<PAGE>
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
 
                               USA NETWORKS, INC.
             (Exact name of registrant as specified in its charter)
                         ------------------------------
 
                          COMMISSION FILE NO. 0-20570
 

<TABLE>
<S>                                            <C>
                  DELAWARE                                      59-2712887
(STATE OR OTHER JURISDICTION OF INCORPORATION      (I.R.S. EMPLOYER IDENTIFICATION NO.)
              OR ORGANIZATION)
</TABLE>

 
                152 WEST 57TH STREET, NEW YORK, NEW YORK, 10019
             (Address of Registrant's principal executive offices)
 
                                 (212) 314-7300
             (Registrant's telephone number, including area code):
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                          COMMON STOCK, $.01 PAR VALUE
                            ------------------------
 
    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 / /
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
 
    As of January 31, 2000, the following shares of the Registrant's capital
stock were outstanding:
 

<TABLE>
<S>                                                           <C>
Common Stock................................................  274,796,816
Class B Common Stock........................................   63,033,452
                                                              -----------
Total.......................................................  337,830,268
Common Stock issuable upon exchange of outstanding
  exchangeable subsidiary equity............................  361,152,846
                                                              -----------
Total outstanding Common Stock, assuming full exchange of
  Class B Common Stock and exchangeable subsidiary equity...  698,983,114
                                                              ===========
</TABLE>

 
    The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of January 31, 2000 was $5,106,225,712. For the purpose of the
foregoing calculation only, all directors and executive officers of the
Registrant are assumed to be affiliates of the Registrant.
 
    Assuming the exchange, as of January 31, 2000, of all equity securities of
subsidiaries of the Registrant exchangeable for Common Stock of the Registrant,
the Registrant would have outstanding 698,983,114 shares of Common Stock with an
aggregate market value of $17,343,518,516.
 
    ALL SHARE NUMBERS SET FORTH ABOVE GIVE EFFECT TO THE TWO-FOR-ONE STOCK SPLIT
WHICH BECAME EFFECTIVE ON FEBRUARY 24, 2000 FOR HOLDERS OF RECORD AS OF THE
CLOSE OF BUSINESS ON FEBRUARY 10, 2000.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>
                                     INDEX
 

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                        --------
<S>       <C>                                                           <C>

                                     PART I
 

Item 1.   Business....................................................      3

Item 2.   Properties..................................................     36

Item 3.   Legal Proceedings...........................................     39
 

                                    PART II
 

Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.........................................     45

Item 6.   Selected Financial Data.....................................     45

Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................     47

Item 8.   Consolidated Financial Statements and Supplementary Data....     58

Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosures...................................     91
 

                                    PART III
 

Item 10.  Directors and Executive Officers of the Registrant..........     91

Item 11.  Executive Compensation......................................     91

Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................     91

Item 13.  Certain Relationships and Related Party Transactions........     91
 

                                    PART IV
 

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form
          8-K.........................................................     92
</TABLE>

 
                                       2

<PAGE>

                                     PART I
 

ITEM 1. BUSINESS
 
                                    GENERAL
 
    USA Networks, Inc. ("USAi") through its subsidiaries, is a leading media and
electronic commerce company. USAi's principal operating assets include USA
Network, Sci-Fi Channel, Studios USA, Home Shopping Network, Ticketmaster,
Ticketmaster Online-CitySearch, Inc., Hotel Reservations Network, Internet
Shopping Network, USA Films and USA Broadcasting.
 
    USAi is organized along seven principal areas of business:
 
    - NETWORKS AND TELEVISION PRODUCTION, which includes Networks and Studios
      USA. Networks operates USA Network and Sci-Fi Channel cable networks and
      Studios USA produces and distributes television programming.
 
    - ELECTRONIC RETAILING, consisting primarily of 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 United States, and
      Ticketmaster.com, Ticketmaster's exclusive agent for online ticket sales.
 
    - HOTEL RESERVATIONS, consisting of Hotel Reservations Network, a leading
      consolidator of hotel rooms for resale in the consumer market in the
      United States.
 
    - INTERNET SERVICES, which includes the Internet Shopping Network, USAi's
      online retailing networks business, and local city guide business.
 
    - FILMED ENTERTAINMENT, which primarily represents USAi's domestic
      theatrical film distribution and production businesses.
 
    - BROADCASTING, which owns and operates television stations.
 
    All share numbers referenced herein reflect the two-for-one stock split of
USAi's common stock and Class B common stock to holders of record as of the
close of business on February 10, 2000, unless otherwise specified.
 
CORPORATE HISTORY
 
    USAi was incorporated in July 1986 in Delaware under the name Silver King
Broadcasting Company, Inc. as a subsidiary of Home Shopping Network, Inc.
("Holdco"). On December 28, 1992, Holdco distributed the capital stock of USAi
to its stockholders.
 
SAVOY AND HOME SHOPPING MERGERS
 
    In December 1996, USAi completed mergers with Savoy Pictures
Entertainment, Inc. ("Savoy") and Holdco, and Savoy and Holdco became
subsidiaries of USAi. At the same time as the mergers, USAi changed its name
from Silver King Broadcasting Company, Inc. to HSN, Inc.
 
TICKETMASTER TRANSACTION
 
    On July 17, 1997, USAi acquired a controlling interest in Ticketmaster
Group, Inc. ("Ticketmaster") from Mr. Paul G. Allen, who upon completion of the
transaction became a director of USAi, in exchange for shares of USAi's common
stock. On June 24, 1998, USAi acquired the remaining Ticketmaster common equity
in a tax-free stock-for-stock merger.
 
                                       3

<PAGE>
UNIVERSAL TRANSACTION
 
    On February 12, 1998, USAi completed the Universal transaction, in which
USAi acquired USA Networks, a New York partnership (which consisted of USA
Network and Sci-Fi Channel cable television networks) and the domestic
television production and distribution business ("Studios USA") of Universal
Studios, Inc. ("Universal") from Universal. Universal is controlled by The
Seagram Company Ltd., a Canadian corporation ("Seagram"). USAi paid Universal
approximately $1.6 billion in cash ($300 million of which was deferred with
interest) and an effective 45.8% interest in USAi through shares of USAi common
stock, USAi Class B common stock and shares of USANi LLC, a Delaware limited
liability company ("USANi LLC"). The USANi LLC shares are exchangeable for
shares of USAi's common stock and Class B common stock on a one-for-one basis.
 
    Due to Federal Communication Commission ("FCC") restrictions on foreign
ownership of entities such as USAi that control domestic television broadcast
licenses, Universal, which is controlled by Seagram, is limited in the number of
shares of USAi's stock that it may own. USAi formed USANi LLC primarily to hold
USAi's non-broadcast businesses in order to comply with such FCC restrictions
and for other tax and regulatory reasons. Universal's interest in USANi LLC is
not subject to the FCC foreign ownership limitations. USAi maintains control and
management of USANi LLC, and the businesses held by USANi LLC are managed by
USAi in substantially the same manner as they would be if USAi held them
directly through wholly owned subsidiaries. As long as Mr. Diller is the
Chairman and Chief Executive Officer of USAi and does not become disabled, these
arrangements will remain in place. At such time as Mr. Diller no longer occupies
such positions, or if Mr. Diller becomes disabled, Universal may have the right
to designate a person to be the manager of USANi LLC and the Chairman and Chief
Executive Officer of USAi. If Universal does not have such right, Liberty Media
Corporation ("Liberty") may be entitled to designate such persons. In all other
cases, USAi is entitled to designate the manager of USANi LLC.
 
    As part of the Universal transaction, USAi changed its name to USA
Networks, Inc. and renamed its broadcast television division "USA Broadcasting,"
formerly HSNi Broadcasting.
 
TICKETMASTER ONLINE-CITYSEARCH TRANSACTION
 
    On September 28, 1998, CitySearch, Inc. merged with Ticketmaster Online (now
known as Ticketmaster.com), a wholly owned subsidiary of Ticketmaster, to form
Ticketmaster Online-CitySearch, Inc. ("Ticketmaster Online-CitySearch").
Following the merger, Ticketmaster Online-CitySearch was a majority-owned
subsidiary of Ticketmaster. Shares of Ticketmaster Online-CitySearch's Class B
common stock were sold to the public in an initial public offering that was
completed on December 8, 1998. The Ticketmaster Online-CitySearch Class B common
stock is quoted on the Nasdaq Stock Market. As of December 31, 1999, USAi
beneficially owned 51.7% of the outstanding Ticketmaster Online-CitySearch
common stock, representing 77.3% of the total voting power of Ticketmaster
Online-CitySearch's outstanding common stock. For financial reporting purposes,
Ticketmaster Online-CitySearch's Ticketmaster.com ticketing business is
considered part of USAi's Ticketing Operations, while Ticketmaster
Online-CitySearch's local city guides business is considered part of USAi's
Internet Services.
 
HOTEL RESERVATIONS NETWORK TRANSACTION
 
    On May 10, 1999, the Company completed the acquisition of substantially all
of the assets and the assumption of substantially all of the liabilities of two
entities which operate Hotel Reservations Network, a leading consolidator of
hotel rooms for resale in the consumer market in the United States. On March 1,
2000, Hotel Reservations Network completed an initial public offering. At the
completion of the offering, USAi owned approximately 70.6% of the outstanding
Hotel Reservations Network common stock, representing 97.3% of the total voting
power of Hotel Reservations Network's outstanding common stock.
 
                                       4

<PAGE>
Hotel Reservations Network's class A common stock is quoted on the Nasdaq Stock
Market under the symbol "ROOM."
 
OCTOBER FILMS/PFE TRANSACTION
 
    On May 28, 1999, the Company acquired October Films, Inc., which was 50%
owned by Universal, and the domestic film distribution and development business
previously operated by Polygram Filmed Entertainment, Inc. ("PFE") and PFE's
domestic video and specialty video businesses from Universal.
 
RECENT DEVELOPMENTS
 
    PRECISION TRANSACTION.  On January 12, 2000, USAi and Precision Response
Corporation ("PRC"), a leading provider of third-party customer care services,
announced that they had entered into a merger agreement whereby USAi will
acquire all of the outstanding shares of PRC in a tax-free merger transaction.
Under terms of the agreement, each PRC share held on the closing date of the
transaction will be exchanged for 1.08 shares of USAi common stock (after giving
effect to USAi's two-for-one stock split as of February 10, 2000). In addition,
if the average trading price of USAi common stock at the time of the closing is
less than $18.52 (as adjusted to give effect to USAi's two-for-one stock split
as of February 10, 2000), PRC would be entitled to terminate the transaction, at
which time USAi would have the option to issue additional shares to PRC
shareholders providing a value of $20.00 per share. The transaction is expected
to close in April 2000, and is subject to approval by PRC shareholders.
 
    STYLECLICK TRANSACTION.  On January 25, 2000, USAi and Styleclick.com Inc.,
a leading enabler of e-commerce for manufacturers and retailers, announced an
agreement to form a new company by merging USAi's Internet Shopping Network
("ISN") and Styleclick.com. The new company, which will be named
Styleclick, Inc., will own and operate the combined properties of
Styleclick.com Inc. and ISN, which include ISN's FirstAuction.com,
FirstJewelry.com and Styleclick.com's network of branded e-commerce web sites.
Under the terms of the agreement, USAi will also invest $40 million in cash,
contribute $10 million in dedicated media, and will receive warrants to purchase
additional shares of the new company. Upon both the closing of the transaction
and on a fully diluted basis, USAi will own approximately 75% of the new company
and Styleclick.com stockholders will own approximately 25%. In the interim, USAi
has agreed to extend a $10 million bridge loan to Styleclick.com. The
transaction is expected to close in the second quarter of 2000 and is subject to
regulatory and Styleclick.com stockholder approval. The new company is expected
to trade on Nasdaq under the symbol "IBUY."
 
    USAI STOCK SPLIT.  On January 20, 2000, the Board of Directors declared a
two-for-one stock split of USAi's common stock and Class B common stock, payable
in the form of a dividend to stockholders of record as of the close of business
on February 10, 2000. The 100% stock dividend was paid on February 24, 2000. All
share numbers in this Report give effect to such stock split unless otherwise
noted.
 
CORPORATE STRUCTURE AND CONTROLLING SHAREHOLDERS
 
    USAI.  As of January 31, 2000, Liberty, through companies owned by Liberty
and Mr. Diller, owned 6.2% of USAi's outstanding common stock and 78.7% of
USAi's outstanding Class B common stock and Universal owned approximately 6.6%
of USAi's outstanding common stock and 21.3% of USAi's outstanding Class B
common stock. Mr. Diller, through companies owned by Liberty and Mr. Diller, his
own holdings and the stockholders agreement dated as of October 19, 1997, among
Mr. Diller, Universal, Liberty, USAi and Seagram, controls 74.9% of the
outstanding total voting power of USAi. Mr. Diller, subject to the stockholders
agreement and subject to veto rights of Universal and Liberty over fundamental
changes, is effectively able to control the outcome of nearly all matters
submitted to a vote of USAi's stockholders.
 
    Assuming the exchange of all equity securities of USANi LLC and Holdco that
are exchangeable for USAi's common stock or Class B common stock, but excluding
employee stock options, as of January 31,
 
                                       5

<PAGE>
2000: (1) Universal would own approximately 44.9% of USAi's common equity,
(2) Liberty would own approximately 20.8% of USAi's common equity, and (3) the
public shareholders, including Mr. Diller, and other USAi officers and
directors, would own approximately 34.3% of USAi's common equity.
 
    HOLDCO.  As of January 31, 2000, Liberty owned a 19.9% equity interest (9.2%
of the voting power) in Holdco and USAi owned the remaining equity and voting
interests. Holdco's only asset is its 36.6% interest in USANi LLC. Holdco has a
dual-class common stock structure similar to USAi's. Under an exchange agreement
dated as of December 20, 1996, between USAi and a subsidiary of Liberty, Liberty
or its permitted transferee will exchange its Holdco common stock and its Holdco
Class B common stock for shares of USAi's common stock and Class B common stock,
respectively, at the applicable conversion ratio. This exchange will only occur
at such time or from time to time as Liberty or its permitted transferee is
allowed under applicable FCC regulations to hold additional shares of USAi's
stock. Liberty, however, is obligated to effect an exchange only after all of
its USANi LLC shares have been exchanged for shares of USAi's common stock. Upon
completion of the exchange of Liberty's Holdco shares, Holdco will become a
wholly owned subsidiary of USAi.
 
    USANI LLC.  As of January 31 2000, USAi owned 6.3% and indirectly through
Holdco 36.6% of the outstanding USANi LLC shares, Universal owned 49.1% of the
outstanding USANi LLC shares and Liberty owned 8.0% of the outstanding USANi LLC
shares.
 
    Under an exchange agreement, dated February 12, 1998, among USAi, Universal
and Liberty, Universal may exchange its USANi LLC shares for shares of USAi's
common stock and Class B common stock and Liberty may exchange its USANi LLC
shares for USAi's common stock. USAi has the right, subject to conditions, to
require Liberty to exchange such shares when, under applicable law, it is
legally permitted to do so. USAi may only require Universal to exchange its
USANi LLC shares upon a sale of USAi as provided in the exchange agreement.
 
FORWARD LOOKING STATEMENTS
 
    THIS REPORT CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
SECURITIES LAWS. WE HAVE BASED THESE FORWARD-LOOKING STATEMENTS ON OUR CURRENT
EXPECTATIONS AND PROJECTIONS ABOUT FUTURE EVENTS, BASED ON THE INFORMATION
CURRENTLY AVAILABLE TO US. SUCH FORWARD-LOOKING STATEMENTS ARE PRINCIPALLY
CONTAINED IN THE SECTIONS "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS." THE FORWARD-LOOKING
STATEMENTS INCLUDE, AMONG OTHER THINGS, STATEMENTS RELATING TO OUR ANTICIPATED
FINANCIAL PERFORMANCE, BUSINESS PROSPECTS, NEW DEVELOPMENTS, NEW MERCHANDISING
STRATEGIES AND SIMILAR MATTERS.
 
    THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND
ASSUMPTIONS, THAT MAY AFFECT THE OPERATIONS, PERFORMANCE, DEVELOPMENT AND
RESULTS OF OUR BUSINESS AND INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING:
 
    - MATERIAL ADVERSE CHANGES IN ECONOMIC CONDITIONS IN OUR MARKETS;
 
    - FUTURE REGULATORY ACTIONS AND CONDITIONS IN OUR OPERATING AREAS;
 
    - COMPETITION FROM OTHERS;
 
    - SUCCESSFUL INTEGRATION OF OUR 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.
 
    WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR ANY OTHER
REASON. IN LIGHT OF THESE RISKS, UNCERTAINTIES AND ASSUMPTIONS, THE
FORWARD-LOOKING EVENTS DISCUSSED IN THIS REPORT MAY NOT OCCUR.
 
                                       6

<PAGE>
                           DESCRIPTION OF BUSINESSES
 
NETWORKS AND TELEVISION PRODUCTION
 
NETWORKS
 
    Networks operates two domestic advertiser-supported 24-hour cable television
networks--USA Network and Sci-Fi Channel. Since its inception in 1977, USA
Network has grown into one of the nation's most widely distributed and viewed
satellite-delivered television networks. According to Nielsen Media Research, as
of December 1999, USA Network was available in approximately 77.2 million U.S.
households (77% of the total U.S. households with televisions). For the
1999 year, USA Network earned the highest primetime rating of any domestic basic
cable network, with an average rating of 2.4 in primetime for the 12-month
period (Source: Nielsen Media Research). USA Network is a general entertainment
network featuring original series and movies, theatrical movies, off-network
television series and major sporting events, designed to appeal to the available
audiences during particular viewing hours. In general, USA Network's programming
is targeted at viewers between the ages of 18 to 49.
 
    Sci-Fi Channel was launched in 1992. It has been one of the fastest-growing
satellite-delivered networks since its inception. According to Nielsen Media
Research, as of December 1999, Sci-Fi Channel was available in 59.7 million U.S.
households (60% of the total U.S. households with televisions). Sci-Fi Channel
features science fiction, horror, fantasy and science-fact oriented programming.
In general, Sci-Fi Channel's programming is designed to appeal to viewers
between the ages of 18 to 49. According to Nielsen Media Research, Sci-Fi
Channel averaged a prime time 1.0 rating for December 1999, a new record for the
network.
 
    USA Network and Sci-Fi Channel derive virtually all of their revenues from
two sources. The first is the per-subscriber fees paid by the cable operators
and other distributors. The second is from the sale of advertising time within
the programming carried on each of the networks. AT&T Corp. and Time Warner
together represent nearly 40% of USA Network's distribution and more than 30% of
Sci-Fi Channel's distribution. USAi is currently in negotiations with AT&T to
renew its distribution agreement for USA Network.
 
    PROGRAMMING AND TRANSMISSION.  Presently, USA Network's program line-up
features original series, produced exclusively for USA Network, including the
following: MONDAY NIGHT RAW, MONDAY NIGHT WAR ZONE, LA FEMME NIKITA and PACIFIC
BLUE. USA Network also exhibits approximately 22 movies produced exclusively for
it each year. USA Network's programming includes off-network series such as
BAYWATCH, JAG and WALKER, TEXAS RANGER and major theatrically-released feature
films. USA Network is home to exclusive midweek coverage of the U.S. OPEN TENNIS
CHAMPIONSHIPS and early round coverage of THE MASTERS, THE RYDER CUP and major
PGA Tour golf events.
 
    USA Network typically enters into long-term agreements for its major
off-network series programming. Its original series commitments usually start
with less than a full year's commitment, but contain options for further
production over several years. In addition, USA Network has some original
programming produced for it (through financing/distribution arrangements entered
into by its wholly owned subsidiary, USA Cable Entertainment LLC), so that it is
better able to control all of the rights to such programming. These original
productions will include specials, series, and made-for-television movies. USA
Network acquires theatrical films in both their "network" windows and
"pre-syndication" windows. Under these arrangements, the acquisition of such
rights is often concluded many years before the actual exhibition of the films
begins on the network. USA Network's original films start production less than a
year prior to their initial exhibition. USA Network typically obtains the right
to exhibit both its acquired theatrical films and original films numerous times
over multiple year periods.
 
