
Annual commitments are $6.2 million for the remainder of 1998, $79.1 million in
1999, $129.0 million in 2000, $121.4 million in 2001, $104.4 million in 2002 and
$224.2 million in 2003 and thereafter.

NOTE J -- BROADCAST STATION TRANSACTIONS

On January 20, 1998, the Company completed the sale of its Baltimore
television station for $80.0 million resulting in a pre-tax gain of $74.9
million during the first quarter of 1998.

On June 18, 1998, the Company purchased a television station serving the
Atlanta, Georgia market for $50 million. On June 18, 1998, the Company completed
the acquisition of the remaining equity interest in an entity which owned three
television stations and immediately sold the television station serving
Portland, Oregon. The two remaining stations serve Orlando, Florida and Rapid
City, South Dakota. The Company sold the station serving Rapid City on October
30, 1998.

On July 16, 1998, the Company sold the assets of SF Broadcasting, which
owns and operates four television stations. The total consideration received by
SF Broadcasting was $307 million, of which the Company's share was approximately
$110 million, net of repayment of bank debt outstanding and redemption of
minority interest. No after-tax gain or loss was realized on the disposition of
the SF television stations.

13
15

ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL

USA Networks, Inc. (the "Company" or "USAi"), formerly known as HSN, Inc.,
is a holding company, the subsidiaries of which are engaged in diversified media
and electronic commerce businesses. In July, 1997, the Company acquired a
controlling interest in Ticketmaster Group, Inc. ("Ticketmaster"). On June 24,
1998, the Company completed its acquisition of the remaining common stock of
Ticketmaster in a tax-free merger by exchanging 1.126 shares of Common Stock for
each outstanding share of Ticketmaster common stock not owned by the Company.
The acquisition of the controlling interest and the tax-free merger are referred
to as the "Ticketmaster Transaction". On February 12, 1998, the Company acquired
cable television networks USA Network and The Sci-Fi Channel (collectively,
"Networks") as well as the domestic television production and distribution
business of Universal Studios ("Studios USA") from Universal Studios, Inc. (the
"Universal Transaction") and changed the Company's name to USA Networks, Inc.
Following the Universal Transaction, the Company's principal areas of business
are the operation of cable networks and the production and distribution of
television programming (through its Networks and television production
business), electronic retailing (through its Home Shopping business), automated
ticketing services (through Ticketmaster), the ownership and operation of
television stations (through USA Broadcasting), and Internet services. During
1996, the Company merged with Home Shopping Network, Inc. ("Home Shopping") and
Savoy Pictures Entertainment, Inc. ("Savoy") (collectively, the "Mergers"). The
Ticketmaster Transaction, the Universal Transaction and the Mergers were
accounted for using the purchase method of accounting.

Prior to the Universal Transaction, the Company's principal areas of
business were electronic retailing, ticketing operations and television
broadcasting. The electronic retailing business principally operates two
services, The Home Shopping Network and America's Store (together "HSN"). The
ticketing operations business sells approximately 70 million tickets a year
through 2,900 retail center outlets, 25 telephone call centers and an Internet
site and is the leading provider of automated ticketing services in the U.S. The
television broadcasting business owns and operates twelve full-power UHF
television stations (the "USA Stations"). Share numbers, earnings per share and
conversion ratios reflect the Company's two-for-one stock split to holders of
record at the close of business on March 12, 1998.

EBITDA

Earnings before interest, income taxes, depreciation and amortization
("EBITDA") is defined as operating profit plus depreciation and amortization.
EBITDA is presented here as a management tool and as a valuation methodology for
companies in the media, entertainment and communications industries. EBITDA does
not purport to represent cash provided by operating activities. EBITDA should
not be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.

THIS REPORT INCLUDES FORWARD-LOOKING STATEMENTS RELATING TO SUCH MATTERS AS
ANTICIPATED FINANCIAL PERFORMANCE, BUSINESS PROSPECTS, NEW DEVELOPMENTS, NEW
MERCHANDISING STRATEGIES AND SIMILAR MATTERS. A VARIETY OF FACTORS COULD CAUSE
THE COMPANY'S ACTUAL RESULTS AND EXPERIENCE TO DIFFER MATERIALLY FROM THE
ANTICIPATED RESULTS OR OTHER EXPECTATIONS EXPRESSED IN THE COMPANY'S
FORWARD-LOOKING STATEMENTS. THE RISKS AND UNCERTAINTIES THAT MAY AFFECT THE
OPERATIONS, PERFORMANCE, DEVELOPMENT AND RESULTS OF THE COMPANY'S BUSINESS
INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING: MATERIAL ADVERSE CHANGES IN
ECONOMIC CONDITIONS IN THE MARKETS SERVED BY THE COMPANY; FUTURE REGULATORY
ACTIONS AND CONDITIONS IN THE COMPANY'S OPERATING AREAS; COMPETITION FROM
OTHERS; SUCCESSFUL INTEGRATION OF THE COMPANY'S DIVISIONS' MANAGEMENT
STRUCTURES; PRODUCT DEMAND AND MARKET ACCEPTANCE; THE ABILITY TO PROTECT
PROPRIETARY INFORMATION AND TECHNOLOGY OR TO OBTAIN NECESSARY LICENSES ON
COMMERCIALLY REASONABLE TERMS; AND OBTAINING AND RETAINING KEY EXECUTIVES AND
EMPLOYEES.