    Sci-Fi Channel's program lineup includes original programs produced
specifically for it, such as FARSCAPE and FIRST WAVE, (and starting in
June 2000, is expected to include INVISIBLE MAN and CROSSING OVER WITH JOHN
EDWARD, as well as science fiction movies and classic science fiction series,
such as the original
 
                                       7

<PAGE>
STAR TREK, THE TWILIGHT ZONE and QUANTUM LEAP). Sci-Fi Channel's programming
arrangements for off-network series, original series, theatrical movies and
original movies are similar to those entered into by USA Network.
 
    USA Network and Sci-Fi Channel each distribute their programming service on
a 24-hour per day, seven day per week basis. Both networks are distributed in
all 50 states and Puerto Rico via satellite for distribution by cable television
systems and direct broadcast satellite systems and for satellite antenna owners
by means of satellite transponders owned and leased by Networks. Any cable
television system or individual satellite dish owner in the United States and
its territories and possessions equipped with standard satellite receiving
facilities is capable of receiving Networks' services.
 
    Networks has the full-time use of four transponders on two domestic
communications satellites, although one of those transponders has been
subleased, and is available only in the event of certain catastrophic events.
Like Home Shopping Network, Networks has protection in the event of the failure
of its transponders. A transponder failure that would necessitate a move to
another transponder on the same satellite would not result in any significant
interruption of service to those that receive Networks' programs. However, a
failure that would necessitate a move to another satellite temporarily may
affect the number of cable systems that receive Networks programs as well as
other programming carried on the failed satellite, because of the need to
install equipment or to reorient earth stations. The projected ends of life of
the two satellites utilized by Networks are May 2004 and March 2006,
respectively.
 
    Networks' control of two different transponders on each of two different
satellites would enable it to continue transmission of its programs should
either one of the satellites fail. Although Networks believes it is taking
reasonable measures to ensure its continued satellite transmission capability,
there can be no assurance that termination or interruption of satellite
transmission will not occur. Such a termination or interruption of service by
one or both of these satellites could have a material adverse effect on the
operations and financial condition of USAi. The availability of replacement
satellites and transponders is dependent on a number of factors over which
Networks has no control, including competition among prospective users for
available transponders and the availability of satellite launching facilities
for replacement satellites.
 
    Each of the networks enters into agreements with cable operators and other
distributors which agree to carry the programming service, generally as part of
a package with other advertiser-supported programming services. These agreements
are multi-year arrangements in which the distributor pays Networks a fee for
each subscriber to the particular programming service.
 
TELEVISION PRODUCTION
 
    Studios USA produces and distributes television programs and motion picture
films intended for initial exhibition on television and home video in both
domestic and international markets. These productions include original
programming for network television, first-run syndication through local
television stations, pay television, basic cable and home video and
made-for-television movies. Studios USA also is the exclusive domestic
distributor of the Universal television library. In addition to the activities
of Studios USA, other USAi business units are also engaged in financing or
producing television programs for exhibition on USA Network, Sci-Fi Channel or
USA Broadcasting.
 
    Studios USA and its predecessor companies have produced programming for
network television since the early 1950s and Studios USA remains a major
supplier of network and first-run syndication programming today, including
LAW & ORDER and XENA: WARRIOR PRINCESS. For the 1999/2000 broadcast season,
Studios USA has launched LAW & ORDER: SPECIAL VICTIMS UNIT for NBC and two new
syndicated series, CLEOPATRA 2525 and JACK OF ALL TRADES. Studios USA generally
retains foreign and off-network distribution rights for programming originally
produced for television networks. In addition, Studios USA distributes original
television programming in domestic markets for first-run syndication as well as
exhibition on basic cable and other media and generally retains foreign
distribution rights.
 
                                       8

<PAGE>
    Television production generally includes four steps: development,
pre-production, principal photography and post-production. The
production/distribution cycle represents the period of time from development of
the property through distribution and varies depending upon such factors as type
of product and primary form of exhibition. Under the facilities lease agreement,
Studios USA's production activities are centered on the Universal production
lot. Some television programs and films are produced, in whole or in part, at
other locations both inside and outside the United States.
 
    Development of television programs and films begins with ideas and concepts
of producers and writers, which form the basis of a television series or film.
Producers and writers are frequently signed to term agreements generally
providing Studios USA with exclusive use of their services for a term ranging
from one to five years in the case of producers and one to two years in the case
of writers. Term agreements are signed with such talent to develop network
comedy and drama and first-run syndication programming. Term agreements are also
signed with actors, binding them to Studios USA for a period of time during
which Studios USA attempts to attach them to a series under development. These
term agreements represent a significant investment for Studios USA.
 
    In the case of network development, the ideas and concepts developed by
producers and writers are presented to broadcast networks to receive their
approval and financial participation in the development of a "pilot" that could
possibly become a commitment from the network to license a minimum number of
episodes based on the pilot. In general, the production cycle for network
programming begins with the presentation of pilot concepts to network
broadcasters in the fall of each year. Alternatively, Studios USA may elect to
self-finance a project, and then market the completed script or produced pilot
to the various networks. In any case, each May, networks release their fall
schedules, committing to the series production of pilots, renewing existing
programs and canceling others. Networks typically commit to seven to thirteen
episodes for such new series with options to acquire additional episodes for a
negotiated license fee and twenty-two episodes for a renewed series. Production
on these series begins in June and continues through March, depending upon the
network commitment. The network broadcast season generally runs from September
through May. Studios USA incurs production costs throughout the production cycle
up through completion of an episode while networks remit a portion of the
license fees to Studios USA upon the beginning of episodic production and a
portion upon delivery of episodes.
 
    Several of Studios USA's subsidiary companies are individually and
separately engaged in the development and/or production of television programs.
Certain of these subsidiaries are also signatories to various collective
bargaining agreements within the entertainment industry. The most significant of
these are the agreements with the Writers Guild of America, the Directors Guild
of America and the Screen Actors Guild which agreements typically have a term of
several years and then require re-negotiation.
 
    TELEVISION PRODUCTION CUSTOMERS.  Studios USA produces television films for
the U.S. broadcast networks for prime time television exhibition. Certain
television films are initially licensed for network television exhibition in the
U.S. and are simultaneously syndicated outside the U.S. Historically, Studios
USA customers for network television film product have been concentrated with
the three established major U.S. television networks--ABC, CBS and NBC. In
recent years, Fox Broadcasting, UPN and the WB Network have created new
networks, decreasing to some extent Studios USA's dependence on ABC, CBS and NBC
and expanding the outlets for its network product. Revenue from licensing
agreements is recognized in the period that the films are first available for
telecast. Programming consists of various weekly series and "made for
television" feature length films for 1999/2000. Network programming includes the
returning production LAW & ORDER and one new series--LAW & ORDER: SPECIAL
VICTIMS UNIT on NBC. In the initial telecast season, the network license
provides for the production of a minimum number of episodes, with the network
having the option to order additional episodes for both the current and future
television seasons. The success of any one series may be influenced by the time
period in which the network airs the series, the strength of the programs
against which it competes, promotion of the series by the network and the
overall commitment of the network to the series.
 
                                       9

<PAGE>
    Generally, network licenses give the networks the exclusive right to
telecast new episodes of a given series for a period of time, generally four to
five years and sometimes with further options thereafter. In the case of LAW &
ORDER: SPECIAL VICTIMS UNIT, however, USA Network shares this initial exhibition
"window" with NBC. Studios USA has also licensed to USA Network off-syndication
episodes of HERCULES: THE LEGENDARY JOURNEYS and XENA: WARRIOR PRINCESS and
off-network episodes of NEW YORK UNDERCOVER.
 
    Studios USA also produces television film product that is initially
syndicated directly to independent television stations for airing throughout the
broadcast day and to network affiliated stations for non-primetime airing.
First-run syndication programming for 1999/2000 includes one hour weekly series
including returning productions of HERCULES: THE LEGENDARY JOURNEYS and XENA:
WARRIOR PRINCESS as well as the initial year production of a BACK TO BACK ACTION
hour, consisting of two half-hour series, CLEOPATRA 2525 and JACK OF ALL TRADES
and talk shows including returning productions of THE SALLY JESSY RAPHAEL SHOW,
THE JERRY SPRINGER SHOW and MAURY. In addition, in the fall of 2000, Studios USA
will launch a half-hour reality strip from Law & Order creator Dick Wolf
entitled ARREST & TRIAL.
 
    Studios USA licenses television film product to independent stations and
directly to network affiliated stations in return for either a cash license fee,
barter or part-barter and part-cash. Barter syndication is the process whereby
Studios USA obtains commitments from television stations to broadcast a program
in certain agreed upon time periods. Studios USA retains advertising time in the
program in lieu of receiving a cash license fee, and sells such retained
advertising time for its own account to national advertisers at rates based on
the projected number of viewers. By placing the program with television stations
throughout the United States, an "ad hoc" network of stations is created to
carry the program. The creation of this ad hoc network of stations, typically
representing a penetration of at least 80% of total U.S. television households,
enables Studios USA to sell the commercial advertising time through advertising
agencies for sponsors desiring national coverage. The rates charged for this
advertising time are typically lower than rates charged by U.S. broadcast
networks for similar demographics since the networks' coverage of the markets is
generally greater. In order to create this ad hoc network of stations and reach
80% of total U.S. television households, Studios USA must syndicate its
programming with stations that are owned and operated by the major broadcast
networks and station groups, which are essentially entities which own many
stations in the major broadcast markets across the United States. Without
commitments from broadcast network stations and station groups, the necessary
market penetration may not be achieved which may adversely affect the chances of
success in the first-run syndication market.
 
    Generally, television films produced for broadcast or cable networks or
barter syndication provide license fees and/or advertising revenues that cover
only a portion of the anticipated production costs. The recoverability of the
balance of the production costs and the realization of profits, if any, is
dependent upon the success of other exploitation including international
syndication licenses, subsequent basic cable and domestic syndication licenses,
releases in the home video market, merchandising and other uses. Pursuant to an
agreement with Universal, Studios USA has the right to include eligible product
in Universal's international free television output and volume agreements with
television broadcasters in major international territories. These agreements
represent a substantial revenue source for Studios USA.
 
    DISTRIBUTION.  In general, during a series' initial production years (i.e.,
seasons one to four), domestic network and international revenues fall short of
production costs. As a result, the series will likely remain in a deficit
position until sold in the domestic syndication market. The series will be
available for airing in the off-network syndication market after a network's
exclusivity period ends, typically the September following the completion of the
third or fourth network season (or the subsequent season if the series were a
mid-season order). For a successful series, the syndication sales process
generally begins during the third network season. The price that a series will
command in syndication is a function of supply and demand. Studios USA
syndicated series are sold for cash and/or bartered services (i.e., advertising
time) for a period of at least five years. Barter transactions have played an
increasingly important role in the syndication process as they can represent a
majority of the distributor's syndication revenue.
 
                                       10

<PAGE>
    Studios USA distributes its current programming domestically. In addition,
USAi and Universal have agreed that Studios USA will have the exclusive right
through February 2013, to distribute domestically Universal's large television
library, with programming dating back to the 1950s and including such series as
ALFRED HITCHCOCK PRESENTS; THE VIRGINIAN; MARCUS WELBY, M.D.; DRAGNET; COLUMBO;
KOJAK; THE ROCKFORD FILES; MURDER SHE WROTE; MAGNUM P.I.; MIAMI VICE; COACH and
NORTHERN EXPOSURE. During this period, Studios USA also has the exclusive right,
with limited exceptions, to distribute domestically television programming newly
produced by Universal.
 
    In addition, USAi and Universal have agreed that Universal will have the
exclusive right, again with limited exceptions, to distribute all Studios USA
programming internationally. In that regard, Universal has entered into several
output and volume agreements with international television broadcasters that
include programming produced by Studios USA. In May 1996, Universal signed a
free television output and co-production agreement with Germany's RTL. The
ten-year agreement covers all new and existing product distributed by Universal
to RTL, UFA and CLT broadcasting outlets in Germany and other German-speaking
territories and provides that RTL will co-produce a minimum number of series
from Universal and Studios USA over the term of the agreement, providing a
portion of each series' production costs. With regard to the output arrangement,
RTL has exclusive first-run free television rights in its territories to carry
every series and television movie made by Universal and Studios USA during the
term of the agreement. In 1997, Universal signed similar volume agreements in
France, Spain, Italy and the United Kingdom in which the licensor generally
committed to license a minimum number per year of first-run series and first-run
television movies during a specified term in the territory. Pursuant to the
terms of the international distribution agreement between USAi and Universal,
USAi's eligible programming will have the first right to participate in
Universal's international output and volume agreements with international
television broadcasters, including in Germany, France, Spain, Italy and the
United Kingdom.
 
ELECTRONIC RETAILING
 
    Home Shopping Network sells a variety of consumer goods and services by
means of live, customer-interactive electronic retail sales programs which are
transmitted via satellite to cable television systems, affiliated broadcast
television stations and satellite dish receivers. Home Shopping Network operates
two retail sales programs, Home Shopping Network and America's Store, each
24 hours a day, seven days a week.
 
    Home Shopping Network's retail sales and programming are intended to promote
sales and customer loyalty through a combination of product quality, price and
value, coupled with product information and entertainment. Home Shopping Network
and America's Store programs are carried by cable television systems and
broadcast television stations throughout the country. Home Shopping Network and
America's Store are divided into segments which are televised live with a host
who presents the merchandise, sometimes with the assistance of a guest
representing the product vendor, and conveys information relating to the
product. Viewers purchase products by calling a toll-free telephone number.
According to Nielsen Media Research, as of December 31, 1999, Home Shopping
Network was available in approximately 73.7 million unduplicated households,
including approximately 60.6 million cable households.
 
    The following table highlights the changes in the estimated unduplicated
television household reach of Home Shopping Network, by category of access for
the year ended December 31, 1999:
 

<TABLE>
<CAPTION>
                                                             CABLE     BROADCAST   SATELLITE    TOTAL
                                                            --------   ---------   ---------   --------
                                                                   (IN THOUSANDS OF HOUSEHOLDS)
<S>                                                         <C>        <C>         <C>         <C>
Households--December 31, 1998.............................   53,455     13,842       2,028      69,325
Net additions/(deletions).................................    7,163     (2,394)       (353)      4,416
                                                             ------     ------       -----      ------
Households--December 31, 1999.............................   60,618     11,448       1,675      73,741
                                                             ======     ======       =====      ======
</TABLE>

 
                                       11

<PAGE>
    Households capable of receiving both broadcast and cable transmissions are
included under cable and therefore are excluded from broadcast to present
unduplicated household reach. Cable households included 9.1 million and
5.2 million direct broadcast satellite households at December 31, 1999 and 1998,
respectively, and therefore are excluded from satellite.
 
    According to industry sources, as of December 31, 1999, there were
100.1 million homes in the United States with a television set, 68.5 million
basic cable television subscribers and 1.7 million homes with satellite dish
receivers, excluding direct broadcast satellite.
 
    As of December 31, 1999, America's Store reached approximately 6.8 million
cable television households, of which 1.2 million were on a part time basis. Of
the total cable television households receiving America's Store, 6.5 million
also receive Home Shopping Network.
 
CUSTOMER SERVICE AND RETURN POLICY
 
    Home Shopping Network believes that satisfied customers will be loyal and
will purchase merchandise on a regular basis. Accordingly, Home Shopping Network
has customer service personnel and computerized voice response units available
to handle calls relating to customer inquiries 24 hours a day, seven days a
week. Generally, any item purchased from Home Shopping Network may be returned
within 30 days for a full refund of the purchase price, including the original
shipping and handling charges.
 
DISTRIBUTION, DATA PROCESSING AND TELECOMMUNICATIONS
 
    Home Shopping Network's fulfillment subsidiaries store, service and ship
merchandise from warehouses located in Salem, Virginia and Waterloo, Iowa.
Generally, merchandise is delivered to customers within seven to ten business
days of the receipt by Home Shopping Network of the customer's payment for an
order.
 
    Home Shopping Network currently operates multiple main frame and distributed
computing platforms and has extensive computer systems which track purchase
orders, inventory, sales, payments, credit authorization, and delivery of
merchandise to customers. During 1999, Home Shopping Network continued to
upgrade many of its computer systems, which upgrade will be largely completed in
2000.
 
    Home Shopping Network has digital telephone and switching systems and
utilizes a voice response unit, which allows callers to place their orders by
means of touch tone input or to be transferred to an operator.
 
PRODUCT PURCHASING AND LIQUIDATION
 
    Home Shopping Network purchases merchandise made to its specifications,
merchandise from manufacturers' lines, merchandise offered under certain
exclusive rights and overstock inventories of wholesalers. The mix of products
and source of such merchandise depends upon a variety of factors including price
and availability. Home Shopping Network generally does not have long-term
commitments with its vendors, and there are various sources of supply available
for each category of merchandise sold.
 
    Home Shopping Network's product offerings include: jewelry; hardgoods, which
include consumer electronics, collectibles, housewares, and consumables; health
and beauty, which consists primarily of cosmetics, skin care, fitness and
nutritional supplements; softgoods, which consist primarily of apparel; and
fashion accessories. For 1999 hardgoods, jewelry, health and beauty, softgoods
and fashion accessories accounted for approximately 42.3%, 27.6%, 17.3%, 11.2%
and 1.6%, respectively, of Home Shopping Network's net sales.
 
    Home Shopping Network liquidates excess inventory through its four outlet
stores located in the Tampa Bay and Orlando areas and one outlet store in the
Chicago area. Damaged merchandise is liquidated by Home Shopping Network through
traditional channels.
 
                                       12

<PAGE>
TRANSMISSION AND PROGRAMMING
 
    Home Shopping Network produces its programming in its studios located in St.
Petersburg, Florida. Home Shopping Network and America's Store programs are
distributed to cable television systems, broadcast television stations, direct
broadcast satellite, and satellite antenna owners by means of Home Shopping
Network's satellite uplink facilities to satellite transponders leased by Home
Shopping Network. Any cable television system, broadcast television station or
individual satellite dish owner in the United States and the Caribbean Islands
equipped with standard satellite receiving facilities is capable of receiving
Home Shopping Network and America's Store.
 
    Home Shopping Network has lease agreements securing full-time use of three
transponders on three domestic communications satellites, although one of those
transponders has been subleased as described below. Each of the transponder
lease agreements grants Home Shopping Network "protected" rights. When the
carrier provides services to a customer on a "protected" basis, replacement
transponders (I.E., spare or unassigned transponders) on the satellite may be
used in the event the "protected" transponder fails. Should there be no
replacement transponders available, the "protected" customer will displace a
"preemptible" transponder customer on the same satellite. The carrier also
maintains a protection satellite and should a satellite fail completely, all
"protected" transponders would be moved to the protection satellite which is
available on a "first fail, first served" basis.
 
    Use of the transponder which Home Shopping Network subleases may, however,
be preempted in order to satisfy the owner's obligations to provide the
transponder to another lessee on the satellite in the event that the other
lessee cannot be restored to service through the use of spare or reserve
transponders (the "special termination right"). As of June 5, 1995, Home
Shopping Network discontinued use of this satellite transponder for which it has
a non-cancelable operating lease calling for monthly payments of approximately
$150,000 through December 31, 2006. In 1996, Home Shopping Network subleased
this satellite transponder for a term of 10 years with an option to cancel after
four years. The monthly sublease rental is in excess of the monthly payment.
 
    A transponder failure that would necessitate a move to another transponder
on the same satellite would not result in any significant interruption of
service to the cable systems and/or television stations which receive Home
Shopping Network and America's Store. However, a failure that would necessitate
a move to another satellite may temporarily affect the number of cable systems
and/or television stations which receive Home Shopping Network and America's
Store, as well as all other programming carried on the failed satellite, because
of the need to install equipment or to reorient earth stations.
 
    The terms of two of the satellite transponder leases utilized by Home
Shopping Network are for the life of the satellites, which are projected through
2004. The term of the third subleased satellite is through December 31, 2006,
subject to earlier implementation of the special termination right.
 
    Home Shopping Network's access to two transponders pursuant to long-term
agreements would enable it to continue transmission of Home Shopping Network
programming should either one of the satellites fail. Although Home Shopping
Network believes it is taking every reasonable measure to ensure its continued
satellite transmission capability, there can be no assurance that termination or
interruption of satellite transmissions will not occur. Such a termination or
interruption of service by one or both of these satellites could have a material
adverse effect on the operations and financial condition of USAi.
 
    The availability of replacement satellites and transponder time beyond
current leases is dependent on a number of factors over which Home Shopping
Network has no control, including competition among prospective users for
available transponders and the availability of satellite launching facilities
for replacement satellites.
 
    The FCC grants licenses to construct and operate satellite uplink facilities
which transmit signals to satellites. These licenses are generally issued
without a hearing if suitable frequencies are available. Home Shopping Network
has been granted one license for operation of C-band satellite transmission
facilities
 
                                       13

<PAGE>
and two licenses for operation of KU-band satellite transmission facilities on a
permanent basis in Clearwater and St. Petersburg, Florida.
 
AFFILIATION AGREEMENTS WITH CABLE OPERATORS
 
    Home Shopping Network has entered into affiliation agreements with cable
system operators to carry Home Shopping Network, America's Store, or both
services. The agreements have terms ranging from 3 to 14 years, and obligate the
cable operator to assist with the promotional efforts of Home Shopping Network
by carrying commercials promoting Home Shopping Network and America's Store and
by distributing Home Shopping Network's marketing materials to the cable
operator's subscribers. All cable operators receive a commission of 5 percent of
the net merchandise sales within the cable operator's franchise area, regardless
of whether the sale originated from a cable or a broadcast household. With
larger, multiple system operators, Home Shopping Network has agreed to provide
additional compensation. This compensation will be in various forms, for
example, by purchasing advertising availabilities from cable operators on other
programming networks, by establishing commission guarantees for the operator, or
by making an upfront payment to the operator in return for commitments to
deliver a minimum number of Home Shopping Network subscribers for a certain
number of years.
 
AFFILIATION AGREEMENTS WITH TELEVISION STATIONS
 
    Home Shopping Network has entered into affiliation agreements with
television stations to carry Home Shopping Network or America's Store programs.
In addition to the 13 owned and operated full power (three of which do not carry
Home Shopping Network or America's Store) and 26 low power television stations
owned by USAi, as of December 31, 1999, USAi has affiliation agreements with 5
full-time, full power stations, 39 part-time, full power stations that carry
Home Shopping Network or America's Store and 50 low power stations. USAi has a
minority ownership interest in 3 of the full-time, full power stations that
carry Home Shopping Network or America's Store programs. The affiliation
agreements have terms ranging from four weeks to fourteen years. All television
station affiliates other than stations owned by USAi receive an hourly or
monthly fixed rate for airing Home Shopping Network and America's Store
programs. Full power television signals are carried by cable operators within a
station's coverage area. For more information, see
"--Regulation--Must-Carry/Retransmission Consent." Low power station signals are
rarely carried by cable systems.
 
TICKETING OPERATIONS
 
TICKETMASTER
 
    Ticketmaster, through its wholly and majority owned subsidiaries, is the
leading provider of automated ticketing services in the United States with over
3,750 domestic clients, including many of the country's foremost entertainment
facilities, promoters and professional sports franchises. Ticketmaster has
established its market position by providing these clients with comprehensive
ticket inventory control and management, a broad distribution network and
dedicated marketing and support services. Ticket orders are received and
fulfilled through operator-staffed call centers, independent sales outlets
remote to the facility box office and Ticketmaster.com's web site. Revenue is
generated principally from convenience charges received by Ticketmaster for
tickets sold on its clients' behalf. Ticketmaster generally serves as an
exclusive agent for its clients and typically has no financial risk for unsold
tickets.
 
    Ticketmaster has a comprehensive domestic distribution system that includes
approximately 2,700 remote sales outlets, covering many of the major
metropolitan areas in the United States, and 17 domestic call centers with
approximately 2,000 operator positions. Ticketmaster also operates in Great
Britain, Canada, Ireland, Mexico and Australia and, in 1998, expanded into Chile
and Argentina. The number of tickets sold through Ticketmaster has increased
from approximately 29 million tickets in 1990 to approximately 75 million
tickets in 1999.
 
                                       14

<PAGE>
    USAi believes that the Ticketmaster system for live event ticketing
transactions and its distribution capabilities enhance Ticketmaster's ability to
attract new clients and maintain its existing client base. The Ticketmaster
system, which includes both hardware and software, is typically installed in a
client's box office and provides a single centralized inventory control
management system capable of tracking total ticket inventory for all events,
whether sales are made on a season, subscription, group or individual ticket
basis. The versatility of the Ticketmaster system allows it to be customized to
satisfy a full range of client requirements.
 
    Ticketmaster generally enters into written agreements with its clients under
which Ticketmaster agrees to provide the Ticketmaster system and to serve as the
client's exclusive ticket sales agent for all sales of individual tickets sold
outside of the facility's box office for a specified period, typically five to
seven years. Under its facilities agreements, Ticketmaster generally is granted
the right to sell tickets for all live events presented at a facility, and
installs the Ticketmaster system in the facility's box office. Agreements with
promoters generally grant Ticketmaster the right to sell tickets for all live
events presented by that promoter at any facility, unless the facility is
covered by an exclusive agreement with another automated ticketing service
company.
 
    As part of its client agreements, Ticketmaster is generally granted the
right to collect from ticket purchasers a per ticket convenience charge on all
tickets sold other than at the box office and an additional per order handling
charge on all tickets sold by Ticketmaster other than at remote sales outlets to
partially offset the cost of fulfillment. The amount of the convenience charge
is typically determined during the contract negotiation process, and varies
based upon numerous factors, including the services to be rendered to the
client, the amount and cost of equipment to be installed at the client's box
office and the amount of advertising and/or promotional allowances to be
provided, as well as the type of event and whether the ticket is purchased at a
remote sales outlet, by telephone, through the Ticketmaster.com web site or
otherwise. Any deviations from those amounts for any event are negotiated and
agreed upon by Ticketmaster and the client prior to any ticket sales. During
Ticketmaster's fiscal 1999, the convenience charges generally ranged from $1.50
to $7.50 per ticket. Convenience charges, when added to per order handling
charges, averaged approximately $4.70 per ticket in fiscal 1999. Ticketmaster's
client agreements also generally establish the amounts and frequency of any
increases in the convenience charge and handling charge during the term of the
agreement.
 
    The agreements with some of Ticketmaster's clients provide for a client to
participate in the convenience charges paid by ticket purchasers for tickets
bought through Ticketmaster for that client's events. The amount of such
participation, if any, is determined by negotiation with that client. Some
agreements also may provide for Ticketmaster to make participation advances to
the client, generally recoupable by Ticketmaster out of the client's future
right to participation. In limited cases, Ticketmaster makes an upfront,
non-recoupable payment to a client for the right to sell tickets for that
client.
 
    Clients are routinely required by contract to include the Ticketmaster name
in print, radio and television advertisements for entertainment events sponsored
by such clients. The Ticketmaster name and logo are also prominently displayed
on printed tickets and ticket envelopes.
 
    Ticketmaster generally does not buy tickets from its clients for resale to
the public and has no financial risk for unsold tickets. In the United Kingdom,
Ticketmaster may from time to time buy tickets from its clients for resale to
the public in an amount typically not exceeding (Pounds) 600,000 in the
aggregate. Ticket prices are not determined by Ticketmaster. Ticketmaster's
clients also generally determine the scheduling of when tickets go on sale to
the public and what tickets will be available for sale through Ticketmaster.
Facilities and promoters, for example, often handle group and season ticket
sales in-house. Ticketmaster only sells a portion of its clients' tickets, the
amount of which varies from client to client and varies as to any single client
from year to year.
 
    USAi believes that the primary benefits derived by Ticketmaster's clients by
use of the Ticketmaster system include (1) centralized control of total ticket
inventory as well as accounting information and
 
                                       15

<PAGE>
market research data, (2) centralized accountability for ticket proceeds,
(3) manageable and predictable transaction costs, (4) broader and expedited
distribution of tickets, (5) wide dissemination of information about upcoming
events through Ticketmaster's call centers, the Ticketmaster.com web site and
other media platforms, (6) the ability to easily add additional performances if
warranted by demand, and (7) marketing and promotional support.
 
    If an event is canceled, Ticketmaster's current policy is to refund the per
ticket convenience charges (but not the handling charge). Refunds of the ticket
price for a canceled event are funded by the client. To the extent that funds
then being held by Ticketmaster on behalf of the client are insufficient to
cover all refunds, the client is obligated to provide Ticketmaster with
additional funds within 24 to 72 hours after a request by Ticketmaster.
 
TICKETMASTER.COM
 
    Ticketmaster.com (formerly known as Ticketmaster Online) is a leading online
ticketing service that enables consumers to purchase tickets for live music,
sports, theater and family entertainment events presented by Ticketmaster
clients and related merchandise over the web. Consumers can access the
Ticketmaster.com service at WWW.TICKETMASTER.COM and from CitySearch owned and
operated city guides at WWW.CITYSEARCH.COM through numerous direct links from
banners and event profiles. In addition to these services, the Ticketmaster.com
web site provides local information and original content regarding live events
for Ticketmaster clients throughout the United States, Canada and the United
Kingdom. In January 2000, Ticketmaster Online-CitySearch acquired 2b
Technology, Inc., a Richmond, Virginia based visitor management software
developer and an offline and online ticketing company targeted at venues such as
higher volume museums, cultural institutions and historic sites.
 
    Throughout the Ticketmaster.com web site and at the conclusion of a
confirmed ticket purchase, the consumer is prompted to purchase merchandise that
is related to a particular event, such as videos, tour merchandise and sports
memorabilia. Ticketmaster Online-CitySearch intends to expand the types and
range of merchandise that can be ordered by consumers through the
Ticketmaster.com web site.
 
    Since the beginning of online ticket sales in November 1996,
Ticketmaster.com has experienced significant growth in tickets sold through its
web site. Gross transaction dollars for ticket sales increased from
approximately $223,000 in November 1996 to $51 million in December 1999.
Similarly, tickets sold on the Ticketmaster.com web site in November 1996
represented less than 0.1% of total tickets sold by Ticketmaster, while tickets
sold online in the quarter ended December 31, 1999 represented more than 18%.
 
    TICKETMASTER LICENSE AGREEMENT.  Under the License and Services Agreement
entered into among Ticketmaster, Ticketmaster.com and USAi, as part of the
Ticketmaster Online-City Search transaction, subject to certain limitations,
Ticketmaster has granted (a) Ticketmaster.com an exclusive, irrevocable license
to use the Ticketmaster trademark and (b) certain Ticketmaster databases to sell
live event tickets online for Ticketmaster's clients. In addition, subject to
limitations, Ticketmaster authorized Ticketmaster Online-CitySearch to be
Ticketmaster's exclusive, perpetual, worldwide agent for such online ticket
sales. The Ticketmaster license agreement further provides that Ticketmaster may
use and permit others to use the Ticketmaster trademark in connection with the
online promotion of ticket sales.
 
                                       16

<PAGE>
    Ticketmaster retains the rights to sell tickets by non-online means and to
use the Ticketmaster trademark in connection with such sales. The Ticketmaster
license agreement defines such non-online means to include (1) by telephone;
(2) by other voice-to-voice means or voice-to-voice recognition unit systems;
(3) by non-interactive broadcast, cable and satellite television; and (4) by
kiosks and retail ticket outlets. Client venues retain the rights to sell
tickets at their box offices or as otherwise provided in client venue agreements
with Ticketmaster.
 
    Ticketmaster is the contracting party with client venues, promoters and
sports franchises, providing ticket inventory management, consumer information
and related data for all ticketing transactions. Ticketmaster provides this
information to Ticketmaster Online-CitySearch for processing of online live
event ticket sales and provides all transaction processing and fulfillment
services for online live event ticket sales. Ticketmaster Online-CitySearch is
required under the Ticketmaster license agreement to comply with the terms of
Ticketmaster's client agreements. Ticketmaster Online-CitySearch rights,
contained in the Ticketmaster license agreement, are subject to the client
agreements. The Ticketmaster license agreement also generally restricts
Ticketmaster Online-CitySearch from cooperating with, offering online links to,
or entering into any agreements with venues, ticket sellers or sales agents for
online sale of tickets.
 
    Under the Ticketmaster license agreement, Ticketmaster Online-CitySearch
pays Ticketmaster a royalty based on the percentage of the net profit it derives
from online ticket sales. Ticketmaster Online-CitySearch also reimburses
Ticketmaster for Ticketmaster's direct expenses related to online ticket sales.
 
    Under the Ticketmaster license agreement, Ticketmaster.com has also been
granted the non-exclusive right to promote and sell online merchandise available
through Ticketmaster. Ticketmaster serves as Ticketmaster.com's exclusive
fulfillment provider for the online sales of this merchandise. As long as
Ticketmaster's fees, terms and quality of service are no less favorable than
those available to Ticketmaster.com from third parties, Ticketmaster or its
affiliates will serve as Ticketmaster.com's exclusive fulfillment provider for
the online sales of all other merchandise available through Ticketmaster.
Ticketmaster may also solicit sponsorship and advertising for Ticketmaster.com's
web sites in a bundle with other sponsorship and advertising opportunities
offered by Ticketmaster.
 
HOTEL RESERVATIONS
 
    Hotel Reservations Network is a leading online consolidator of hotel
accommodations in terms of hotel rooms booked online, providing service through
its websites, affiliated websites and its toll-free call center. Hotel
Reservations Network contracts with hotels in advance for volume purchases and
guaranteed availability of hotel rooms at wholesale prices and sells these rooms
to consumers, often at significant discounts to published rates. In addition,
these hotel supply relationships often allow Hotel Reservations Network to offer
its customers hotel accommodation alternatives for otherwise unavailable dates.
At December 31, 1999, Hotel Reservations Network had room supply agreements with
approximately 1,500 hotels in 40 major markets in North America and Western
Europe.
 
    Hotel Reservations Network markets its hotel accommodations primarily over
the Internet through its own websites, www.hoteldiscount.com and
www.180096hotel.com, and through third-party websites. Hotel Reservations
Network has negotiated affiliate marketing agreements with many of the leading
travel-related websites including Preview Travel, Expedia (operated by
Microsoft), Travelocity (operated by Sabre Holdings Corp., a majority owned
subsidiary of American Airlines), TravelWeb (operated by Pegasus Systems), Cheap
Tickets, Yupi.com, GetThere.com and over 1,600 other affiliate websites. Hotel
Reservations Network is also prominently featured on and directly linked to most
of the leading Internet search engines and online communities, including America
Online, Lycos, Yahoo!, Ticketmaster Online-CitySearch, Excite and Infoseek.
Through these agreements, its hotel accommodations are prominently featured on
and linked to these affiliated websites on a co-branded or private label basis.
 
    Hotel Reservations Network has room supply relationships with a wide range
of independent hotel operators, as well as hotels associated with national
chains, including Hilton, Sheraton, Westin, Radisson,
 
                                       17

<PAGE>
Best Western, Loews, Doubletree and Hampton Inn. These hotel suppliers view
Hotel Reservations Network as an efficient distribution channel to help maximize
their overall revenues and occupancy levels. Although Hotel Reservations Network
contracts in advance for volume room commitments, its hotel supply contracts
often allow it to return unsold rooms without penalty within a specified period
of time. In addition, because Hotel Reservations Network contracts to purchase
hotel rooms in advance, it is able to manage billing procedures for the rooms it
sells and thereby maintain direct relationships with its customers. Hotel
Reservations Network has developed proprietary revenue management and
reservation systems software that is integrated with its websites and call
center operations. These systems and software enable Hotel Reservations Network
to accurately monitor its room inventory and provide prompt, efficient customer
service. Its hotel supply contracts and revenue management capabilities
differentiate Hotel Reservations Network from retail travel agencies and other
commission-based resellers of hotel accommodations.
 
INTERNET SERVICES
 
    USAi operates several Internet services associated with its media and
entertainment and electronic retailing businesses. In July 1998, USAi announced
the formation of USA Networks Interactive to coordinate the operations of its
Internet Services business. In addition to the services described below, USA
Networks Interactive operates SCIFI.COM, the web site for Sci-Fi Channel.
SCIFI.COM, which was launched in 1995, is an online science fiction resource,
featuring original entertainment, daily news, feature stories, games and special
events that focus on science fiction, science fact, fantasy, horror, the
paranormal and the unknown.
 
RETAILING
 
    USAi conducts its Internet retailing operations through Internet Shopping
Network. Internet Shopping Network's retailing services include FIRST
AUCTION.COM, which was launched in June 1997, and FIRST JEWELRY.COM, which
officially launched in October 1999. FIRST AUCTION.COM is an interactive
Internet site, which auctions a broad range of merchandise, including
housewares, home decor products, jewelry, apparel, toys, collectibles, beauty
products, outdoor fitness and sporting equipment, consumer electronics and
computers. As of December 31, 1999, FIRST AUCTION.COM had approximately 464,000
registered members. FIRST JEWELRY.COM is an interactive Internet site, which
sells jewelry across a broad range of categories and price points. Since its
October 1999 launch, FIRST JEWELRY.COM has continued to experience rapid sales
growth.
 
    Internet Shopping Network specializes in marketing, fulfillment, customer
service and site development in online retailing. Internet Shopping Network has
online advertising distribution agreements with America Online, @Home,
Women.com, Lycos Network and MyPoints.com. Internet Shopping Network's
technology partners include Sun Microsystems, LinkShare, Oracle and Netscape.
 
    During 1999, Home Shopping Network re-launched its web site, HSN.com, as a
transactional e-commerce site. Home Shopping Network's site allows consumers to
shop for selected merchandise from Home Shopping Network's inventory, and
provides opportunities for consumers to engage in a variety of entertaining
community activities including live chats with celebrity guests and user
populated bulletin boards.
 
CITYSEARCH
 
    CITYSEARCH SERVICE FOR CONSUMERS.  CitySearch produces and delivers
comprehensive local city guides on the web, providing up-to-date information
regarding arts and entertainment events, community activities, recreation,
business, shopping, professional services and news/sports/weather to consumers
in metropolitan areas. Each local city guide primarily consists of original
content developed and designed specifically for the web by CitySearch and its
partners. The CitySearch service is topically organized by
 
                                       18

<PAGE>
categories, such as arts and entertainment, restaurants and bars, community,
shops and services, sports and outdoors, hotels and tourism, local news and
professional services. Within most of the city guides, consumers can search
neighborhood shopping areas, obtain maps, contact community organizations and
vendors by e-mail, and engage in bulletin board discussions with individuals
such as local public officials and celebrities. In CitySearch owned and operated
markets, consumers can also access the Ticketmaster.com web site through
CitySearch city guides to purchase live event tickets and related merchandise
online. In some markets, consumers can also access audio streams, including
recent news and other information, from local radio partners. CitySearch offers
local and regional businesses the opportunity to reach and interact with
targeted consumers. In addition, content generated by consumers through e-mail
and bulletin boards enhances the sense of community in CitySearch sites.
 
    In 1999, CitySearch acquired CityAuction, an online auction company,
Match.com and the One & Only Network, which are both online personals services,
and AstroAbby, an online horoscope service. Match.com is a leading online
matchmaking and dating service that offers single adults a convenient, fun and
private environment for meeting other singles. With the recent integration of
the One & Only Network, as of December 31, 1999, Match.com has more than four
million user registrations and approximately 560,000 active users, generating
more than 100 million monthly page views. Match.com is the leading provider of
online personals and matchmaking services on Microsoft's MSN Network. CitySearch
is continuing to grow each of these offerings in their own right and is also
integrating these services with its city guides.
 
    In addition, in 1999, CitySearch acquired the arts and entertainment portion
of the MSN Sidewalk (sidewalk.com) city guides, significantly expanding the
reach of its city guides. CitySearch has integrated the Sidewalk city guides
with the CitySearch city guides to create a nationwide network.
 
    The CitySearch service has been launched in more than 70 markets across the
United States and in selected international markets. CitySearch plans to
continue to expand the service both in owned and operated markets and by
partnering internationally with major media companies, although CitySearch's
domestic focus during 2000 will be to develop those markets it has already
launched in the United States. CitySearch's major media partners bring capital,
brand recognition, promotional strength and local knowledge to their city guides
and allow CitySearch to build out its international network of sites faster than
it could solely through owned and operated sites. As of December 31, 1999,
CitySearch had launched sites in 77 markets worldwide, including five
partner-led markets and 72 owned and operated markets, and in seven
international markets, all of which are partner-led markets. In addition, at
February 14, 2000, CitySearch had signed an agreement with an additional
international partner to launch at least one additional international city
guide. CitySearch has also executed a term sheet to enter into a strategic
partnership with a consortium of prominent Japanese companies to launch city
guides throughout Japan.
 