14
16

TRANSACTIONS AFFECTING THE COMPARABILITY OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION

During the past two years, the Company has pursued several strategic
initiatives that have resulted in the acquisition and development of several new
businesses. As a result, the following changes should be considered when
comparing the Company's results of operations and financial position. These
include the Universal Transaction in February 1998 and the Ticketmaster
Transaction in July 1997 and June 1998. The acquisitions caused a significant
increase in net revenues, operating costs and expenses and operating profit. To
enhance comparability, the discussion of consolidated results of operations is
supplemented, where appropriate, with separate pro forma financial information
that gives effect to the above transactions as if they had occurred at the
beginning of the respective periods presented. The pro forma information is not
necessarily indicative of the revenues and cost of revenues that would have
actually been reported had the Universal Transaction and the Ticketmaster
Transaction occurred at the beginning of the respective periods, nor is it
necessarily indicative of future results.

A. CONSOLIDATED RESULTS OF OPERATIONS

The following discussions present the material changes in the consolidated
results of operations of the Company for the quarter and nine months ended
September 30, 1998, compared with the quarter and nine months ended September
30, 1997. The operations of the quarter and nine months ended September 30, 1997
consist of the operations of Home Shopping, Savoy, USA Broadcasting and, since
July 17, 1997, Ticketmaster, while the operations of the quarter and nine months
ended September 30, 1998 consist of Home Shopping, Savoy, USA Broadcasting,
Ticketmaster and, since February 12, 1998, the results of Networks and Studios
USA. Reference should also be made to the unaudited Condensed Consolidated
Financial Statements included herein.

QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. QUARTER AND NINE MONTHS
ENDED SEPTEMBER 30, 1997

The Universal Transaction and the Ticketmaster Transaction resulted in
significant increases in net revenues, operating costs and expenses, other
income (expense), minority interest and income taxes and will continue to
materially impact the Company's operations for the remainder of 1998 when
compared to 1997, and accordingly, no significant discussion of these
fluctuations is presented.

NET REVENUES

For the quarter ended September 30, 1998, revenues increased $314 million
compared to 1997 primarily due to increases of $281 million, $22 million, and
$21 million from the Networks and television production business, Ticketing
operations, and Electronic retailing, respectively.

For the nine months ended September 30, 1998, revenues increased $996
million compared to 1997 primarily due to increases of $757 million, $216
million, and $24 million from the Networks and television production business,
Ticketing operations, and Electronic retailing, respectively.

OPERATING COSTS AND EXPENSES

For the quarter ended September 30, 1998, operating expenses increased $287
million compared to 1997 primarily due to increases of $250 million and $24
million from the Networks and television production business and Ticketing
operations, respectively.

For the nine months ended September 30, 1998, operating expenses increased
$903 million compared to 1997 primarily due to increases of $641 million, $206
million and $64 million from the Networks and television production business,
Ticketing operations, and Electronic retailing, respectively.

OTHER INCOME (EXPENSE)

For the quarter and nine months ended September 30, 1998, net interest
expense increased $15 million and $65 million, respectively, compared to 1997
primarily due to interest incurred on the new credit facility to finance
15
17

the Universal Transaction and non-cash interest expense on long-term program
liabilities at the Networks and television production business.

On January 20, 1998, the Company sold its Baltimore television station at a
gain of $74.9 million. On July 16, 1998, the Company completed the sale of the
assets of SF Broadcasting for a pre-tax gain of $9.2 million.

For the nine months ended September 30, 1998, other expense increased $10
million compared to 1997 primarily due to losses from international joint
ventures of Home Shopping and Networks and television production business.

INCOME TAXES

The Company's effective tax rate of 48.9% and 51.3% for the quarter and
nine months ended September 30, 1998 is higher than the statutory rate due
primarily to non-deductible goodwill and other acquired intangible and state
income taxes. During the remainder of 1998, the Company's effective tax rate is
expected to be higher than the statutory rate as a result of the items mentioned
above and higher than the first nine months rate because the gain on the sale of
the Baltimore television station in the first quarter had the effect of lowering
the Company's effective tax rate.