    CITYSEARCH SERVICE FOR BUSINESS CUSTOMERS.  CitySearch creates and hosts
CitySearch web sites for local and regional businesses and organizations for a
monthly fee. CitySearch offers local businesses a wide range of options in
creating web presences, from a basic web presence costing as little as $60 per
month to a multi-page site with additional features and functionality costing up
to $1,000 per month. Most business customers have entered into a one-year
agreement that automatically converts into a month-to-month contract upon
expiration of the initial term. By aggregating a customer's web site with those
of numerous other businesses in a comprehensive local city guide, CitySearch
provides categorical, geographic and editorial context to a customer's web
presence to generate usage by consumers, as well as significant Internet
traffic. Based on internal studies, CitySearch believes that CitySearch users
are more evenly split between men and women, better educated, slightly older and
have higher annual incomes than the typical Internet user. CitySearch believes
that these demographics are attractive to its business customers.
 
    CitySearch provides an integrated solution for businesses to establish a
CitySearch web presence, including design, photography, layout, posting of
updated information, hosting and maintenance. Businesses are able to provide a
targeted audience with current information about their products and services
 
                                       19

<PAGE>
including photographs, prices, location, schedules of live entertainment, sales
and other relevant information. Unlike traditional media such as yellow pages
advertising, CitySearch offers CitySearch business customers a certain number of
free updates each month. The business customers also receive usage reports,
e-mails from interested consumers and access to an expanded base of potential
buyers including tourists and out-of-town users. CitySearch has recently
introduced a strategy of bundling enhanced features and functionality, including
panoramic images and audio clips. These services, when bundled with the basic
CitySearch services, are typically priced from $190 to $1,000 per month, and
have accounted for significant increases in the average selling prices of
CitySearch's offerings. CitySearch believes its broad offering of services and
its prices compare favorably to other web advertising options available to
businesses. Such options range from low cost, low quality scanned-in information
to free-standing custom-designed sites that may cost in excess of $10,000 in
up-front fees to produce and that rely on significant promotion to attract
traffic. By providing a high-quality web presence at an affordable price,
CitySearch believes that its services address the demand of the large number of
businesses whose online needs fall between these market extremes.
 
FILMED ENTERTAINMENT
 
    USA Films consists of two operating units: feature film production and
distribution (through USA Films' October Films and Gramercy Pictures
subsidiaries) and home video distribution (through USA Home Entertainment).
October Films and Gramercy Pictures acquire, produce and distribute theatrical
motion pictures. During 1999, October's theatrical releases included "Cookie's
Fortune," "The Muse" and "Topsy-Turvy." Gramercy's 1999 releases included "Being
John Malkovich." During fiscal 2000, October and Gramercy expect to collectively
distribute approximately 20 feature films, including "Pitch Black," "Where the
Money Is," "One Night At McCools" and "Nurse Betty." October Films and Gramercy
Pictures directly license filmed products to theatrical exhibitors in the United
States. These theatrical films are generally released in home video markets
through USA Home Entertainment. Television sales in the United States are made
primarily through Studios USA, although October and Gramercy each have direct
overall agreements in place with pay television services. Foreign exploitation
is principally accomplished through licensing arrangements with local
subdistributors in foreign territories.
 
    USA Home Entertainment has four primary categories of product that it
releases directly in the United States and in Canada through licensed
subdistributors. These include theatrical films released by October Films or
Gramercy Pictures, feature length motion pictures acquired directly by USA Home
Entertainment for release solely in video markets, children's programming and
sports programming. Among USA Home Entertainment's children's programming is the
animated "Franklin" television property. USA Home Entertainment has overall
agreements with the National Football League, National Basketball Association,
National Hockey League and Major League Baseball, under which USA Home
Entertainment is the exclusive distributor in home video markets for programming
originated by each of these sports leagues.
 
BROADCASTING
 
    USAi's television broadcasting operations are conducted through USA
Broadcasting. USA Broadcasting, through its wholly owned subsidiaries, owns and
operates 13 full-power UHF television stations, including one satellite station,
which comprise the USA Station Group. The USA Station Group owns television
stations in 12 of the nation's top 22 markets, including seven of the top 10
markets, which reach approximately 31% of television households in the United
States. USA Broadcasting also owns minority interests in an additional four
full-power UHF television stations which reach approximately 7% of television
households in the United States.
 
    With the exception of the television stations serving the Miami/Ft.
Lauderdale, Dallas/Ft. Worth and Atlanta markets, each of USA Broadcasting's
full-power television stations airs Home Shopping Network's electronic-retail
sales programming. Contingent upon consideration of the possible impact on Home
 
                                       20

<PAGE>
Shopping Network in each market, as part of its efforts to maximize the value of
the USA Broadcasting stations, USAi intends over time to disaffiliate the USA
Station Group stations from Home Shopping Network and develop and program the
stations independently.
 
SUMMARY OF USA STATION GROUP MARKETS
 

<TABLE>
<CAPTION>
                                                                                HOUSEHOLDS IN
                                                                                 DESIGNATED                 LICENSE
TELEVISION                                CHANNEL          METROPOLITAN          MARKET AREA      DMA      EXPIRATION
STATION                CITY OF LICENSE      NO.            AREA SERVED           (`DMA')(1)     RANK(1)       DATE
----------             ----------------   --------   ------------------------   -------------   --------   ----------
<S>                    <C>                <C>        <C>                        <C>             <C>        <C>
WHSE-TV(2)...........  Newark, NJ            68      New York, NY                 6,755,510         1         6/1/07
WHSI-TV(2)...........  Smithtown, NY         67      New York, NY                 6,755,510         1         6/1/07
KHSC-TV..............  Ontario, CA           46      Los Angeles, CA              5,009,230         2        12/1/06
WEHS-TV..............  Aurora, IL            60      Chicago, IL                  3,140,460         3        12/1/05
WHSP-TV..............  Vineland, NJ          65      Philadelphia, PA             2,659,260         4         6/1/07
WHSH-TV..............  Marlborough, MA       66      Boston, MA                   2,174,300         6         4/1/07
KSTR-TV..............  Irving, TX            49      Dallas, TX                   1,899,330         8         8/1/06
WHOT-TV..............  Athens, GA            34      Atlanta, GA                  1,674,700        10         4/1/05
KHSH-TV..............  Alvin, TX             67      Houston, TX                  1,624,340        11         8/1/06
WQHS-TV..............  Cleveland, OH         61      Cleveland, OH                1,469,010        13        10/1/05
WBHS-TV..............  Tampa, FL             50      Tampa/St. Petersburg, FL     1,435,520        15         2/1/05
WAMI-TV..............  Hollywood, FL         69      Miami, FL                    1,385,940        16         2/1/05
WBSF-TV..............  Melbourne, FL         43      Orlando, FL                  1,041,380        22         2/1/05
</TABLE>

 
------------------------
 
(1) Estimates by Nielsen Marketing Research as of January 1. For multiple
    ownership purposes, the FCC attributes only 50% of a market Area of Dominant
    Influence ("ADI") reach to UHF stations. Arbitron ADI's, like Nielsen DMA's,
    are measurements of television households in television markets throughout
    the country. For USAi's purposes, ADI and DMA measurements do not materially
    differ.
 
(2) Operating as a satellite of WHSE-TV, WHSI-TV primarily rebroadcasts the
    signal of WHSE-TV. Together, the two stations serve the metropolitan New
    York City television market and are considered one station for FCC multiple
    ownership purposes.
 
BROADCAST STATION INTERESTS
 
    As of December 31, 1999, USA Broadcasting and its affiliates held minority
interests in several television stations as described below:
 
    - An affiliate of USA Broadcasting owns a 45% nonvoting common stock
      interest in the following entities: (1) Roberts Broadcasting Company,
      which owns Station WHSL(TV), East St. Louis, Illinois, serving the St.
      Louis, Missouri metropolitan area; (2) Urban Broadcasting Corporation,
      which owns Station WTMW(TV), Arlington, Virginia, serving the Washington,
      D.C. metropolitan area; and (3) Roberts Broadcasting Company of Denver,
      which owns Station KTVJ(TV), Boulder, Colorado, serving the Denver,
      Colorado metropolitan area. WHSL(TV) and KTVJ(TV) carry Home Shopping
      Network programming. WTMW(TV) ceased carrying Home Shopping Network
      programming on May 10, 1999. Various court actions are pending among
      various subsidiaries of the USAi involving, among other things,
      performance issues concerning the affiliation agreements for each of the
      aforementioned stations.
 
    - An affiliate of USA Broadcasting holds a 49% nonvoting common stock
      interest in Channel 66 of Vallejo, California, Inc., licensee of Station
      KPST-TV, Vallejo, California which serves the San Francisco market.
 
                                       21

<PAGE>
    - A subsidiary of USA Broadcasting has an option to purchase a 45% nonvoting
      common stock interest in Jovon Broadcasting Company, the licensee of
      Station WJYS(TV), Hammond, Indiana, serving the Chicago, Illinois
      television market. Jovon has contested the validity of the option. For
      more information, see "--Legal Proceedings."
 
LPTV STATIONS
 
    USAi's 26 low power television stations are located in the areas of New
York, New York; Atlanta, Georgia; St. Petersburg, Florida; St. Louis, Missouri;
Knoxville, Tennessee; Minneapolis, Minnesota; New Orleans, Louisiana; Roanoke,
Virginia; Tucson, Arizona; Tulsa, Oklahoma; Wichita, Kansas; Columbus, Ohio;
Kansas City, Missouri; Springfield, Illinois; Huntington, West Virginia;
Champaign, Illinois; Toledo, Ohio; Portsmouth, Virginia; Raleigh, North
Carolina; Des Moines, Iowa; Shreveport, Louisiana; Spokane, Washington;
Pensacola, Florida; Birmingham, Alabama; Mobile, Alabama; and Jacksonville,
Florida. USAi's low power television stations, for the most part, carry
America's Store. The low power television stations have an average coverage
radius of 10-12 miles and an average transmitter power of 1,000-2,000 watts.
This contrasts with USAi's full-power UHF television stations, which cover an
average radius of 45-55 miles and have an average transmitter power of 120,000
watts. Each of the low power television stations are regarded by the FCC as
having secondary status to full power stations and are subject to being
displaced by changes in full power stations resulting from digital television
allotments. On November 29, 1999, Congress enacted the Community Broadcasters
Protection Act, which created a new "Class A" low power television station.
Class A low power television stations will be entitled to protection from future
displacement by full-power television stations under certain circumstances. The
FCC has initiated a rulemaking proceeding to adopt rules governing the extent of
protection that must be afforded Class A low power television stations and the
eligibility criteria for Class A status. USA Broadcasting may seek Class A
status for its low power television stations under these rules.
 
    PROGRAMMING.  Each of the USA Station Group stations, other than the
stations in the Miami/ Ft. Lauderdale, Dallas/Ft. Worth and Atlanta markets,
through the applicable subsidiaries, broadcasts Home Shopping Network for
approximately 164 hours per week. As part of its efforts to maximize the value
of the USA Station Group, the Company intends over time, subject to
consideration of the possible impact on Home Shopping Network on a market by
market basis, to disaffiliate the USA Station Group stations from Home Shopping
Network and develop and program the stations independently. In June 1998, USA
Broadcasting implemented its plans to disaffiliate WAMI-TV, its television
station in the Miami/Ft. Lauderdale market. Instead of Home Shopping Network
programming, the station now airs news, sports and entertainment programming. In
October 1999, USA Broadcasting disaffiliated stations in two additional markets,
Atlanta (WHOT-TV) and Dallas/Ft. Worth (KSTR-TV). Instead of Home Shopping
Network programming, these stations now air sports and entertainment programming
and the Dallas/ Fort Worth station also airs news programming.
 
    Upon disaffiliation, substantial expenditures are and will be required to
develop USA Broadcasting programming and promotions on the USA Stations, which,
during this developmental and transitional stage, would not be offset by
sufficient advertising revenues. Additionally, USAi may also incur additional
expenses and cash outflows, including making up-front payments, which could be
substantial, in connection with entering into cable distribution agreements to
secure carriage of Home Shopping Network programming and/or the USA Stations'
programming. Furthermore, disaffiliation will disrupt Home Shopping Network's
ability to reach some of its existing customers which may cause a reduction in
USAi's revenues. USAi believes that the process of disaffiliation can be
successfully managed to minimize these adverse consequences while maximizing the
value of the USA Stations.
 
    There can be no assurance that, if Home Shopping Network and the USA
Stations disaffiliate, USAi will be successful in its strategy to develop and
broadcast new programming formats, whether on a local or national basis, or that
USAi will be able to find other means of distributing its Home Shopping Network
programming on favorable terms to the households in the broadcast areas
currently served by USA Station
 
                                       22

<PAGE>
Group stations. The consequences of any of these decisions will impact the
business, financial condition and results of operations of USAi.
 
ELECTRONIC COMMERCE AND SERVICES
 
    In October 1999, USAi announced the formation of USA Electronic Commerce and
Services ("ECS"). ECS was created to exploit the concept that matching content
with a compatible product, surrounded by a well-serviced fulfillment
infrastructure will link products and individuals in a customer relationship.
ECS offers third parties a package of scalable solutions, specifically to
deliver merchandising, database marketing, teleservicing, fulfillment and online
customer care, all of which are expected to be supported by the media and
commerce assets of USAi. ECS also provides these services internally to USAi
companies and divisions.
 
    ECS provides an umbrella organization for the following components:
 
    - Home Shopping Network fulfillment and teleservices.
 
    - Short Shopping, USAi's contextual commerce business that offers clients a
      means of marketing, selling and delivering products to targeted viewers
      through direct selling commercials.
 
    - Ticketmaster's call centers.
 
    - Ticketmaster Direct, which provides clients with telemarketing services,
      using databases to support sales initiatives, merchandising opportunities
      and partnership marketing programs.
 
    - eSolutions, which intends to provide a package of integrated, real time,
      interactive customer care services, comprised of customizable
      communication channels including voice over internet protocol,
      collaborative browse, chat, e-mail, instant call back, database and fax
      back.
 
    - Cross-Company Sales, which seeks to maximize USAi's integrated asset base
      by reaching households through USA Network, Sci-Fi Channel, USAi's
      television stations and primary online outlets, including CitySearch,
      Ticketmaster.com, Hotel Reservations Network, personals sites--Match.com
      and One & Only, and auction sites--FirstAuction.com and CityAuction.com.
 
    In February 2000, USAi and The National Basketball Association ("NBA")
announced a media, e-commerce and services partnership, delivered through ECS,
NBA.com, NBA.com TV and other divisions of USAi and the NBA. The agreement
provides for cross-marketing, commerce and service initiatives centered around
the NBA Store at NBA.com. Pursuant to the agreement, ECS will provide integrated
media marketing services, database-driven offers, catalog and promotion. Under
the terms of the agreement, among other things, Home Shopping Network will air
NBA programs and specials, HSN Fulfillment will deliver services for NBA
customers, Short Shopping will produce commerce spots and specials for NBA
programming, including NBA.com TV, Ticketmaster will integrate merchandise sales
with ticket purchases, Ticketmaster Online-CitySearch will house an NBA "box
office" link to NBA.com, and USA Network, Sci-Fi Channel and USA Broadcasting
will provide promotion time in support of HSN NBA shows and "on sale" events.
The agreement does not include broadcast of actual NBA games.
 
                             INTERNATIONAL VENTURES
 
INTERNATIONAL TV CHANNEL JOINT VENTURE
 
    As part of the Universal transaction, USAi and Universal agreed to form a
50-50 joint venture to be managed by Universal which would own, operate and
exploit the international development of USA Network, The Sci-Fi Channel and
Universal's action/adventure channel, 13TH STREET. During the second quarter of
1999, USAi elected to not participate in the venture.
 
                                       23

<PAGE>
HOME SHOPPING NETWORK VENTURES
 
    EUROPE.  On December 17, 1999, USAi entered into an agreement with Thomas
and Leo Kirch and Georg Kofler pursuant to which each agreed to cause the
entities controlled by them to jointly pursue on an exclusive basis in Europe
televised shopping and related e-commerce opportunities and to consider pursuing
other media opportunities in each case subject to preexisting obligations and
applicable law and regulation in the various member countries. The parties
agreed to consider alternatives consistent with applicable law with respect to
the structure of any entities formed to pursue such opportunities.
 
    GERMANY.  In 1999, the joint venture entity through which Home Shopping
Network participates in a German language televised shopping business, H.O.T.
Home Order Television GmbH & Co. KG, was converted to a German AG ("HOT
Germany"). In connection with such restructuring, Home Shopping Network and
Mr. Kofler entered into a shareholders agreement which, among other things,
provides that Mr. Kofler will vote his shares in HOT Germany as directed by HSN
on certain matters including the election of a majority of the members of the
Supervisory Board of HOT Germany. Mr. Kofler also granted Home Shopping Network
a right of first refusal with respect to the stock in HOT Germany held by him.
Home Shopping Network also agreed to purchase Mr. Kofler's HOT Germany stock
under certain circumstances and agreed to vote as directed by Mr. Kofler on
various matters including the election of Mr. Kofler as Chairman of the HOT
Germany Supervisory Board. Mr. Kofler also agreed to take steps as may be
necessary for Home Shopping Network to consolidate the financial results of HOT
Germany with those of Home Shopping Network.
 
    ITALY.  In 1998, Home Shopping Network entered into a joint venture
agreement with SBS Broadcasting System S.A. and SBS Italia S.r.l. ("SBS Italia")
to explore and, if deemed feasible, develop an Italian language televised
shopping business. During 1999, Home Shopping Network, SBS and SBS Italia agreed
to restructure the joint venture and to change the name of SBS Italia to HOT
Italia and to utilize HOT Italia as the vehicle for developing a live shopping
business in Italy. As a result of the restructuring, 51% of the equity of HOT
Italia was transferred to H.O.T. Home Order Television Europe GmbH & Co. KG
("Hot Europe") and 12% transferred to HOT Germany. HOT Europe is a partnership
in which Home Shopping Network has a 19.2% non-voting equity interest and that
is controlled by H.O.T. Home Order Television International GmbH ("HOT
International"). HOT International is owned by George Kofler, Thomas Kirch and
Quelle AG. Home Shopping Network's direct ownership interest in HOT Italia was
reduced to 18.5% as a result of this restructuring. It is anticipated that HOT
Germany will contribute its interest in HOT Italia to HOT Europe and Quelle will
assign its interest in HOT Europe and HOT International to Mr. Kofler.
 
    HOT Italia owns 10.1% of the equity of an entity, Vallau Italia Promomarket
("VIP"), that operates an Italian national broadcast network. VIP has applied
for a license to operate a national broadcast network in Italy. In the event the
license is issued, HOT Italia intends to apply for authority to purchase the
remaining 89.9% of the equity in VIP it does not currently own. HOT Italia has
entered into purchase agreements to purchase the remaining equity of VIP for
118.9 billion Lire. There can be no assurance that VIP will be granted a license
and that HOT Italia will be able to acquire VIP. In the event such license or
authorization is not granted, HOT Italia would be required to seek alternative
means of distributing programming. Currently, there are limited available means
of distributing television programming on a nationwide basis and there can be no
assurance that alternative means of distribution can be secured.
 
    JAPAN.  In 1997, Home Shopping Network acquired a 30% interest in Jupiter
Shop Channel Co. Ltd., a venture based in Tokyo. Jupiter Shop Channel broadcasts
televised shopping 24 hours a day, of which 60 hours per week are devoted to
live shopping. Jupiter Shop Channel has reached agreements to be available in
approximately 3.37 million full-time equivalent households as of December 31,
1999. Liberty Media International, Inc., a subsidiary of Liberty, owns a 50%
interest in Jupiter Programming Co. Ltd. which is the 70% shareholder in the
venture.
 
                                       24

<PAGE>
    SPANISH LANGUAGE NETWORKS.  During 1999, Home Shopping Network continued to
operate HOME SHOPPING EN ESPANOL in conjunction with Univision Communications on
Univision's cable affiliate, Galavision. Currently, HOME SHOPPING EN ESPANOL is
aired six hours per day Sunday through Friday, and seven hours on Saturday with
one-half of the broadcast time being aired on the West Coast and the other half
on the East Coast. It reaches approximately 2.7 million households in the United
States. Home Shopping Network and Univision have agreed that Home Shopping
Network will buy out Univision's interest in the joint venture although no final
agreements have been entered into. In connection therewith, Galavision will
continue to carry HOME SHOPPING EN ESPANOL until December 31, 2000. Home
Shopping Network will continue to seek to expand the distribution of HOME
SHOPPING EN ESPANOL in the United States and elsewhere in the Spanish speaking
world.
 
                                   REGULATION
 
CURRENT FCC REGULATION
 
    A substantial portion of USAi's businesses are subject to various statutes,
rules, regulations and orders relating to communications and generally
administered by the FCC. The communications industry, including the operation of
broadcast television stations, cable television systems, satellite distribution
systems and other multichannel distribution systems and, in some respects,
vertically integrated cable programmers, is subject to substantial federal
regulation, particularly under the Communications Act of 1934, the
Telecommunications Act of 1996 and the rules and regulations promulgated
thereunder by the FCC. Cable television systems are also subject to regulation
at the state and local level. The Communications Act prohibits the operation of
television broadcasting stations except under a license issued by the FCC and
empowers the FCC to issue, renew, revoke and modify broadcast licenses, to
determine the location of stations, to establish areas to be served and to
regulate aspects of broadcast and cable programming. The Communications Act
prohibits the assignment of a broadcast license or the transfer of control of a
licensee without prior FCC approval. If the FCC determines that violations of
the Communications Act or any FCC rule have occurred, it may impose sanctions
ranging from admonishment of a licensee to license revocation.
 
BROADCAST TELEVISION LICENSE GRANT AND RENEWAL
 
    The Communications Act provides that a broadcast license, including the
licenses controlled by USA Broadcasting, may be granted to any applicant upon a
finding that the public interest, convenience and necessity would be served
thereby, subject to limitations. Television stations operate according to
broadcasting licenses that are usually granted by the FCC for a maximum
permitted term of eight years. Television station licenses are subject to
renewal upon application to the FCC, which is required under the Communications
Act to grant the renewal application if it finds that (1) the station has served
the public interest, convenience and necessity; (2) there have been no serious
violations by the licensee of the Communications Act or the rules and
regulations of the FCC; and (3) there have been no other violations by the
licensee of the Communications Act or the rules and regulations of the FCC that,
when taken together, would constitute a pattern of abuse.
 
ALIEN OWNERSHIP OF BROADCAST TELEVISION STATIONS
 
    The Communications Act prohibits the issuance of a broadcast license to, or
the holding of a broadcast license by, any corporation of which more than 20% of
the capital stock is beneficially or nominally owned or voted by non-U.S.
citizens or their representatives or by a foreign government or a representative
thereof, or by any corporation organized under the laws of a foreign country
(collectively, "Aliens"). The 1934 Act also authorizes the FCC, if the FCC
determines that it would be in the public interest, to prohibit the issuance of
a broadcast license to, or the holding of a broadcast license by, any
corporation directly or indirectly controlled by any other corporation of which
more than 25% of the capital stock is beneficially or nominally owned or voted
by Aliens. The FCC has issued interpretations of
 
                                       25

<PAGE>
existing law under which these restrictions in modified form apply to other
forms of business organizations, including partnerships. Under the relevant
provision of the 1934 Act, Universal is considered an Alien, since it is 84%
owned by The Seagram Co. Ltd., a Canadian corporation, and 16% by Matsushita
Electric Industrial Co. Ltd., a Japanese corporation. At the Annual Meeting of
Stockholders held in February 1998, USAi's stockholders approved amendments to
USAi's certificate of incorporation to ensure that USAi will continue to be in
compliance with the Alien ownership limitation of the 1934 Act. Universal's
equity interest in USAi, to the extent held through the ownership of LLC Shares
relating to USANi LLC, which does not hold any broadcast licenses, is not
regarded as an equity interest in USAi for purposes of the statutory provision
regarding Alien ownership.
 
MULTIPLE AND CROSS OWNERSHIP
 
    Current FCC regulations impose significant restrictions on certain
positional and ownership interests in broadcast television stations, cable
systems and other media. On August 5, 1999, the FCC adopted changes in several
of its broadcast ownership rules (collectively, the "FCC Ownership Rules").
These rule changes became effective on November 16, 1999; however, several
petitions have been filed with the FCC seeking reconsideration of the new rules,
so the rules may change. While the following discussion does not describe all of
the ownership rules or rule changes, it attempts to summarize those rules that
appear to be most relevant to USAi. As a general matter, officers, directors and
stockholders who own 5% or more of the outstanding voting stock of a media
company (except for some institutional shareholders, who may own up to 20%) are
deemed to have "attributable" interests in the company. Nonvoting stockholders,
minority voting stockholders in companies controlled by a single majority
stockholder, and holders of options and warrants are generally exempt from
attribution under the current rules. However, under the FCC's new equity-debt
plus rule, a party will be deemed to be attributable if it owns a non-voting
interest exceeding 33% of the total asset value (including debt and equity) of
the licensee and it either provides 15% of the station's weekly programming or
owns an attributable interest in another broadcast station, cable system or
daily newspaper in the market, even if there is a single majority shareholder.
 
    Under the FCC's rules, an individual or entity may hold attributable
interests in an unlimited number of television stations nationwide, subject to
the restriction that no individual or entity may have an attributable interest
in television stations reaching, in the aggregate, more than 35% of the national
television viewing audience subject to a 50% discount in the number of
television households attributed to any UHF station.
 
    The FCC relaxed its "television duopoly" rule, which barred any entity from
having an attributable interest in more than one television station with
overlapping service areas. Under the new rules, an entity may have attributable
interests in stations with overlapping coverage contours if each station is
located in a different DMA. In addition, one entity may now have attributable
interests in two television stations in the same Nielsen Designated Market Area
("DMA") provided that: (1) one of the two stations is not among the top four in
audience share and (2) at least eight independently owned and operated
commercial and noncommercial television stations will remain in the DMA if the
proposed transaction is consummated. The new rules also permit common ownership
of television stations in the same DMA where one of the stations to be commonly
owned has failed, is failing or is unbuilt or where extraordinary public
interest factors are present. The rules continue to restrict the holder of an
attributable interest in a television station from also having an attributable
interest in a radio station, daily newspaper or cable television system serving
a community located within the coverage area of that television station.
 
    Liberty's ownership interests in USAi, including its non-voting ownership
interest in the BDTV entities, have been structured to comply with these
regulations, which apply to Liberty because of TCI's interests in cable
television. In a June 14, 1996 "Memorandum Opinion and Order," the FCC concluded
that Liberty's beneficial interest in USAi through its ownership of convertible
non-voting common stock of the BDTV entities, as augmented by an imputed 50%
"control" premium, was subject to the FCC's former cross-interest policy (which
restricted the common ownership of an attributable interest in one media
 
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company and certain non-attributable but "meaningful," including substantial
non-attributable equity interests, in another media company serving
substantially the same area). The FCC subjected Liberty's ownership interest in
USAi to conditions, including that (1) the prior approval of the FCC be obtained
for any increase in Liberty's interest, and (2) the FCC be notified prior to
completion of any transaction whereby the aggregate percentage of television
households served by cable systems owned or controlled by TCI in any of USA
Broadcasting's television markets would exceed 50 percent. Liberty's ownership
of USANi LLC shares relating to USANi LLC is not regarded as an equity interest
in USAi for purposes of the FCC cross-ownership rules or practices. Two members
of USAi's board of directors, Messrs. Paul G. Allen and William D. Savoy, have
attributable interests in cable television systems located within the coverage
areas of certain of the television stations controlled by USA Broadcasting. On
November 3, 1998, USAi notified the FCC that Messrs. Allen and Savoy have
pledged to recuse themselves from any matters that come before USAi's Board of
Directors pertaining to the operation or management of the television stations
and therefore qualify under the FCC's rules for exemption from attribution of
any interests of USAi or USA Broadcasting in the television stations.
Notwithstanding the recent elimination, these conditions remain in effect.
 
    Pursuant to the requirements of the Telecommunications Act, the FCC is
considering a formal inquiry to review all of its broadcast ownership rules
which are not otherwise under review, including the national audience
limitation, the associated 50% discount for UHF stations and the
cable/television cross-ownership rule. It is not possible at this time to
predict what action the FCC may take and how it may affect USAi.
 
DIGITAL TELEVISION
 
    The FCC has taken a number of steps to implement digital television service
(including high-definition television) in the United States. On February 17,
1998, the FCC adopted a final table of digital channel allotments and rules for
the implementation of digital television. The table of digital allotments
provides each existing television station licensee or permittee with a second
broadcast channel to be used during the transition to digital television,
conditioned upon the surrender of one of the channels at the end of the digital
television transition period. USAi has commenced construction of its digital
facilities for three of its stations, and has completed construction for
WHSH-DT, which began reduced-power digital operations in October 1998. USAi has
preserved its ability to maximize its DTV facilities for each of its stations
and, to the extent that USAi's engineers determine that maximization is
warranted, USAi will file maximization applications by the FCC's May 1, 2000
deadline.
 
    The digital television implementing rules permit broadcasters to use their
assigned digital spectrum flexibly to provide either standard or high-definition
video signals and additional services, including, for example, data transfer,
subscription video, interactive materials, and audio signals, subject to the
requirement that they continue to provide at least one free, over-the-air
television service. The FCC has set a target date of 2002 for completion of
construction of digital television facilities and 2006 for expiration of the
transition period, subject to biennial reviews to evaluate the progress of
digital television, including the rate of consumer acceptance. Conversion to
digital television may reduce the geographic reach of USAi's stations or result
in increased interference, with, in either case, a corresponding loss of
population coverage. Digital television implementation will impose additional
costs on USAi, primarily due to the capital costs associated with construction
of digital television facilities and increased operating costs both during and
after the transition period. The FCC has adopted rules that require broadcasters
to pay a fee of 5% of gross revenues received from ancillary or supplementary
uses of the digital spectrum for which they receive subscription fees or
compensation other than advertising revenues derived from free over-the-air
broadcasting services.
 
    USAi continually reviews developments relating to the FCC's digital
television proceedings, and the digital television industry generally. Material
developments in this regard could have a material impact on USAi's businesses.
For example, in the future, seven of USAi's 26 low-power television stations, as
well as
 
                                       27

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other low-power television affiliates of Home Shopping Network, will likely have
to cease business operations due to irremediable interference to or from new
digital television allocations. Under procedures established in the digital
television rulemaking proceeding, USAi has filed applications for authorization
to shift the operation of 15 additional low-power television stations to
alternative channels that are not subject to displacement. To date, six of such
applications have been granted by the FCC. The remaining four of USAi's
low-power television stations are not expected to be subject to digital
television displacement at their existing channel assignments.
 
CHILDREN'S TELEVISION PROGRAMMING
 
    Under legislation enacted in 1990, the amount of commercial matter that may
be broadcast during programming designed for children 12 years of age and
younger is limited to 12 minutes per hour on weekdays and 10.5 minutes per hour
on weekends. Violations of the children's commercial limitations may result in
monetary fines or non-renewal of a station's broadcasting license. In addition,
the FCC has adopted a guideline for processing television station renewals under
which stations are found to have complied with the Children's Television Act if
they broadcast three hours per week of "core" children's educational
programming, which, among other things, must have as a significant purpose
serving the educational and informational needs of children 16 years of age and
younger. A television station found not to have complied with the "core"
programming processing guideline could face sanctions, including monetary fines
and the possible non-renewal of its broadcasting license, if it has not
demonstrated compliance with the Children's Television Act in other ways. The
FCC has indicated its intent to enforce its children's television rules
strictly.
 
TELEVISION VIOLENCE
 
    As part of a directive in the Telecommunications Act, the broadcast and
cable television industries have adopted, and the FCC has approved a voluntary
content ratings system which, when used in conjunction with so-called "V-Chip"
technology, would permit the blocking of programs with a common rating. The FCC
directed that all television receiver models with picture screens 13 inches or
greater be equipped with "V-Chip" technology under a phased implementation that
began on July 1, 1999. USAi cannot predict how changes in the implementation of
the ratings system and "V-Chip" technology will affect its business.
 
CLOSED CAPTIONING
 
    The FCC's closed captioning rules, which became effective January 1, 1998,
provide for the phased implementation, beginning in the year 2000, of a
universal on-screen captioning requirement with respect to the vast majority of
video programming. The captioning requirement applies to programming carried on
broadcast television stations and cable programming networks. Although the FCC
has provided for exceptions to or exemptions from the rules under certain
circumstances, none applies to any of the current broadcast or cable programming
services of USA Broadcasting, USA Networks or Home Shopping Network. Both USA
Broadcasting and Home Shopping Club have applied to the FCC for waivers of the
closed captioning rules. Parties are not required to comply with the closed
captioning rules while they have waiver requests pending.
 
OTHER BROADCAST TELEVISION REGULATION
 
    The FCC continues to enforce strictly its regulations concerning "indecent"
programming, political advertising, environmental concerns, technical operating
matters and antenna tower maintenance and marking. The FCC recently adopted new
equal employment opportunity rules to replace its former rules which were
partially struck down as unconstitutional by the U.S. Court of Appeals for the
D.C. Circuit. The FCC's new rules require stations to widely disseminate
information regarding job openings, maintain records of their equal employment
opportunity program and outreach efforts, file annual employment
 
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<PAGE>
reports with the FCC and file their model equal employment opportunity program
with the FCC every other year. Stations with fewer than five employees do not
have to comply with the FCC's recruitment standards, but they are subject to
reporting requirements. In addition, FCC regulations governing network
affiliation agreements mandate that television broadcast station licensees
retain the right to reject or refuse network programming or to substitute
programming that the licensee reasonably believes to be of greater local or
national importance. Violation of FCC regulations can result in substantial
monetary forfeitures, periodic reporting conditions, short-term license renewals
and, in egregious cases, denial of license renewal or revocation of license.
 
MUST-CARRY/RETRANSMISSION CONSENT
 
    As part of the Cable Television Consumer Protection and Competition Act of
1992, television broadcasters are required to make triennial elections to
exercise either "must-carry" or "retransmission consent" rights with respect to
their carriage by cable systems in each broadcaster's local market. By electing
must-carry rights, a broadcaster demands carriage on a specified channel on
cable systems within its television market (defined by Nielsen as a Designated
Market Area (DMA)). Alternatively, if a broadcaster chooses to exercise
retransmission consent rights, it can prohibit cable systems from carrying its
signal or grant the appropriate cable system the authority to retransmit the
broadcast signal for a fee or other consideration. Home Shopping Network, USA
Broadcasting and USA Networks are affected by the must-carry rules, which were
upheld in a 1997 U.S. Supreme Court ruling. A material change in the must-carry
rules, or their repeal, could have a material impact on USAi's businesses. The
FCC currently is conducting a rulemaking proceeding to determine carriage
requirements for digital broadcast television stations on cable systems during
and following the transition from analog to digital broadcasting, including
carriage requirements with respect to ancillary and supplemental services that
may be provided by broadcast stations over their digital spectrum.
 
SHVIA
 
    On November 29, 1999, the President signed the Satellite Home Viewer
Improvement Act ("SHVIA"). Among other things, SHVIA provides for a statutory
copyright license to enable satellite carriers to retransmit local television
broadcast stations into the stations' respective local markets. After May 27,
2000, satellite carriers will be prohibited from delivering a local signal into
its local markets--so called "local-into-local" service--without the consent or
must-carry election of such station, but stations will be obligated to engage in
good faith retransmission consent negotiations with the carriers. SHVIA does not
require satellite carriers to carry local stations, but provides that carriers
that choose to do so must comply with certain mandatory signal carriage
requirements by a date certain, as defined by the Act or as-yet to be drafted
FCC regulations. Further, the Act authorizes satellite carriers to continue to
provide certain network signals to unserved households, as defined in SHVIA and
FCC rules, except that carriers may not provide more than two same-network
stations to a household in a single day. Also, households that do not receive a
signal of Grade A intensity from any of a particular network's affiliates may
continue to receive distant station signals for that network until December 31,
2004, under certain conditions. The FCC has initiated several rulemaking
proceedings, as required by SHVIA, to implement certain aspects of the Act, such
as standard must-carry procedures, exclusivity protection for local stations
against certain distant signals, and enforcement. The FCC has already adopted
rules requiring good faith negotiations for retransmission consent between
satellite carriers and television broadcast stations.
 
CABLE TELEVISION RATE REGULATION
 
    The Telecommunications Act phased out cable rate regulation, except with
respect to the "basic" tier, which must include all local broadcast stations and
public, educational, and governmental access channels and must be provided to
all subscribers. Home Shopping Network and America's Store programming are
distributed on the basic tier in some areas, and "expanded basic" tiers in other
areas. USA Network and
 
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<PAGE>
Sci-Fi Channel are primarily distributed on expanded basic tiers. Rate
regulation of all non-basic tiers including the expanded basic tiers was
eliminated as of March 31, 1999. The local franchising authorities are primarily
responsible for regulating the basic tier of cable service. Because USAi's
revenues are, to some degree, affected by changes in cable subscriber rates,
increased regulation of cable subscriber rates, or a reduction in the rates that
cable service providers may charge customers could have a significant impact on
USAi's revenues.
 
REGULATION OF CABLE SYSTEM OPERATORS AFFILIATED WITH VIDEO PROGRAMMING VENDORS
 
    The 1992 Act prohibits a cable operator from engaging in unfair methods of
competition that prevent or significantly hinder competing multichannel video
programming distributors from providing satellite-delivered programming to their
subscribers. The FCC has adopted regulations to (1) prevent a cable operator
that has an attributable interest, including voting or non-voting stock
ownership of at least 5%, in a programming vendor from exercising improper
influence over the programming vendor in the latter's dealings with competitors
to cable; and (2) to prevent a programmer in which a cable operator has an
attributable interest from discriminating between cable operators and other
multichannel video programming distributors, including other cable operators.
 
    The FCC's rules may have the effect, in some cases, of requiring vertically
integrated programmers to offer their programming to multichannel video
programming distributor competitors of cable television, and of prohibiting
certain exclusive contracts between such programmers and cable system operators.
The rules also permit multichannel video programming distributors to bring
complaints before the FCC if they are unable to obtain cable programming on
non-discriminatory terms because of "unfair practices" by the programmer.
 
    Under the 1992 Act, the FCC set a 40% limit on the number of programming
channels on a cable system that may be occupied by video programmers in which
the cable operator has an attributable interest. USAi could be affected by the
1992 Act as a consequence of Liberty's ownership interests, directly and through
its affiliates, in both cable systems and cable programming services.
 
STATE AND LOCAL REGULATION
 
    Cable television systems are generally constructed and operated under
non-exclusive franchises granted by a municipality or other state or local
governmental entity. Franchises are granted for fixed terms and are subject to
periodic renewal. The Cable Communications Policy Act of 1984 places limitations
on the ability of a local franchising authority to control the operations of a
cable operator, and the courts from time to time have reviewed the
constitutionality of several franchise requirements, often with inconsistent
results. The 1992 Act prohibits exclusive franchises, and allows local
franchising authorities to exercise greater control over the operation of
franchised cable television systems, especially in the areas of customer service
and rate regulation. The 1992 Act also allows local franchising authorities to
operate their own multichannel video distribution systems without having to
obtain franchises. Moreover, local franchising authorities are immunized from
monetary damage awards arising from their regulation of cable television systems
or their decisions on franchise grants, renewals, transfers, and amendments.
 
    The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. Cable franchises generally contain provisions governing time
limitations on the beginning and completion of construction, and governing
conditions of service, including the number of channels, the types of
programming but not the actual cable programming channels to be carried, and the
provision of free service to schools and certain other public institutions. The
specific terms and conditions of a franchise and the laws and regulations under
which it is granted directly affect the profitability of the cable television
system, and thus the cable television system's financial ability to carry
programming. Local governmental authorities also may certify to regulate basic
cable rates. Local rate regulation for a particular system could result in
 
                                       30

<PAGE>
resistance on the part of the cable operator to the amount of subscriber fees
charged by USAi for its programming.
 