MINORITY INTEREST

For the quarter and nine months ended September 30, 1998, minority interest
represents Universal's and Liberty's ownership interest in USANi LLC for the
period February 12 through September 30, 1998, Liberty's ownership interest in
Home Shopping, Fox Broadcasting Company's 50% ownership interest in SF
Broadcasting for the period January 1 through July 16, 1998 and the public's
ownership interest in Ticketmaster for the period January 1 through June 24,
1998.

PRO FORMA QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. PRO FORMA QUARTER
AND NINE MONTHS ENDED SEPTEMBER 30, 1997

The following unaudited pro forma operating results of the Company present
combined results of operations as if the Universal Transaction, Ticketmaster
Transaction and the sale of the assets of SF Broadcasting all had occurred on
January 1, 1998 and 1997, respectively.

As of September 28, 1998, the Company completed the CitySearch Merger (as
defined below). For comparative purposes, the impact of the CitySearch
Transaction has not been reflected in the following pro forma presentation of
results of operations. During the first nine months of 1998, CitySearch
generated operating losses of $27.3 million and negative EBITDA of $24.2
million. The operating losses and negative EBITDA are expected to continue for
the foreseeable future.

The Unaudited Combined Condensed Pro Forma Statements of Operations are
presented for illustrative purposes only and are not necessarily indicative of
the results of operations that would have actually been reported had any of the
transactions occurred as of January 1, 1998 and 1997, respectively, nor are they
necessarily indicative of future results of operations.

16
18

USA NETWORKS, INC. AND SUBSIDIARIES

UNAUDITED COMBINED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS

- -----------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, JUNE 30,
-------------------- ------------------------
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------
(In thousands, except per share data)

NET REVENUES:
Networks and television production....... $281,302 $255,762 $ 914,669 $ 777,710
Electronic retailing..................... 261,183 236,706 776,418 743,893
Ticketing operations..................... 89,134 91,489 283,538 268,462
Internet services........................ 5,934 3,330 14,467 8,511
Broadcasting and other................... 1,175 6,294 8,161 14,147
-------- -------- ---------- ----------
Total net revenues............... 638,728 593,581 1,997,253 1,812,723
Operating costs and expenses:
Cost related to revenues................. 345,882 306,356 1,029,886 936,771
Other costs and expenses................. 183,268 182,153 605,591 563,309
Depreciation and amortization............ 58,168 57,841 177,630 173,880
-------- -------- ---------- ----------
Total operating costs and
expenses....................... 587,318 546,350 1,813,107 1,673,960
-------- -------- ---------- ----------
Operating profit................. $ 51,410 $ 47,231 $ 184,146 $ 138,763
======== ======== ========== ==========
EBITDA........................... $109,578 $105,072 $ 361,776 $ 312,643
======== ======== ========== ==========

For the quarter ended September 30, 1998, pro forma revenues for the
Company increased $45.1 million, or 7.6%, to $638.7 million from $593.6 million
compared to 1997. For the quarter ended September 30, 1998, pro forma cost
related to revenues and other costs and expenses increased $40.6 million, or
8.3%, to $529.1 million from $488.5 million compared to 1997.

For the nine months ended September 30, 1998, pro forma revenues for the
Company increased $184.5 million, or 10.2%, to $2.0 billion from $1.8 billion
compared to 1997. For the nine months ended September 30, 1998, pro forma cost
related to revenues and other costs and expenses increased $135.4 million or
9.0%, to $1.6 billion from $1.5 billion compared to 1997.

For the quarter ended September 30, 1998, pro forma EBITDA increased $4.5
million, or 4.3%, to $109.6 million from $105.1 million compared to 1997.

For the nine months ended September 30, 1998, pro forma EBITDA increased
$49.2 million, or 15.7%, to $361.8 million from $312.6 million compared to 1997.

The following discussion provides an analysis of the aforementioned
increases in pro forma revenues and costs related to revenues and other costs
and expenses by significant business segment.

Networks and Television Production

Net revenue for the quarter ended September 30, 1998 increased by $25.5
million, or 10.0%, to $281.3 million from $255.8 million compared to 1997. The
increase primarily resulted from an increase in advertising revenues at USA
Network and The Sci-Fi Channel cable networks, an increase in affiliate revenues
at both networks and increased revenues from first run syndication product at
Studios USA. The increase in advertising revenue resulted from both higher
ratings and a higher percentage of available advertising spots sold compared to
the prior year. The increase in affiliate revenues resulted primarily from a
significant increase in the number of subscribers at The Sci-Fi Channel and
higher affiliate fees at both networks. The increase in first run syndication
revenue resulted from higher barter revenue from higher ratings and greater
foreign sales.

Net revenue for the nine months ended September 30, 1998 increased $137.0
million, or 17.6%, to $914.7 million from $777.7 million compared to 1997. The
increase in revenues resulted primarily from higher

17
19

advertising and affiliate revenues at both USA Network and The Sci-Fi Channel
and higher ratings on first run syndication product by Studios USA.

Cost related to revenues and other costs and expenses for the quarter ended
September 30, 1998 increased by $18.8 million, or 9.2%, to $221.8 million from
$203.0 million compared to 1997. This increase results primarily from the cost
of increased deliveries of first run syndication product by Studios USA and
higher cost of original programming at USA Network, partially offset by the
absence in 1998 of write offs of USA Network programming recorded in 1997.

Cost related to revenues and other costs and expenses for the nine months
ended September 30, 1998 increased $59.9 million, or 9.6%, to $686.8 million
from $626.9 million compared to 1997. The increase is primarily due to higher
cost of network and first run syndication product at Studios USA and slightly
higher cost of programming at The Sci-Fi Channel partially offset by lower cost
of programming at USA Network.

EBITDA for the quarter ended September 30, 1998 increased $19.5 million, or
36.9%, to $72.2 million from $52.7 million compared to 1997.

EBITDA for the nine months ended September 30, 1998 increased $89.7
million, or 59.5%, to $240.5 million from $150.8 million compared to 1997.

Electronic Retailing

Net revenue for the quarter ended September 30, 1998 increased by $24.5
million, or 10.3%, to $261.2 million from $236.7 million compared to 1997. The
increase primarily results from increased sales of hardgoods, which includes
consumer electronics, collectibles and housewares. Total units shipped increased
by 9.4% to 7.0 million units compared to 6.4 million units in 1997 and the
average price point increased by 1.1%. The increase in net revenue also reflects
a decrease in the return rate to 20.8% from 22.8% compared to 1997.

Net revenue for the nine months ended September 30, 1998 increased $32.5
million, or 4.4%, to $776.4 million from $743.9 million compared to 1997. Total
units shipped increased 5.1% to 20.6 million units compared to 1997 and the
average price point decreased by 1.5%.

Cost related to revenues and other costs and expenses for the quarter ended
September 30, 1998 increased by $20.8 million, or 10.4%, to $220.0 million from
$199.2 million compared to 1997. This increase resulted primarily from higher
net revenues and the sale of merchandise at lower gross margins (38.3% in 1998
compared to 38.2% in 1997).

Cost related to revenues and other costs and expenses for the nine months
ended September 30, 1998 increased $45.3 million, or 7.4%, to $661.0 million
from $615.7 million compared to 1997. This increase resulted from higher net
revenues, the sale of merchandise at lower gross margins (39.7% in 1998 compared
to 41.4% in 1997) and from higher merchandising personnel costs.

EBITDA for the quarter ended September 30, 1998 increased $3.9 million, or
10.5%, to $41.4 million from $37.5 million compared to 1997.

EBITDA for the nine months ended September 30, 1998 decreased $12.7
million, or 9.9%, to $115.5 million from $128.2 million compared to 1997.

Ticketing Operations

Net revenue for the quarter ended September 30, 1998 decreased by $2.4
million, or 2.6%, to $89.1 million from $91.5 million compared to 1997. The
decrease resulted from a slight decrease in the number of tickets sold,
reflecting the absence in 1998 of any major outdoor concerts and the ceasing of
the publication of the Company's event guide magazine, partially offset by an
increase in ticketing revenue due to an increase in revenue per ticket to $4.68
from $4.54 compared to 1997.

Net revenue for the nine months ended September 30, 1998 increased $15.0
million, or 5.6%, to $283.5 million from $268.5 million compared to 1997. The
increase resulted from an increase of 3.2% in the number of tickets sold,
including an increase of 1.2 million in the number of tickets sold on-line, and
an increase in revenue
18
20

per ticket to $4.68 from $4.47 compared to 1997. This increase was partially
offset by a decrease of $2.9 million in publication revenue due to the ceasing
of publishing the Company's event guide magazine.

Cost related to revenues and other costs and expenses for the quarter ended
September 30, 1998 decreased by $1.0 million, or 1.3%, to $74.3 million from
$75.3 million compared to 1997. The decrease resulted primarily from the sale of
fewer tickets and the ceasing of the publication of the Company's event guide
magazine, offset by costs incurred to launch ticketing operations in Northern
California, South America and France.

Cost related to revenues and other costs and expenses for the nine months
ended September 30, 1998 increased $16.0 million, or 7.2%, to $239.6 million
from $223.6 million compared to 1997. This increase resulted from higher
ticketing operation costs resulting from higher ticketing revenue and from costs
incurred to launch ticketing operations in Northern California, South America
and France, partially offset by the ceasing of the publication of the Company's
event guide magazine.

EBITDA for the quarter ended September 30, 1998 decreased $1.4 million, or
8.6%, to $14.8 million from $16.2 million compared to 1997.