    Various proposals have been introduced at the state and local level with
regard to the regulation of cable television systems, and a number of states
have enacted legislation subjecting cable television systems to the jurisdiction
of centralized state governmental agencies. USAi is not able to predict the
impact such regulation could have on its businesses.
 
OTHER CABLE REGULATION
 
    The FCC's regulations concerning the commercial limits in children's
programming and political advertising also apply to cable television system
operators. USAi also must provide program ratings information.
 
PROPOSED CHANGES
 
    Congress and the FCC have under consideration, and in the future may
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly, the operation, ownership
and profitability of USAi's broadcast stations and broadcast and cable
programming networks. In addition to the changes and proposed changes noted
above, such matters include, for example, a proposal to adopt rules that would
require video programming distributors, including television broadcast stations,
to provide oral descriptions of their programming for the visually impaired,
rate regulation for upper tiers of service, political advertising rates and
potential restrictions on the advertising of products (beer, wine and hard
liquor, for example). Other matters that could affect USAi's regulated media
businesses include technological innovations and developments generally
affecting competition in the mass communications industry, such as direct radio
and television broadcast satellite service, the continued establishment of
wireless cable systems, digital television and radio technologies, and the
advent of telephone company participation in the provision of video programming
service.
 
OTHER REGULATORY CONSIDERATIONS
 
    The summary presented above does not purport to be a complete discussion of
all provisions of the Communications Act or other congressional acts or of the
regulations and policies of the FCC. For further information, you should review
the Communications Act, other congressional acts, and regulations and public
notices promulgated from time to time by the FCC. There are additional
regulations and policies of the FCC and other federal agencies that govern
political broadcasts, public affairs programming, equal opportunity employment
and other matters affecting USAi's business and operations.
 
              TRADEMARKS, TRADENAMES, COPYRIGHTS AND DOMAIN NAMES
 
    USAi has registered and continues to register, when appropriate, its trade
and service marks as they are developed and used, and USAi vigorously protects
its trade and service marks. USAi believes that its marks are a primary
marketing tool for promoting its identity. USAi also obtains copyrights with
respect to its original programming as appropriate and registers the domain
names of its Internet websites.
 
                                  COMPETITION
 
NETWORKS AND TELEVISION PRODUCTION
 
NETWORKS
 
    VIEWERSHIP AND ADVERTISING REVENUES.  Networks competes for access to its
customers and for audience share and revenue with broadcasters and other forms
of entertainment. Cable operators and other distributors only contract to carry
a limited number of the available networks. Therefore, they may decide not to
offer a particular network to their subscribers, or they may package a network
with other networks
 
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<PAGE>
in a manner that only a portion of their subscribers will receive the service
(for example, by charging an additional fee). In addition, there has been
increased consolidation among cable operators, so that USA Network and Sci-Fi
Channel have become increasingly subject to the carriage decisions made by a
small number of operators. This consolidation may reduce the per-subscriber fees
received from cable operators in the future. The consolidation also means that
the loss of any one or more of the major distributors could have a material
adverse impact on the networks. The competition for advertising revenues also
has become more intense as the number of television networks has increased.
While many factors affect advertising rates, ultimately they are dependent on
the numbers and types of viewers which a program attracts. As more networks
compete for viewers, it becomes increasingly difficult to increase or even
maintain a network's number of viewers. Moreover, to do so may require a network
to spend significantly greater amounts of money on programming. Therefore,
greater pressure may be placed on the networks' ability to generate advertising
revenue increases consistent with the increases they have achieved in the past.
Both Networks and Television Broadcasting are affected by competition for
advertising revenues.
 
    THIRD-PARTY PROGRAMMING.  The competition for third-party programming is
likely to increase as more networks seek to acquire that form of programming. In
addition, many networks, including USA Network and Sci-Fi Channel, are
affiliated with companies that produce programming. As a result, non-affiliated
networks may have a diminished capacity to acquire product from production
companies affiliated with other networks.
 
TELEVISION PRODUCTION
 
    PROGRAMMING.  Studios USA operates in a highly competitive environment. The
production and distribution of television programming are highly competitive
businesses. While television programs and films produced by Studios USA compete
with all other forms of network and syndication programming, Studios USA
essentially competes with all other forms of entertainment and leisure
activities. Competition is also faced from other major television studios and
independent producers for creative talent, writers and producers, which are
essential ingredients in the filmed entertainment business. The profitability of
Studios USA is dependent upon factors such as public taste that is volatile,
shifts in demand, economic conditions and technological developments.
 
    In 1995, the FCC repealed its financial interest and syndication rules
("fin-syn rules"). The fin-syn rules were adopted in 1970 to limit television
network control over television programming and to foster the development of
diverse programming sources. The rules had restricted the ability of the three
established, major U.S. televisions networks (I.E., ABC, CBS and NBC) to own and
syndicate television programming. The repeal of the rules has increased in-house
production of television programming for the networks' own use. As a result of
the repeal of the fin-syn rules, the industry has become vertically integrated,
with four of the six major broadcast networks being aligned with a major studio.
In addition, two major broadcast networks have formed their own in-house
production units. Mergers and acquisitions of broadcast networks by studios
(E.G., Disney-ABC) have altered the landscape of the industry. It is possible
that this change will have a negative impact on Studios USA's business as its
network customers are now able to choose between their own product and Studios
USA's product in making programming decisions.
 
ELECTRONIC RETAILING
 
    The Home Shopping Network business operates in a highly competitive
environment. It is in direct competition with retail merchandisers, other
electronic retailers, direct marketing retailers such as mail order companies,
companies that sell from catalogs, other discount retailers and companies that
market through computer technology.
 
    Home Shopping Network and QVC, Inc. are currently the two leading electronic
retailing companies. Liberty, a subsidiary of AT&T which holds a substantial
equity interest in USAi and USANi LLC, currently
 
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owns 43% of QVC but has entered into a stockholders agreement with Comcast
Corporation,which owns 57% of QVC, under which Comcast Corporation controls the
day to day operations of QVC. There are other companies, some having an
affiliation or common ownership with cable operators, that now market
merchandise by means of live television. A number of other entities are engaged
in direct retail sales businesses which utilize television in some form and
which target the same markets in which Home Shopping Network operates. Some
competitors of the Home Shopping Network business are larger and more
diversified than USAi.
 
    VIEWERSHIP.  The Home Shopping Network business also competes for access to
its customers and for audience share and revenue with broadcasters and
conventional forms of entertainment and information, such as programming for
network and independent broadcast television stations, basic and pay cable
television services, satellite master antenna systems, home satellite dishes and
home entertainment centers, newspapers, radio, magazines, outdoor advertising,
transit advertising and direct mail. In particular, the price and availability
of programming for cable television systems affect the availability of these
channels for Home Shopping Network and America's Store programming and the
compensation which must be paid to cable operators for carriage of Home Shopping
Network and America's Store programming.
 
    CHANNEL CAPACITY.  In addition, USAi believes that due to a number of
factors, including the development of cable operator owned programming, the
competition for channel capacity has substantially increased. With the advent of
new compression technologies on the horizon, this competition for channel
capacity may substantially decrease, although additional competitors may have
the opportunity to enter the marketplace. No prediction can be made with respect
to the viability of these technologies or the extent to which they will
ultimately impact the availability of channel capacity. A substantial portion of
USAi's businesses are affected by changes in channel capacity and competition
among programming providers for available channel capacity.
 
TICKETING OPERATIONS
 
    Ticketmaster's and Ticketmaster.com's competitors include event facilities
and promoters that handle their own ticket sales and distribution, live event
automated ticketing companies which may or may not currently offer online
transactional capabilities and web-based live event ticketing companies which
only conduct business online. Where facilities and promoters decide to utilize
the services of a ticketing company, Ticketmaster and Ticketmaster.com compete
with international, national and regional ticketing services, including
TicketWeb, Telecharge, ETM Entertainment Network, Dillard's, Prologue,
Tickets.com and Lasergate. Several of Ticketmaster's and Ticketmaster.com's
competitors have operations in multiple locations throughout the United States
and compete on a national level, while others compete principally in one
specific geographic region. In some geographic regions, including some of the
local markets in which CitySearch provides or intends to provide its local city
guide service, one or more of Ticketmaster's and Ticketmaster.com's competitors
may serve as the primary ticketing service in the region.
 
    In addition, as part of the Ticketmaster license agreement, Ticketmaster.com
is restricted from entering into agreements with facilities, promoters or other
ticket sellers for the online sale of live event tickets. As a result,
Ticketmaster.com is dependent on the ability of Ticketmaster to acquire and
maintain live event ticketing rights, including online ticketing rights, with
facilities and promoters and to negotiate commercially favorable terms for these
rights. Furthermore, substantially all of the tickets sold through
Ticketmaster.com's web site are also sold by Ticketmaster by telephone and
through independent retail outlets. Such sales by Ticketmaster Corp. could have
a material adverse effect on Ticketmaster.com's online sales.
 
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HOTEL RESERVATIONS
 
    The online travel services market is new, rapidly evolving, intensely
competitive and has relatively low barriers to entry. USAi believes that
competition in the online travel services market is based predominantly on
price, selection and availability of hotel rooms, selection of destination
markets, ease of use of online booking service, customer service, reliability
and travel-related content.
 
    Hotel Reservations Network competes against other consolidators of hotel
accommodations, hotels, travel agencies and other online travel services.
Currently, most hotels sell their services through travel agencies, travel
wholesalers or directly to customers, mainly by telephone. Increasingly, major
hotels are offering travel products and services directly to consumers through
their own websites. USAi believes that this trend will continue. Hotels and
travel agents also may continue to rely upon central reservations systems. In
the online travel services market, Hotel Reservations Network competes with
travel-related websites such as Preview Travel, Microsoft's Expedia, Sabre's
Travelocity, Pegasus System's TravelWeb, Priceline.com, Travelscape and
GetThere.com, among others. Although Hotel Reservations Network currently has
agreements with many of these websites under which its booking engine is
prominently displayed on and integrated into their websites, there can be no
assurance that these affiliations will continue. As the market for online travel
services grows, USAi believes that companies already involved in the online
travel services industry, as well as traditional travel suppliers and travel
agencies, will increase their efforts to develop services that compete with
Hotel Reservations Network's online services. Hotel Reservations Network also
faces potential competition from Internet companies not yet in the leisure
travel market and from travel companies not yet operating online. USAi is unable
to anticipate which other companies are likely to offer services in the future
that will compete with the services provided by Hotel Reservations Network.
 
    In addition, many of Hotel Reservations Network's current and potential
competitors have greater brand recognition, longer operating histories, larger
customer bases and significantly greater financial, marketing and other
resources than Hotel Reservations Network and may enter into strategic or
commercial relationships with larger, more established and well-financed
companies. Some of Hotel Reservations Network's competitors may be able to
secure services and products from travel suppliers on more favorable terms,
devote greater resources to marketing and promotional campaigns and devote
substantially more resources to website and systems development than Hotel
Reservations Network. New technologies and the continued enhancement of existing
technologies also may increase competitive pressures on Hotel Reservations
Network. There can be no assurance that Hotel Reservations Network will be able
to compete successfully against current and future competitors or address
increased competitive pressures.
 
INTERNET SERVICES
 
    Internet Shopping Network operates FIRST AUCTION.COM, an Internet retailing
auction service that competes with a number of other companies including uBid,
Yahoo! Auctions Powered by OnSale, Excite, OnSale, ZAuction, Surplus Auction and
FairMarket. Internet Shopping Network also operates FIRST JEWELRY.COM, an
Internet retail jewelry service that competes with a number of other companies
including Mondera, Blue Nile, My Jewelry, Miadora, Adornis, Ashford and Zales.
Home Shopping Network operates HSN.com, an Internet retailing service that
competes with numerous other on-line retail operations, including iQVC, which is
operated by Home Shopping Network's principal television retailing competitor.
Internet Shopping Network and Home Shopping Network/HSN.com potentially face
competition from a number of large online communities and services that have
expertise in developing online commerce. USAi believes that the principal
competitive factors in this market are scale, selection of goods, customer
service, reliability of delivery, brand recognition, web site convenience and
accessibility, price, quality of search tools and system reliability.
 
                                       34

<PAGE>
    Currently, CitySearch's primary competitors include Digital City, Inc., a
company wholly-owned by America Online, Inc., Tribune Company and Infospace.
CitySearch also competes against search engine and other site aggregation
companies which primarily serve to aggregate links to sites providing local
content such as Excite, Inc. (City.Net), Lycos, Inc. (Lycos City Guide) and
Yahoo! (Yahoo! Local). In addition, CitySearch competes against offerings from
media companies, including Cox Interactive Media, Inc., Knight Ridder, Inc. and
Zip2 Corporation, as well as offerings from several telecommunications and cable
companies and Internet service providers that provide local interactive
programming such as SBC Communications, Inc. (At Hand) and MediaOne Group, Inc.
(DiveIn). There are also numerous niche competitors which focus on a specific
category or geography and compete with specific content offerings provided by
CitySearch. CitySearch may also compete with online services and other web site
operators, as well as traditional media such as television, radio and print, for
a share of advertisers' total advertising budgets. Furthermore, additional major
media and other companies with financial and other resources greater than
CitySearch's may introduce new Internet products and services addressing these
markets in the future. There can be no assurance that CitySearch's competitors
will not develop services that are superior to those of CitySearch or that
achieve greater market acceptance than CitySearch's offerings.
 
FILMED ENTERTAINMENT
 
    USA Films operates in a highly competitive environment as the production and
distribution of theatrical motion pictures and home videos are highly
competitive businesses. USA Films competes with other independent distributors
and the major film studios as well as other forms of entertainment and leisure
time activities. Competition has increased notably in the "independent" film
sector due to the emergence of new production and distribution entities (some of
which are subsidiaries of the major film studios) and increased production and
marketing costs.
 
BROADCASTING
 
    VIEWERSHIP AND ADVERTISING REVENUE.  The USA Station Group stations, to the
extent they do not air Home Shopping Network and America's Store programming,
also compete for a share of advertising dollars. A station's share is based
primarily upon (1) the size of its viewing audience, (2) the demographics of
those viewers and (3) the ability to deliver to an advertiser "added" value
audience share primarily on the basis of program popularity, which has a direct
effect on advertising rates. Other factors that are material to a television
station's competitive position include signal coverage, local program
acceptance, audience characteristics, assigned broadcast frequency and cable
channel position. These factors will directly impact the USA Station Group
stations that develop local programming other than Home Shopping Network and
America's Store.
 
    LOCAL MARKETS.  In addition to the above factors, USAi's ownership of and
affiliation with broadcast television stations creates another set of
competitive conditions. These stations compete for television viewers primarily
within local markets. USAi's broadcast television stations are located in highly
competitive markets and compete against both VHF and UHF stations. Due to
technical factors, a UHF television station generally requires greater power and
a higher antenna to secure substantially the same geographical coverage as a VHF
television station. USAi also competes with new entertainment and shopping
networks for carriage on broadcast television stations, direct broadcast
satellite systems and cable television systems. USAi cannot quantify the
competitive effect of the foregoing or any other sources of video programming on
any of USAi's affiliated television stations, nor can it predict whether such
competition will have a material adverse effect on its operations.
 
                                       35

<PAGE>
                                   EMPLOYEES
 
    As of the close of business on December 31, 1999, USAi and its subsidiaries
employed approximately 9,216 full-time employees, with approximately 921
employees employed by Networks and Television Production, 4,185 employees
employed by Electronic Retailing, 268 employed by Hotel Reservations, 1,239
employed by Internet Services, 140 employed by USA Films, 261 employees employed
by USA Broadcasting and 2,202 employees employed by Ticketmaster including
Ticketmaster.com. Of these employees, 4,895 were employed by USAi through USANi
LLC. USAi believes that it generally has good employee relationships, including
employees represented by unions and guilds.
 

I
TEM 2. PROPERTIES
 
    USAi's facilities for its management and operations are generally adequate
for its current and anticipated future needs. USAi's facilities generally
consist of executive and administrative offices, fulfillment facilities,
warehouses, operations centers, call centers, television production and
distribution facilities, satellite transponder sites and sales offices.
 
    All of USAi's leases are at prevailing market (or "most favorable") rates
and, except as noted, with unaffiliated parties. USAi believes that the duration
of each lease is adequate. USAi believes that its principal properties, whether
owned or leased, are adequate for the purposes for which they are used and are
suitably maintained for such purposes. Most of the office/studio space is
substantially utilized, and where significant excess space exists, USAi leases
or subleases such space to the extent possible. USAi anticipates no future
problems in renewing or obtaining suitable leases for its principal properties.
 
CORPORATE
 
    USAi maintains its principal executive offices at Carnegie Hall Tower, 152
West 57th Street, New York, New York which consist of approximately 29,850
square feet leased by USAi through October 30, 2005.
 
NETWORKS AND TELEVISION PRODUCTION
 
    The executive offices of Networks are located at 1230 Avenue of the
Americas, New York, New York 10020. Networks leases approximately 168,000 square
feet at this office space under a lease that continues until March 31, 2005,
subject to two five-year options to continue the term. Networks also has smaller
offices in Chicago (affiliate relations and sales), Detroit (sales), and Los
Angeles (affiliate relations, sales and programming).
 
    Networks also leases approximately 55,000 square feet in a facility in
Jersey City, New Jersey, where Networks has its broadcast operations center.
This space is used to originate and transmit the USA Network and Sci-Fi Channel
signals. Post-production for both networks, including audio production, editing,
graphics and duplication, also is performed at this location. The lease for this
space continues through April 30, 2009, and there are options to continue the
term beyond that time.
 
    Studios USA currently conducts its domestic television production and
distribution operations primarily from its executive and administrative offices
in West Hollywood, California in a facility owned by Ticketmaster. Additionally,
Studios USA has four domestic sales offices located in Atlanta, Chicago, Dallas
and New York City. Production facilities are leased primarily from Universal on
its Universal City lot on an as-needed basis depending upon production
schedules. Studios USA also leases production facilities in New York City for
the production of LAW & ORDER, THE SALLY JESSY RAPHAEL SHOW and MAURY, in New
Jersey for production of LAW & ORDER: SPECIAL VICTIMS UNIT, and in Chicago for
production of THE JERRY SPRINGER SHOW.
 
                                       36

<PAGE>
ELECTRONIC RETAILING
 
    Home Shopping Network owns an approximately 480,000 square foot facility in
St. Petersburg, Florida, which houses its Home Shopping Network television
studios, broadcast facilities, administrative offices and training facilities.
 
    Home Shopping Network owns two warehouse-type facilities totaling
approximately 84,000 square feet near Home Shopping Network's main campus in St.
Petersburg, Florida. These facilities have been used for returns processing,
retail distribution and general storage.
 
    Home Shopping Network leases a 41,000 square foot facility in Clearwater,
Florida for its video and post production operations.
 
    Home Shopping Network owns and operates a warehouse consisting of 163,000
square feet located in Waterloo, Iowa, which is used as a fulfillment center. In
addition, Home Shopping Network rents additional space in Waterloo, Iowa
consisting of 106,000 square feet.
 
    Home Shopping Network owns and operates a warehouse located in Salem,
Virginia, consisting of approximately 780,000 square feet. In addition, Home
Shopping Network leases one additional location in Salem, Virginia consisting of
194,750 square feet and two additional locations in Roanoke, Virginia consisting
of 70,000 square feet and 175,000 square feet.
 
    Home Shopping Network's retail outlet subsidiary leases five retail stores
in the Tampa Bay, Orlando and Chicago areas totaling approximately 105,785
square feet.
 
    Home Shopping Network and its other subsidiaries also lease office space in
California and Utah.
 
TICKETING OPERATIONS
 
    Ticketmaster's headquarters are located in Los Angeles, California, where
Ticketmaster currently leases approximately 58,200 square feet of space under a
lease expiring in 2005, with an option to renew for an additional five years. In
addition, Ticketmaster, its subsidiaries and affiliates lease office space in
various other cities in the United States and other countries in which
Ticketmaster is actively engaged in business.
 
    Ticketmaster owns a 70,000 square foot building in West Hollywood,
California, of which approximately 60,000 square feet are used by Networks and
Television Production and Broadcasting and the remaining 10,000 square feet are
leased to an unaffiliated entity.
 
HOTEL RESERVATIONS
 
    Hotel Reservations Network's operations are headquartered in Dallas, Texas,
where it leases an aggregate of approximately 28,000 square feet of office
space. In addition, Hotel Reservations Network has a right to use an additional
4,500 square feet of office space, if necessary. The lease for this space
expires in 2003.
 
    Hotel Reservations Network also has a small office in Miami, Florida, where
it currently leases approximately 851 square feet under a lease expiring in
2002.
 
INTERNET SERVICES
 
    Ticketmaster Online-CitySearch's executive offices are located in Pasadena,
California, where Ticketmaster Online-City Search currently leases approximately
50,000 square feet under a lease expiring in 2002. Ticketmaster Online-City
Search also leases local office space in approximately 34 cities throughout the
United States and abroad. Local offices range in size from less than 2,000
square feet to 10,000 square feet and have lease terms that range from
month-to-month to seven years. None of such leases expires later than 2004.
 
                                       37

<PAGE>
    Ticketmaster Online-CitySearch's internet personals businesses are currently
housed in 14,130 square feet of leased space in Dallas, Texas. Ticketmaster
On-Line CitySearch intends to move these businesses to a new 38,000 square foot
leased facility in March 2000. That lease will expire in 2005.
 
    Internet Shopping Network's executive offices are located in Sunnyvale,
California, where Internet Shopping Network currently leases 31,000 square feet
under a lease expiring in 2000.
 
FILMED ENTERTAINMENT
 
    USA Films' executive offices are located in New York, New York. The
executive offices of October Films are also located in New York, New York.
Approximately 15,000 square feet are maintained under a lease expiring on
June 30, 2009.
 
    Gramercy's executive offices are located in Beverly Hills, California, where
it currently leases approximately 20,000 square feet under a month to month
arrangement with Universal Studios and the company is in the process of
acquiring a new leasehold. The company also maintains 5,000 square feet of
office space in a second Los Angeles location under a sublease that expires
April 30, 2002.
 
BROADCASTING
 
    USAi owns or leases office, studio and transmitter space for the USA Station
Group stations as follows:
 

<TABLE>
<CAPTION>
LOCATION                                                    FUNCTION                OWNED/LEASED
--------                                        ---------------------------------   ------------
<S>                                             <C>                                 <C>
Mt. Wilson, CA(1).............................  Transmitter                         Leased
Ontario, CA...................................  Offices/Studio                      Owned
Riverview, FL(1)..............................  Transmitter                         Leased
Melbourne, FL.................................  Offices/Studio                      Leased
Miami, FL.....................................  Transmitter                         Leased
Miami Beach, FL...............................  Offices/Studio                      Leased
Miramar, FL...................................  Offices/Studio                      Leased
St. Cloud, FL.................................  Transmitter                         Leased
St. Petersburg, FL............................  Offices/Studio                      Leased
Flowery Branch, GA............................  Transmitter                         Leased
Marietta, GA..................................  Offices/Studio                      Leased
Aurora, IL....................................  Offices (Dish and Master Control)   Leased
Chicago, IL...................................  Transmitter                         Leased
Hudson, MA....................................  Offices/Studio/Transmitter          Owned
Newark, NJ....................................  Offices/Studio                      Owned
Newfield, NJ..................................  Offices/Studio                      Owned
Waterford Works, NJ(1)........................  Transmitter                         Leased
Central Islip, NY.............................  Offices/Studio                      Owned
Middle Island, NY.............................  Transmitter                         Owned
New York, NY..................................  Transmitter                         Leased
Parma, OH.....................................  Offices/Studio/Transmitter          Owned
Houston, TX...................................  Offices (Master Control)            Leased
Cedar Hill, TX................................  Transmitter                         Leased
Irving, TX....................................  Offices/Studio                      Owned
Missouri City, TX.............................  Transmitter                         Leased
</TABLE>

 
                                       38

<PAGE>
    USAi leases the following low power television transmitter sites:
 

<TABLE>
<S>                    <C>
Atlanta, GA            Pensacola, FL
Birmingham, AL         Portsmouth, VA
Champaign, IL          Raleigh, NC
Columbus, OH           Roanoke, VA
Des Moines, IA         Shreveport, LA
Huntington, WV         Springfield, IL
Jacksonville, FL       Spokane, WA
Kansas City, MO        St. Louis, MO
Knoxville, TN          St. Petersburg, FL
Minneapolis, MN        Toledo, OH
Mobile, AL             Tulsa, OK
New Orleans, LA        Tucson, AZ
New York, NY           Wichita, KS
</TABLE>

 
------------------------
 
(1) USAi owns the transmitter facility, but the site is leased.
 

ITEM 3. LEGAL PROCEEDINGS
 
    In the ordinary course of business, USAi and USANi LLC and their
subsidiaries are parties to litigation involving property, personal injury,
contract and other claims. The amounts that may be recovered in these matters
may be subject to insurance coverage and, although there can be no assurance in
this regard, are not expected to be material to the financial position or
operations of USAi and USANi LLC.
 
FEDERAL TRADE COMMISSION MATTER
 
    Home Shopping Network is involved from time to time in investigations and
enforcement actions by consumer protection agencies and other regulatory
authorities. Effective October 2, 1996, the Federal Trade Commission and Home
Shopping Network and two of its subsidiaries entered into a consent order under
which Home Shopping Network agreed that it will not make claims for specified
categories of products, including any claim that any product can cure, treat or
prevent illness, or affect the structure or function of the human body, unless
it possesses competent and reliable scientific evidence to substantiate the
claims. The settlement did not represent an admission of wrongdoing by Home
Shopping Network, and did not require the payment of any monetary damages.
Thereafter, the FTC investigated Home Shopping Network's compliance with its
consent order. The FTC indicated to Home Shopping Network that it believed Home
Shopping Network had not complied with the consent order and that it intended to
seek monetary penalties and consumer redress for non-compliance. Effective
April 29, 1999, Home Shopping Network settled the FTC's claims that it had
violated the consent order. The FTC filed a complaint in Federal District Court
in Tampa, Florida and entered a consent decree, under which Home Shopping
Network paid a civil penalty of $1.1 million and was enjoined from violating the
consent order. The settlement did not constitute an admission of wrongdoing by
Home Shopping Network.
 
ASCAP LITIGATION
 
    Networks, along with almost every other satellite-delivered network, is
involved in continuing disputes regarding the amounts to be paid by it for the
performance of copyrighted music from members of the American Society of
Composers, Authors and Publishers and by Broadcast Music, Inc. The payments to
be made to the American Society will be determined in a "rate court" proceeding
under the jurisdiction of the U.S. District Court in the Southern District of
New York. In the initial phase of this proceeding, it was determined that
Networks must pay the American Society a specified interim fee, calculated as a
 
                                       39

<PAGE>
percentage of the gross revenues of each of USA Network and Sci-Fi Channel. This
fee level is subject to upward or downward adjustment in future rate court
proceedings, or as the result of future negotiations, for all payments
subsequent to January 1, 1986 with respect to USA Network and for all payments
subsequent to launch with respect to Sci-Fi Channel. All American Society claims
prior to these times have been settled and are final. As to Broadcast Music,
Networks has agreed with Broadcast Music with respect to certain interim fees to
be paid by both USA Network and Sci-Fi Channel. Subsequent to July 1, 1992 and
subsequent to launch of Sci-Fi Channel, respectively, these interim fees are
subject to upward or downward adjustment, based on a future negotiated
resolution or submission of the issue to Broadcast Music's own federal "rate
court." USAi cannot predict the final outcome of these disputes, but does not
believe that it will suffer any material liability as a result of them.
 
TICKETMASTER CONSUMER CLASS ACTION
 
    During 1994, Ticketmaster was named as a defendant in 16 federal class
action lawsuits filed in United States District Courts purportedly on behalf of
consumers who were alleged to have purchased tickets to various events through
Ticketmaster. These lawsuits alleged that Ticketmaster's activities violated
antitrust laws. On December 7, 1994, the Judicial Panel on Multidistrict
Litigation transferred all of the lawsuits to the United States District Court
for the Eastern District of Missouri for coordinated and consolidated pretrial
proceedings. After an amended and consolidated complaint was filed by the
plaintiffs, Ticketmaster filed a motion to dismiss and, on May 31, 1996, the
District Court granted that motion ruling that the plaintiffs had failed to
state a claim upon which relief could be granted. On April 10, 1998, the United
States Court of Appeals for the Eighth Circuit issued an opinion affirming the
district court's ruling that the plaintiffs lack standing to pursue their claims
for damages under the antitrust laws and held that the plaintiffs' status as
indirect purchasers of Ticketmaster's services did not bar them from seeking
equitable relief against Ticketmaster. Discovery on the plaintiff's remanded
claim for equitable relief is ongoing in the District Court and a trial date of
July 17, 2000 has been set. On July 9, 1998, the plaintiffs filed a petition for
writ of certiorari to the United States Supreme Court seeking review of the
decision dismissing their damage claims. Plaintiff's petition for writ of
certiorari in the United States Supreme Court was denied on January 19, 1999.
The action is still pending.
 
    Ticketmaster has stated that the Court's affirmance of the decision
prohibiting plaintiffs from obtaining monetary damages against Ticketmaster
eliminates the substantial portion of plaintiffs' claims. With respect to
injunctive relief, the Antitrust Division of the United States Department of
Justice had previously investigated Ticketmaster for in excess of 15 months and
closed its investigation with no suggestion of any form of injunctive relief or
modification of the manner in which Ticketmaster does business.
 
HOME SHOPPING NETWORK CONSUMER CLASS ACTION
 
    On November 15, 1999, Home Shopping Network was named as a defendant in a
consumer class action lawsuit entitled BRUCE TOMKINS, HENRIETTA BUCK AND JODI
HABEL HILL ON BEHALF OF THEMSELVES AND ALL OTHER SIMILARLY SITUATED INDIVIDUALS
V. PROTEVA, INC., HOME SHOPPING NETWORK, INC. D/B/A HOME SHOPPING NETWORK AND
THE HOME SHOPPING NETWORK, JOHN ROBERTS, VIVIAN ROBERTS MCKINLEY, KN CHAN,
WILLIAM LYNCH AND BRIAN JORDAN, filed in the Chancery Division of the Circuit
Court of Cook County, Illinois, Case No. 99 CH 12013. The action is purportedly
brought on behalf of consumers who were alleged to have purchased a Proteva
personal computer from one of the defendants and experienced one of the three
following conditions: (a) the computer was or became defective upon purchase or
soon thereafter, (b) a defendant refused or failed to honor the rebate offer
which was offered as part of the sale, or (c) a defendant refused or failed to
provide customer service as purportedly advertised. In the complaint, the
plaintiffs assert causes of action for consumer fraud, breach of implied
warranty of merchantability and unjust enrichment and seek compensatory and
punitive damages along with interest, costs and attorneys' fees. Home Shopping
Network has filed an answer to the complaint and intends to vigorously defend
this action.
 
                                       40

<PAGE>
JOVON LITIGATION
 
    Silver King Capital Corporation holds an option to acquire 45% of the stock
of Jovon Broadcasting Corporation, licensee of WJYS-TV, Hammond, Indiana. In a
1996 order, the FCC ruled that USAi could proceed to exercise its option to
acquire 45% of Jovon's stock, but limited the present exercise of that option to
no more than 33% of Jovon's outstanding stock. Certain entities controlled by
USAi filed litigation on May 30, 1997 in the Circuit Court of Pinellas County,
Florida against Jovon seeking declaratory and injunctive relief to permit USAi
to proceed with the exercise of its option, or, in the alternative, to obtain
damages for breach of contract by Jovon. On September 11, 1998, the FCC released
a Memorandum Opinion and Order affirming 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, USAi filed
a Request for Clarification, seeking to confirm that it may use a trust
mechanism in order to exercise the option. On January 9, 1998, the Circuit Court
of Pinellas County, Florida denied Jovon's motion to dismiss litigation brought
by certain entities controlled by USAi against Jovon. The court stayed the
action for a period of six months.
 
    On February 1, 1999, the court lifted the stay. Thereafter, the entities
controlled by USAi filed an Amended Complaint that named Joseph and Yvonne
Stroud as additional defendants and sought additional equitable relief. On
April 9, 1999, Jovan and the Strouds answered the Amended Complaint and moved
for Summary Judgment. The court granted the Motion for Summary Judgment by Order
dated June 1, 1999 and entered the Order of Summary Final Judgment on June 15,
1999 on the grounds that (1) according to the FCC, the option agreement is "not
legal" and (2) the option agreement was legally terminated by Jovon in
October 1988. Thereafter, on July 12, 1999, the entities controlled by USAi
filed a Notice of Appeal with the court to appeal the Order of Summary Final
Judgment to the Court of Appeal for the Second District of Florida. The briefing
of the appeal should be completed in mid-March 2000. On November 8, 1999, the
FCC released a Memorandum Opinion and Order dismissing USAi's Request for
Clarification as moot based on the Florida Circuit Court's determination that
Jovon had validly terminated the Option Agreement. USAi filed a Petition for
Reconsideration of the FCC's Memorandum Opinion and Order on December 8, 1999.
The Petition was opposed by Jovon and remains pending.
 
URBAN LITIGATION
 
    Beginning in October 1996, Home Shopping Club, Inc., predecessor in interest
to Home Shopping Club, L.P., withheld monthly payments under the Affiliation
Agreement with Urban Broadcasting Corporation due to breaches of the Affiliation
Agreement by Urban. Urban has contested this action. In addition, on
January 10, 1997, Urban filed an Emergency Request for Declaratory Ruling with
the FCC requesting an order that the requirement in the Affiliation Agreement
that Urban broadcast at full power violates the FCC's rules, or alternatively,
requesting that the FCC revise the terms of the Affiliation Agreement to bring
it into compliance with its Rules. Urban also requested that the FCC undertake
an inquiry into USAi's actions of withholding payments to Urban to determine
whether USAi is fit to remain an FCC licensee. On December 17, 1999, Urban filed
a Supplement to Emergency Request for Declaratory Relief requesting that the FCC
(1) set a deadline for reformation of several agreements between the parties,
(2) rule that the station's power authorized level is lower than the level set
by current authorizations and (3) agree not to pass on any applications for
assignment or transfer of the station. Certain entities controlled by USAi filed
an opposition to this Request on January 10, 2000 to which Urban replied on
January 27, 2000. As of this date, no ruling has been issued by the FCC.
 
    On October 23, 1997, HSC filed suit against Urban in the Circuit Court for
Arlington County, Virginia seeking a judicial declaration that it was entitled
to withhold the payments in dispute because of Urban's breaches of the
Affiliation Agreement. Urban has responded with counterclaims and began a
related action in the Circuit Court against HSC, HSN, Inc. (now USAi) and Silver
King Broadcasting of Virginia, Inc. (now USA Station Group of Virginia, Inc.).
Urban has asserted contract and tort claims
 
                                       41

<PAGE>
related to HSC's decision to withhold affiliation payments. A trial was held on
April 5-7, 1999. At the conclusion of Urban's case, the court ruled that Urban's
evidence be struck and that judgment be entered in favor of HSC, USAi and USA
Station Group of Virginia, Inc. on all counts of Urban's First Amended Motion
for Judgment. Further, the court ruled that the related chancery action, which
had been consolidated with the law action for trial, be severed for further
proceedings at some future date. A Final Order of Judgment concerning the above
rulings was entered by the court on May 5, 1999. On May 3, 1999, HSC, USAi and
USA Station Group of Virginia, Inc. filed a Motion for Summary Judgment directed
to all remaining counts in the chancery action. Urban has appealed the judgment
in the law action to the Virginia Supreme Court. In addition, on June 11, 1999,
judgment was entered in favor of HSC, USAi and USA Station Group of Virginia on
all Urban's counterclaims in the chancery suit, and the trial court granted
HSC's request for a declaratory judgment that HSC had not breached the
Affiliation Agreement. Urban failed to file a timely appeal of the judgment in
the chancery suit. Based on Urban's failure to appeal the chancery suit, USAi
has moved to dismiss Urban's appeal in the related law action. A hearing on the
motion to dismiss was heard on February 16, 2000.
 
    On November 12, 1999, the Arlington County Circuit Court granted USA Station
Group of Virginia a default judgment against Urban arising from Urban's defaults
on the Loan Agreement for $10,552,060.64, plus interest, plus $8,131 in
attorneys fees and costs. Urban has noted an appeal of the judgment.
 
MOVIEFONE LITIGATION
 
    In March 1995, MovieFone, Inc. and The Teleticketing Company, L.P. filed a
complaint against Ticketmaster in the United States District Court for the
Southern District of New York. Plaintiffs allege that they are in the business
of providing movie information and teleticketing services, and that they are
parties to a contract with Pacer Cats Corporation, a wholly owned subsidiary of
Wembley plc, to provide teleticketing services to movie theaters. Plaintiffs
also allege that, together with Pacer Cats, they had planned to begin selling
tickets to live entertainment events, and that Ticketmaster, by its conduct,
frustrated and prevented plaintiffs' ability to do so. Plaintiffs further allege
that Ticketmaster has interfered with and caused Pacer Cats to breach its
contract with plaintiffs. The complaint asserts that Ticketmaster's actions
violate Section 7 of the Clayton Act and Sections 1 and 2 of the Sherman Act,
and that Ticketmaster tortiously interfered with contractual and prospective
business relationships and seeks monetary and injunctive relief based on such
allegations. Ticketmaster filed a motion to dismiss. The court heard oral
argument on September 26, 1995. In March 1997, prior to the rendering of any
decision by the Court on Ticketmaster's motion to dismiss, Ticketmaster received
an amended complaint in which the plaintiffs assert essentially the same claims
as in the prior complaint but have added a RICO claim and tort claims.
Ticketmaster filed a motion to dismiss the amended complaint in April 1997,
which is pending. Some of the claims in this litigation are similar to claims
that were the subject of an arbitration award in which MovieFone was a claimant
and Pacer Cats a respondent. Among other things, the award included damages from
Pacer Cats to MovieFone of approximately $22.75 million before interest and an
injunction against some entities, which may include affiliates of Ticketmaster,
restricting or prohibiting their activity with respect to aspects of the movie
teleticketing business for a specified period of time. Neither USAi,
Ticketmaster, nor any entity owned or controlled by Ticketmaster, were parties
to the arbitration. In May 1998, MovieFone 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 assignee of, or otherwise acted in concert with, Pacer Cats. In
November 1998, the court ruled that the Ticketmaster affiliate is bound by the
arbitrators' findings that it is the successor to Pacer Cats and, as such,
liable for breaches committed by Pacer Cats and subject to the terms of the
arbitration award's injunction. The court further found that the Ticketmaster
affiliate had violated the injunction and awarded MovieFone approximately
$1.38 million for losses it incurred as a result of such violations. The
Ticketmaster affiliate filed a notice of appeal of the court's decision,
including to seek reversal of the ruling regarding successor liability and
violations of the injunction. The appeal was denied by order entered
January 11, 2000. Further, on December 21, 1999, the court extended the
injunction for six months.
 
                                       42

<PAGE>
ANTHONY MARTIN LITIGATION
 
    On July 22, 1999, a class action entitled ANTHONY MARTIN V. TICKETMASTER
LLC; TICKETMASTER CORPORATION; TICKETMASTER GROUP, INC.; TIME CONSUMER
SERVICE, INC. AND JOHN DOES 1-10 was filed in the United States District Court
for the Northern District of Illinois. The plaintiff alleges that Ticketmaster
engages in unlawful business practices in connection with offering the
"Entertainment Weekly" magazine to consumers. The complaint, which alleges that
Ticketmaster's policies violate 39 U.S.C. 3009 (mailing of unordered
merchandise) and Section 2 of the Illinois Consumer Fraud and Deceptive Business
Practices Act, seeks restitution, damages, punitive damages and attorney's fees.
Defendants filed an answer on September 16, 1999. Ticketmaster believes that
these allegations have no merit.
 