EBITDA for the nine months ended September 30, 1998 decreased $1.0 million,
or 2.2%, to $43.9 from $44.9 compared to 1997.

Internet Services

Net revenue for the quarter ended September 30, 1998 increased $2.6 million
to $5.9 million in 1998 compared to $3.3 million in 1997. The increase resulted
from an increase in registered users to the primary service, First Auction. Net
revenue for the nine months ended September 30, 1998 increased $6.0 million to
$14.5 million in 1998 from $8.5 million compared to 1997.

EBITDA loss increased to $3.9 million for the quarter ended September 30,
1998 compared to $2.1 million in 1997 and for the nine months ended September
30, 1998 increased to $9.6 million from $5.5 million compared to 1997, primarily
due to costs to maintain and enhance the Internet services and to increased
advertising and promotion costs.

On September 28, 1998, the Company completed the CitySearch Merger. During
the first nine months of 1998, CitySearch generated operating losses of $27.3
million and negative EBITDA of $24.2 million. The operating losses and negative
EBITDA are expected for the foreseeable future.

Broadcasting and Other

Net revenue includes revenue generated from the distribution of films from
the Savoy library acquired as a result of the Mergers and revenues generated at
the Miami television station.

Other costs related to revenues and other costs and expenses include costs
to generate the Savoy revenues, corporate expenses and $6.3 million and $11.1
million of cost in the quarter and nine months ended September 30, 1998,
respectively, to launch the Miami station.

B. FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $146.7 million for the nine
months ended September 30, 1998. These cash proceeds were used to pay for
capital expenditures of $64.2 million, to make long-term investments totalling
$25.6 million and to reduce amounts outstanding under the Company's bank loans.

Consolidated capital expenditures for the nine months ended September 30,
1998 relate in part to the build-out of the Miami station. Consolidated capital
expenditures are expected to range from $80.0 million to $90.0 million in 1998.

On February 12, 1998, the Company and certain of its subsidiaries,
including USANi LLC as borrower, entered into a new $1.6 billion credit facility
(the "New Facility") with a $40.0 million sub-limit for letters of credit. The
New Facility was used to finance the Universal Transaction and to refinance the
Company's existing $275.0 million revolving credit facility. The New Facility
consists of a $600.0 million revolving credit facility, a
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$750.0 million Tranche A Term Loan and a $250.0 million Tranche B Term Loan. On
August 5, 1998, the Company repaid the Tranche B Term Loan in the amount of
$250.0 million from cash on hand. The revolving credit facility and the Tranche
A Term Loan mature on December 31, 2002. The New Facility is guaranteed by, and
secured by stock in, substantially all of the Company's material subsidiaries.
The interest rate on borrowings under the New Facility is tied to an alternate
base rate or the London InterBank Rate, in each case, plus an applicable margin.
As of October 30, 1998, there was $750.0 million in outstanding borrowings under
the New Facility and $599.9 million was available for borrowings after taking
into account outstanding letters of credit. As of October 30, 1998, the
borrowing rate on loans outstanding under the Tranche A Term Loan was 6.2%.

On February 12, 1998, the Company completed the Universal Transaction. The
consideration paid to Universal included a cash payment of $1.6 billion, a
portion of which ($300.0 million plus interest) was deferred until no later than
June 30, 1998. The Investment Agreement relating to the Universal Transaction
also contemplated that, on or prior to June 30, 1998, the Company and Liberty
would complete a transaction involving a $300.0 million cash investment, plus an
interest factor, by Liberty in the Company through the purchase of USANi LLC
shares. Pursuant to this agreement, on June 30, 1998, Liberty contributed $308.5
million in exchange for 15,000,000 USANi LLC shares.

Pursuant to the Investment Agreement, the Company has granted to Universal
and Liberty preemptive rights with respect to future issuances of USAi Common
Stock and USAi Class B Common Stock, which generally allow Universal and Liberty
the right to maintain an ownership percentage equal to the ownership percentage
such entity held, on a fully converted basis, immediately prior to such
issuance. In addition, Universal had certain mandatory purchase obligations with
respect to USAi Common Stock (or USANi LLC shares) issued with respect to the
conversion of the 5 7/8% Debentures and the Ticketmaster tax-free merger. During
the period from February 12, 1998 through July 27, 1998, Universal and Liberty
contributed approximately $787 million pursuant to the preemptive rights in
exchange for Common Stock and USANi LLC shares. These preemptive rights
exercises are described more fully below.

In connection with the Universal Transaction, the Company entered into a
joint venture agreement relating to the development of international general
entertainment television channels including international versions of USA
Network, The Sci-Fi Channel and Universal's action/adventure channel 13th
Street. Unless the Company elects to have Universal buy out its interest in the
venture, the Company and Universal will be 50-50 partners in the venture, which
will be managed by Universal. USANi LLC and Universal have each committed to
contribute $100 million in capital in the venture over a number of years. The
decision by the Company on whether to have Universal buy out its interest in the
joint venture is expected to be made during the fourth quarter of 1998.

In connection with the Universal Transaction and other strategic
initiatives, the Company anticipates that it will need to invest working capital
in connection with the development and expansion of its overall operations.

The Company implemented its plan to disaffiliate its station in the Miami,
Florida market in June 1998. The Company has incurred and will continue to incur
expenditures to develop programming and promotion of this station, which during
the development and transitional stage, may not be offset by sufficient
advertising revenues. The Company may also transition additional broadcasting
stations to the new format in 1999. The Company believes that the process of
disaffiliation can be successfully managed so as not to have a material adverse
effect on the Company and so as to maximize the value of the broadcasting
stations.

During the remainder of 1998, management expects to pay cable distribution
fees of between $5.0 million and $25.0 million, relating to new and current
contracts with cable systems operators to carry Home Shopping's programming.

On June 24, 1998 the Company completed its acquisition of Ticketmaster by
issuing 15,967,200 shares of USAi Common Stock to the public shareholders of
Ticketmaster and converted 3.6 million options to acquire Ticketmaster common
stock into options to acquire USAi Common Stock for a total consideration of
$467.0 million. In connection with the closing of the acquisition, the Company
repaid all outstanding borrowings under the Ticketmaster credit agreement using
proceeds from the New Facility. In connection with the Ticketmaster tax-free
merger, Universal and Liberty exercised their preemptive rights with respect to
the issuance of 12.6 million shares of USAi Common Stock to the holders of
Ticketmaster common stock. In the aggregate, Universal and

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Liberty acquired 24,649,716 USANi LLC Shares in exchange for total consideration
of $493.0 million. Of that amount, $105.2 million was applied to the remainder
of the Universal deferred purchase price obligation (including accrued interest)
and the remainder was received in cash. These transactions closed in July 1998.

On January 20, 1998, the Company consummated the sale of its Baltimore,
Maryland television station for $80.0 million. On June 18, 1998, the Company
purchased a television station serving the Atlanta, Georgia, market. On June 18,
1998 the Company acquired the remaining interest in an entity partially owned by
the Company, which owned television stations serving the Orlando, Florida;
Portland, Oregon and Rapid City, South Dakota markets. The aggregate purchase
prices for these transactions was approximately $70.0 million. The proceeds from
the sale of the Baltimore station were used, in part, to complete the purchase
of the Atlanta station. On June 19, 1998 the Company sold the station serving
Portland, Oregon for total cash consideration of $30 million. On October 30,
1998, the Company sold the station serving Rapid City, South Dakota for total
consideration of $5.5 million.

As of March 1, 1998, the Company redeemed, at a redemption price of 104.7%
of the principal amount, all of Home Shopping's outstanding 5.875% Convertible
Subordinated Debentures (the "Home Shopping Debentures"). The Home Shopping
Debentures were all converted by the holders into 7,499,022 shares of USAi
Common Stock on or prior to the Redemption Date. In connection with their
preemptive mandatory and optional rights with respect to issuances of shares by
the Company, Universal exercised its right in connection with the redemption of
the Home Shopping Debentures which resulted in the issuance of 9,978,830 USANi
LLC shares, generating an increase in minority interest in USANi LLC of $199.6
million. This amount reduced the Company's deferred purchase price liability by
that amount. Liberty exercised its optional preemptive rights (related to the
redemption of the Home Shopping Debentures and the Universal preemptive
elections) in exchange for 4,697,327 shares of USAi Common Stock, generating
proceeds of $93.9 million, which was used to pay down bank debt.

On February 20, 1998, the Company's Board of Directors approved the
declaration of a dividend to its stockholders in the form of a distribution of
one share of Common Stock for each share of common stock outstanding to holders
of record as of the close of business on March 12, 1998. The payment date for
the dividend was March 26, 1998. The two-for-one stock split also included an
identical stock dividend with respect to the Company's Class B Common Stock,
paid in the form of one share of Class B Common Stock for each share of Class B
Common Stock outstanding as of the close of business on March 12, 1998.

On July 30, 1998, the Company announced that its Board of Directors has
authorized a stock repurchase program of up to 10 million shares of the
Company's outstanding common stock over the next 12 months, on the open market
or in negotiated transactions. The amount and timing of purchases, if any, will
depend on market conditions and other factors, including the Company's overall
capital structure. The Company has not yet determined the circumstances under
which, or the prices at which, shares would be repurchased, or whether such
purchases would be made opportunistically or on a regular basis. Funds for these
purchases will come from cash on hand or borrowings under the revolving credit
facility.

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for the acquisition of the additional CitySearch interest was approximately
$120.9 million, substantially all of which was allocated to goodwill which will
be amortized over three years.

In connection with the CitySearch Transaction, the Company recorded a
deferred gain of $65.8 million by exchanging a 35.2% interest in Ticketmaster
Online with a basis of $55.1 million for a 50.7% interest in CitySearch, which
had a fair value of $120.9 million. The gain was deferred because the
stockholders of CitySearch have various put options on their TMCS stock to USAi,
which options terminate upon the completion of a qualified initial public
offering, as defined. This gain will be recognized at the time of the completion
of the TMCS initial public offering.

CitySearch has experienced significant losses during its startup phase and
the Company expects to continue to incur losses for the foreseeable future as it
rolls out its product into new markets. As of September 30, 1998, TMCS has $57
million in cash which it believes is sufficient to cover future losses. In
addition, TMCS currently expects to issue shares in an initial public offering
which is expected to generate proceeds sufficient to repay a $50 million loan to
the Company and to fund its operations.

In Management's opinion, available cash, internally generated funds and
available borrowings will provide sufficient capital resources to meet the
Company's foreseeable needs.

During the nine months ended September 30, 1998, the Company did not pay
any cash dividends, and none are permitted under the New Facility.

OTHER MATTERS

The Company is currently working to resolve the potential impact of the
year 2000 on the processing of date-sensitive information by the Company's
computerized information systems. The year 2000 problem is the result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000 which could result in miscalculation or system failures. Various systems
could be affected ranging from complex information technology ("IT") computer
systems to non-information technology ("non-IT") devices such as an individual
machine's programmable logic controller.

The Company is currently conducting a detailed assessment of all of its IT
and non-IT hardware and software to assess the scope of its year 2000 issue. The
Company has potential exposure in technological operations within the sole
control of the Company and in technological operations which are dependent in
some way on one or more third parties. The Company believes that it has
preliminarily identified all significant technological areas within its control.
The Company has initiated communications with significant vendors and customers
to confirm their plans to become Year 2000 compliant and is assessing any
possible risk to or effects on the Company's operations. The Company believes
that, with respect to technological operations which are dependent on third
parties, the significant areas of potential risk are the ability of cable
operators to receive the signal transmission of USA Network, The Sci Fi Channel
and the HSN Services, and the ability of banks and credit card processors to
process credit card transactions. The Company expects its Year 2000 assessment,
remediation, implementation and testing to be completed by the second quarter of
1999 with the exception of certain of its systems at Ticketmaster which are
scheduled to be completed by October 1999.

Because the assessment is still in progress, it is not possible at this
time to predict with any reasonable certainty the total cost to remediate all
Year 2000 issues. However, the Company believes that the total costs associated
with the Year 2000 issue will not exceed $10 million (exclusive of capital
expenditures that are currently planned to replace existing hardware and
software systems as part of the Company's ongoing efforts to upgrade its
infrastructure and systems). The figure will be revised as a result of further
assessment.
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Accordingly, based on existing information, the Company believes that the
costs of addressing potential problems will not have a material adverse effect
on the Company's financial position, results of operations or cash flows in
future periods. However, if the Company, its customers or vendors were unable to
resolve such issues in a timely manner, it could result in a material adverse
effect on the Company's financial position, results of operations or cash flows.
The Company plans to devote the necessary resources to resolve all significant
year 2000 issues in a timely manner.

The Company is currently focusing its efforts on identification and
remediation of its Year 2000 exposures and has not yet developed contingency
plans in the event it does not successfully complete all phases of its Year 2000
program. The Company intends to examine its status in the first quarter of 1999,
and periodically thereafter, to determine whether such plans are necessary.

SEASONALITY

The Company's businesses are subject to the effects of seasonality.
Consequently, the operating results for the quarter and nine months ended
September 30, 1998 for each line of business, and for the Company as a whole,
are not necessarily indicative of results for the full year.

Networks and television production revenues are influenced by advertiser
demand and the seasonal nature of programming, and generally peak in the spring
and fall.

The Company believes seasonality impacts its electronic retailing segment
but not to the same extent it impacts the retail industry in general.

Ticketing operations revenues are occasionally impacted by fluctuation in
the availability of events for sale to the public.

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PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the Ticketmaster 1994 consolidated consumer class action lawsuit,
previously reported in Ticketmaster's Annual Report on Form 10-K for the fiscal
year ended January 31, 1998 and in the Company's Quarterly Reports on Form 10-Q
for the fiscal quarters ended March 31, 1998 and June 30, 1998, discovery on the
plaintiff's claim for equitable relief is ongoing in the United States District
Court in the Eastern District of Missouri and a trial date of July 17, 2000 has
been set. On July 9, 1998, the plaintiffs filed a petition for a writ of
certiorari in the United States Supreme Court seeking review of the decision
dismissing their claims. On October 5, 1998, the Supreme Court invited the
Solicitor General of the United States to file a brief expressing the views of
the United States in this case.

In the MovieFone litigation, previously reported in Ticketmaster's Annual
Report on Form 10-K for the fiscal year ended January 31, 1998 and Quarterly
Report on Form 10-Q for the fiscal quarter ended April 30, 1998 and the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, in May 1998, the claimant in the previously disclosed arbitration
proceeding against Pacer Cats Corporation, a wholly owned subsidiary of Wembley
plc ("Pacer Cats"), filed a petition in New York state court to hold an entity
affiliated with Ticketmaster in contempt of the injunction provision of the
arbitration award on the grounds that such entity is a successor or assign of,
or otherwise acted in concert with, Pacer Cats. The motion is pending. Certain
of the MovieFone Entities have also filed an action against Ticketmaster in the
United States District Court for the Southern District of New York, MovieFone,
Inc. v. Ticketmaster Corporation, 95 Civ. 1861, alleging claims under the
antitrust laws and RICO as well as tort law, based on allegations that are
substantially similar to those made in the MovieFone arbitration proceeding. The
Southern District action seeks monetary and injunctive relief. Ticketmaster has
filed a motion to dismiss this action, which is pending.

In the Ticketmaster Shareholder Litigation, previously reported in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, the Cook County Circuit Court entered an order dismissing the Illinois
case with prejudice. Defendants intend to seek dismissal of the California cases
based on the decision of the Circuit Court in Illinois.

In the Jovon litigation, previously reported in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997 and the Company's
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1998 and
June 30, 1998, the Federal Communications Commission ("FCC") released a
Memorandum Opinion and Order ("Order") addressing Jovon Broadcasting
Corporation's petition for reconsideration of its 1996 ruling regarding USA
Capital Corporation's option to acquire a 45 percent interest in Jovon. In the
Order, the FCC affirmed its earlier holding that the option does not violate the
cross-interest policy and may be exercised up to a one-third equity interest in
Jovon. The FCC left the validity of the option agreement to be determined by the
state courts. On October 13, 1998, the Company filed a Request for
Clarification, seeking to confirm that it may use a trust mechanism in order to
exercise the option. Jovon has filed a response to the Request for
Clarification. On January 9, 1998, the Circuit Court of Pinellas County, Florida
denied Jovon's motion to dismiss litigation brought by certain entities
controlled by the Company against Jovon. However, the court stayed the action
for a period of six months. A status conference is expected to be held before
the end of 1998, at which time the court will decide whether an extension of the
stay is warranted.

The Company is engaged in various other lawsuits either as plaintiff or
defendant. In the opinion of management, the ultimate outcome of these various
lawsuits should not have a material adverse impact on the Company.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10** -- Amended and Restated Agreement and Plan of Reorganization,
among CitySearch, Inc., Tiberius, Inc., USA Networks, Inc.,
Ticketmaster Group, Inc., Ticketmaster Corporation and
Ticketmaster Multimedia Holdings, Inc., dated August 12,
1998
11 -- Statement Re: Computation of Per Share Earnings
27.1 -- Financial Data Schedule (for SEC use only)
27.2 -- Financial Data Schedule (for SEC use only)
27.3 -- Restated Financial Data Schedule (for SEC use only)
27.4 -- Restated Financial Data Schedule (for SEC use only)

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

* Reflects management contracts and compensatory plans

** Filed herewith

(b) Reports on Form 8-K

None

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

USA NETWORKS, INC.
--------------------------------------
(Registrant)

Dated November 13, 1998 /s/ BARRY DILLER
---------------------------------------- --------------------------------------------------------
Barry Diller
Chairman of the Board and
Chief Executive Officer

Dated November 13, 1998 /s/ VICTOR A. KAUFMAN
---------------------------------------- --------------------------------------------------------
Victor A. Kaufman
Office of the Chairman,
Chief Financial Officer
(Principal Financial Officer)

Dated November 13, 1998 /s/ MICHAEL P. DURNEY
---------------------------------------- --------------------------------------------------------
Michael P. Durney
Vice President, Controller
(Chief Accounting Officer)

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INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----

10** -- Amended and Restated Agreement and Plan of Reorganization,
among City Search, Inc., Tiberius, Inc., USA Networks, Inc.,
Ticketmaster Group, Inc., Ticketmaster Corporation and
Ticketmaster Multimedia Holdings, Inc., dated August 12,
1998.
11 -- Statement Re: Computation of Per Share Earnings
27.1 -- Financial Data Schedule (for SEC use only)
27.2 -- Financial Data Schedule (for SEC use only)
27.3 -- Restated Financial Data Schedule (for SEC use only)
27.4 -- Restated Financial Data Schedule (for SEC use only)

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

* Reflects management contracts and compensatory plans

** Filed herewith