ETM ENTERTAINMENT LITIGATION
 
    On January 27, 2000, ETM Entertainment Network, Inc. filed a federal court
lawsuit entitled ETM ENTERTAINMENT NETWORK, INC. V. TICKETMASTER CORPORATION,
TICKETMASTER-ON-LINE CITYSEARCH, INC., MTV NETWORKS, INC. AND Q PRIME, INC.,
Case No. SA 00-97 AHS (ANX). The case is pending in Los Angeles (Santa Ana
division). Plaintiffs allege antitrust violations, intentional interference with
ETM's exclusive ticketing contract with the Bi-Lo Center in Charleston, South
Carolina and false advertising. Ticketmaster's response is due on March 17,
2000. Ticketmaster intends to vigorously defend this action.
 
TICKETMASTER CASH DISCOUNT LITIGATION
 
    On or about December 17, 1999, a purported class action lawsuit entitled
ADRIANA GARZA, ET AL. V. SOUTHWEST TICKETING, INC., D/B/A TICKETRON,
TICKETMASTER AND RAINBOW TICKETMASTER, TICKETMASTER TEXAS MANAGEMENT,
TICKETMASTER LLC, TICKETMASTER GROUP, INC., TICKETMASTER ON-LINE
CITYSEARCH, INC. AND THE MAY DEPARTMENT STORES COMPANY, Case No. C-5714-99-B,
was filed in state court in the District Court of Hidalgo County, Texas, 93(rd)
Judicial District. The lawsuit challenges the cash discounts offered by
Ticketmaster's outlets in Texas, and alleges that Ticketmaster and May
Department Stores impose a surcharge on credit card users. Ticketmaster is
indemnifying May Department Stores in connection with this matter pursuant to
the terms of the Ticket Center Agreement between the parties. On January 14,
2000, defendants removed the case to a federal court, and filed an Answer on
January 24, 2000 denying the allegations. Plaintiff filed a motion to remand to
state court, to which defendants filed a response on February 18, 2000.
Ticketmaster intends to vigorously defend this action.
 
    In addition, on or about January 18, 2000, a lawsuit entitled KAREN AND JOE
NEWTON ON BEHALF OF THEMSELVES AND ALL THOSE SIMILARLY SITUATED V. TICKETMASTER
LLC was filed in state court in the District Court of Bexar County, Texas.
Plaintiffs allege that Ticketmaster imposes a surcharge on credit card
transactions. On January 25, 2000, Ticketmaster removed the case to federal
court. On February 4, 2000, Ticketmaster filed an answer denying the allegations
and intends to vigorously defend this action.
 
MARKETINGWORKS LITIGATION
 
    On October 14, 1999, Marketingworks, Inc., a home video distribution
company, filed a complaint against Universal Studios Home Video and Studios USA
Television Distribution LLC ("Universal/USA") in Los Angeles Superior Court,
alleging contract and tort claims in connection with a home video series
consisting of out-takes from THE JERRY SPRINGER SHOW. Marketingworks contends
that in January 1997, it disclosed confidential marketing plans to Universal
Television, which were subsequently appropriated for use in the "out-take" home
video series. In January 2000, Universal/USA removed the case to Federal Court
as the claims may be preempted by copyright and Marketingworks has sought
federal remedies under the Lanham Act. Universal/USA also filed a motion to
dismiss those claims that are within the scope of copyright preemption.
Marketingworks has filed a motion to have the matter remanded back to state
court. Both motions are expected to be heard in March 2000. Although discovery
is only commencing,
 
                                       43

<PAGE>
based on information provided by outside counsel to Universal/USA to date, USAi
believes it is unlikely that this claim could present any material liability to
the Company.
 
FIRST JEWELLERY LITIGATION
 
    On November 10, 1999, First Jewellery Company of Canada, Inc. and its
affiliate A&A Jewelers, Inc. filed a complaint against Internet Shopping Network
and USAi in U.S. District Court for the Southern District of New York, claiming
that Internet Shopping Network's use of the "First Jewelry" name and URL
infringes on plaintiffs' claimed "First Jewellery" and "1(st) Jewellery"
trademarks. Plaintiffs also filed a domain name challenge with Network
Solutions, Inc. On December 14, 1999, a hearing was held on plaintiffs'
preliminary injunction motion. On January 31, 2000 and February 17, 2000, the
judge issued two orders granting the preliminary injunction motion, ordering
Internet Shopping Network to cease using the name "First Jewelry" in connection
with Internet Shopping Network's jewelry business commencing on April 17, 2000,
unless used to announce a name change, and ordering Internet Shopping Network
until such name change to prominently display next to the "First Jewelry" logo
on the First Jewelry home page a statement disclaiming any affiliation with
plaintiffs, but permitting Internet Shopping Network throughout the pendency of
the litigation to use the WWW.FIRSTJEWELRY.COM URL provided the web page at such
URL is only used to announce the new name and provide consumers a link to a new
URL under which the web site operates with its new name.
 
POLYGRAM FILMED ENTERTAINMENT LITIGATION
 
    On January 19, 2000, USA Films and Polygram Filmed Entertainment were named
as defendants in a lawsuit entitled RSVP, STAN LATHON AND RUSSELL SIMMONS V. USA
FILMS, INC., POLYGRAM FILMED ENTERTAINMENT, INC. AND DOES 1 -50. (HJD), Case No.
BC 223340. The case is pending in the Los Angeles Superior Court. Plaintiffs and
Polygram Filmed Entertainment, USA Films' predecessor in interest, are parties
to a written three-year "First Look Term Producing Agreement." Plaintiffs allege
that the Agreement grants Plaintiffs the right to designate a motion picture
project to Polygram Filmed Entertainment and, provided certain criteria are met,
Polygram Filmed Entertainment then is obligated to fund production of the
project in an amount not to exceed $7 million. Plaintiffs allege that Polygram
Filmed Entertainment and USA Films have breached the terms of the Agreement by
refusing to agree to fund production of a motion picture project entitled "Small
World." Plaintiffs also seek a declaration that Polygram Filmed Entertainment
and USA Films are obligated to fund production of this motion picture project
and further seek specific performance of the Agreement. The complaint was served
on or about January 21, 2000, and defendants filed their answer on February 17,
2000. No discovery has yet been taken. USA Films intends to vigorously defend
the action.
 
OTHER
 
    USAi engaged in various other lawsuits either as plaintiffs or defendants.
In the opinion of management, the ultimate outcome of these various lawsuits
should not have a material impact on USAi.
 
                                       44

<PAGE>

                                    PART II
 

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
    USAi's common stock is quoted on The Nasdaq Stock Market ("NASDAQ") (Symbol:
USAI). There is no established public trading market for USAi's Class B common
stock.
 
    On January 20, 2000, the Board of Directors declared a two-for-one stock
split of USAi's common stock and Class B common stock, payable in the form of a
dividend to stockholders of record as of the close of business on February 10,
2000. The 100% stock dividend was paid on February 24, 2000. On February 20,
1998, the Board of Directors declared a two-for-one stock split of USAi's common
stock and Class B common stock, payable in the form of a dividend to
stockholders of record as of the close of business on March 12, 1998. The 100%
stock dividend was paid on March 26, 1998. All share numbers give effect to such
stock splits.
 
    The following table sets forth, for the calendar periods indicated, the high
and low sales prices per share for USAi's common stock on NASDAQ:
 

<TABLE>
<CAPTION>
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
YEAR ENDED DECEMBER 31, 1999
First Quarter...............................................   $22.34     $15.56
Second Quarter..............................................    21.56      17.06
Third Quarter...............................................    24.31      18.38
Fourth Quarter..............................................    28.43      17.19
YEAR ENDED DECEMBER 31, 1998
First Quarter...............................................   $14.65     $11.50
Second Quarter..............................................    13.81      11.12
Third Quarter...............................................    15.69       9.62
Fourth Quarter..............................................    18.81       6.90
</TABLE>

 
    The bid prices reported for these periods reflect inter-dealer prices,
rounded to the nearest cent, and do not include retail markups, markdowns or
commissions, and may not represent actual transactions.
 
    There were approximately 30,000 stockholders of record as of January 31,
2000 and the closing price of USAi's common stock that day was $24.8125.
 
    USAi has paid no cash dividends on its common stock to date and does not
anticipate paying cash dividends in the immediate future. Additionally, USAi's
current loan facilities preclude the payment of dividends.
 

ITEM 6. SELECTED FINANCIAL DATA
 
    The following table presents selected historical financial data of USAi for
(1) the year ended August 31, 1995, (2) the four month period ended
December 31, 1995 and (3) each of the years in the four year period ended
December 31, 1999. This data was derived from USAi's audited consolidated
financial statements and reflects the operations and financial position of USAi
at the dates and for the periods indicated. The information in this table should
be read with the financial statements and accompanying notes and other financial
data pertaining to USAi included herein.
 
    EBITDA is defined as net income plus: (1) provision for income taxes,
(2) interest expense, (3) depreciation and amortization, including amortization
of cable distribution fees, and (4) minority interest. EBITDA is presented
because we believe it is a widely accepted indicator of our ability to service
debt as well as a valuation methodology for companies in the media,
entertainment and communications industries. EBITDA should not be considered in
isolation or as a substitute for measures of financial
 
                                       45

<PAGE>
performance or liquidity prepared in accordance with generally accepted
accounting principles. EBITDA may not be comparable to calculations of similarly
titled measures presented by other companies.
 

<TABLE>
<CAPTION>
                                                            FOUR MONTHS
                                              YEAR ENDED       ENDED                    YEARS ENDED
                                              AUGUST 31,    DECEMBER 31,                DECEMBER 31,
                                                 1995           1995        1996(1)       1997(2)      1998(3) (4)    1999(5)
                                              -----------   ------------   ----------   ------------   -----------   ----------
                                                                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                           <C>           <C>            <C>          <C>            <C>           <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues................................    $47,918       $15,980      $   75,172    $1,261,749    $ 2,634,136   $3,235,761
Operating profit (loss).....................      8,236          (680)          3,612        94,519        218,216      213,020
Net earnings (loss).........................        115        (2,882)         (6,539)       13,061         76,874      (27,631)
Basic earnings(loss) per common share(6):
Net earnings (loss).........................        .00          (.08)           (.15)          .06            .27         (.08)
Diluted earnings (loss) per common share(6):
Net earnings (loss).........................        .00          (.08)           (.15)          .06            .21         (.08)
BALANCE SHEET DATA (END OF PERIOD):
Working capital (deficit)...................    $ 6,042       $ 7,553      $  (24,444)   $   60,941    $   443,408   $  356,702
Total assets................................    142,917       136,670       2,116,232     2,670,796      8,316,190    9,253,152
Long-term obligations, net of current
  maturities................................     97,937        95,980         271,430       448,346        775,683      574,979
Minority interest...........................         --            --         356,136       372,223      3,633,597    4,492,066
Stockholders' equity........................      9,278         7,471       1,158,749     1,447,354      2,571,405    2,769,729
Other Data:
Net cash provided by (used in):
Operating activities........................    $17,442       $ 2,582      $   11,968    $   47,673    $   226,756   $  366,467
Investing activities........................     (1,696)          249          (2,622)      (82,293)    (1,193,589)    (443,409)
Financing activities........................     (5,576)       (5,901)         14,120       108,050      1,297,654       55,948
Effect of exchange rate changes.............         --            --              --            --         (1,501)        (123)
EBITDA......................................     22,910         4,021          19,098       191,543        464,363      572,817
</TABLE>

 
------------------------------
 
(1) The consolidated statement of operations data include the operations of
    Savoy and Holdco since their acquisition by USAi on December 19, 1996 and
    December 20, 1996, respectively. Prior to USAi's acquisition of USA
    Networks, which consisted of USA Network and Sci-Fi Channel cable television
    networks, and the domestic television production and distribution business
    of Universal, the assets of Holdco consisted principally of our retail sales
    programs, Home Shopping Network and America's Store.
 
(2) The consolidated statement of operations data include the operations of
    Ticketmaster since the acquisition by USAi of its controlling interest in
    Ticketmaster on July 17, 1997.
 
(3) The consolidated statement of operations data include the operations of
    Networks and Studios USA since their acquisition by USAi from Universal on
    February 12, 1998 and CitySearch since its acquisition by USAi on
    September 28, 1998. For more information about the Ticketmaster
    Online-CitySearch transaction, see "Corporate History."
 
(4) Net earnings for the year ended December 31, 1998 include a pre-tax gain of
    $74.9 million related to USAi's sale of its Baltimore television station
    during the first quarter of 1998 and a pre-tax gain of $109.0 million
    related to the CitySearch transaction during the fourth quarter of 1998.
 
(5) The consolidated statement of operations data include the operations of
    Hotel Reservations Network and of October Films and certain distribution
    assets of Polygram Filmed Entertainment since their acquisition by USAi on
    May 10, 1999 and May 28, 1999, respectively. Net earnings for the year ended
    December 31, 1999 includes a pre-tax gain of $89.7 million related to the
    sale of securities.
 
(6) Earnings (loss) per common share data and shares outstanding retroactively
    reflect the impact of the two-for-one stock splits of USAi's common stock
    and Class B common stock paid on February 24, 2000 and March 26, 1998. All
    share numbers give effect to such stock splits.
 
                                       46

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
                                    GENERAL
 
    USAi is a holding company, with subsidiaries engaged in diversified media
and electronic commerce businesses. USAi adopted its present corporate structure
as part of the Universal transaction. USAi maintains control and management of
Holdco and USANi LLC, and manages the businesses held by USANi LLC in
substantially the same manner as they would be if USAi held them directly
through wholly owned subsidiaries.
 
    In July 1997, USAi acquired a controlling interest in Ticketmaster. On
June 24, 1998, USAi completed its acquisition of Ticketmaster in a tax-free
merger, pursuant to which each outstanding share of Ticketmaster common stock
not owned by USAi was exchanged for 2.252 shares of common stock. The
acquisition of the controlling interest and the tax-free merger are referred to
as the "Ticketmaster Transaction."
 
    USAi completed the Universal transaction on February 12, 1998. In the
Universal transaction, USAi acquired USA Networks, a New York general
partnership, which consisted of USA Network and Sci-Fi Channel cable television
networks, and Universal Studios, Inc.'s domestic television production and
distribution businesses from Universal, and changed its name to USA
Networks, Inc.
 
    In September 1998, USAi merged Ticketmaster Online, now known as
Ticketmaster.com, into a subsidiary of CitySearch, Inc., a publisher of local
city guides on the Web, to create Ticketmaster Online-CitySearch.
 
    In May 1999, the Company acquired substantially all of the assets and
assumed substantially all of the liabilities of two entities which operate Hotel
Reservations Network (the "Hotel Reservations Network Transaction"), a leading
consolidator of hotel rooms for resale in the consumer market in the United
States. Also in May 1999, the Company acquired October Films, Inc. and the
domestic film distribution and development business of Universal which was
previously operated by Polygram Filmed Entertainment ("USA Films") (the "October
Films/PFE Transaction"). In connection with these transactions, the Company
established the Hotel reservations and Filmed entertainment business segments.
On March 1, 2000, Hotel Reservations Network completed an initial public
offering. The Hotel Reservation Network's class A common stock is quoted on the
Nasdaq Stock Market under the symbol "ROOM".
 
                  TRANSACTIONS AFFECTING THE COMPARABILITY OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
 
    During the past three years, we have augmented our media and electronic
commerce businesses by acquiring and developing several new businesses. As a
result, the following changes should be considered when comparing our results of
operations and financial position. These include the Hotel Reservations Network
transaction, the October Films/ PFE transaction, the Universal transaction, the
acquisition of a controlling interest in Ticketmaster in July 1997 and the
subsequent tax-free merger in 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 which would have actually been reported had the Hotel
Reservations Network transaction, the October Films/ PFE transaction, the
Universal transaction and the Ticketmaster transaction occurred at the beginning
of the respective periods, nor is it necessarily indicative of future results.
 
                                       47

<PAGE>
    Reference should be made to the Consolidated Financial Statements and
Summary Financial Data included herein.
 
CONSOLIDATED RESULTS OF OPERATIONS
 
YEAR ENDED DECEMBER 31, 1999 VS. YEAR ENDED DECEMBER 31, 1998
 
    The Hotel Reservations Network transaction, the October Films/ PFE
transaction and the Universal transaction resulted in significant increases in
net revenues, operating costs and expenses, other income (expense), minority
interest and income taxes. However, no significant discussion of these
fluctuations is presented.
 
NET REVENUES
 
    For the year ended December 31, 1999, revenues increased by $602 million, or
22.8%, to $3.2 billion from $2.6 billion in 1998 primarily due to increases of
$220 million, $124 million, $120 million and $74 million from the Networks and
television production, Hotel Reservations, Electronic retailing and Ticketing
operations businesses, respectively.
 
OPERATING COSTS AND EXPENSES
 
    For the year ended December 31, 1999, operating expenses increased by
$607 million, or 25.1%, to $3.0 billion from $2.4 billion in 1998, primarily due
to increases of $152 million, $119 million, $99 million and $91 million from the
Internet services, Hotel reservations, Electronic retailing and Networks and
television production businesses, respectively.
 
OTHER INCOME (EXPENSE)
 
    For the year ended December 31, 1999, net interest expense decreased by
$57.1 million, compared to 1998 primarily due to lower borrowing levels as a
result of the repayment of bank debt in the fourth quarter of 1998 and in 1999
from the proceeds of equity transactions involving Universal and Liberty Media
Corporation, a subsidiary of AT&T Corporation ("Liberty"). In addition, the
conversion of the Convertible Subordinated Debentures to equity as of March 1,
1998 and lower interest rates resulted in decreased interest expense.
 
    In the year ended December 31, 1999, the Company realized gains of
$89.7 million related to the sale of securities and $10.4 million from the
reversal of equity losses which were recorded in 1998 as a result of the
Universal transaction.
 
    In 1998, USAi sold its Baltimore television station for a pre-tax gain of
$74.9 million and completed the sale of the assets of SF Broadcasting for a
pre-tax gain of $9.2 million. In the fourth quarter of 1998, USAi recognized
pre-tax gains totaling $109.0 million related to the merger of Ticketmaster.com
and CitySearch, Inc. and the subsequent initial public offering of shares of
Ticketmaster Online-CitySearch, Inc. ("TMCS").
 
INCOME TAXES
 
    USAi's effective tax rate of 34.9% for the year ended December 31, 1999 was
consistent with the statutory rate. The impact on taxable income of
non-deductible goodwill, consolidated book losses not consolidated into taxable
income and state income taxes were offset by the impact of minority interest.
 
MINORITY INTEREST
 
    For the year ended December 31, 1999, minority interest primarily
represented Universal's and Liberty's ownership interest in USANi LLC, Liberty's
ownership interest in Holdco and the public's ownership in TMCS.
 
                                       48

<PAGE>
                     PRO FORMA YEAR ENDED DECEMBER 31, 1999
                   VS. PRO FORMA YEAR ENDED DECEMBER 31, 1998
 
    The following unaudited pro forma operating results of USAi present combined
results of operations as if the Universal transaction, Ticketmaster transaction,
CitySearch transaction, the sale of the assets of SF Broadcasting, the Hotel
Reservations Network transaction and the October Films/ PFE transaction all had
occurred on January 1, 1999 and 1998, respectively.
 
    The unaudited combined condensed pro forma statements of operations of USAi
are presented below 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, 1999 and 1998,
respectively, nor are they necessarily indicative of future results of
operations.
 
        UNAUDITED COMBINED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
 

<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>          <C>
NET REVENUES:
Networks and television production..........................  $1,305,871   $1,243,049
Electronic retailing........................................   1,204,524    1,084,139
Ticketing operations........................................     460,058      386,555
Hotel reservations..........................................     161,814       66,470
Internet services...........................................      60,949       37,962
Filmed entertainment........................................      82,053       44,764
Broadcasting and other......................................      15,480       16,723
                                                              ----------   ----------
  Total net revenues........................................   3,290,749    2,879,662
Operating costs and expenses:
Cost related to revenues....................................   1,908,718    1,694,651
Other costs and expenses....................................     804,525      693,127
Amortization of cable distribution fees.....................      26,680       22,089
Depreciation and amortization...............................     342,875      299,155
                                                              ----------   ----------
  Total operating costs and expenses........................   3,082,798    2,709,022
                                                              ----------   ----------
  Operating profit..........................................  $  207,951   $  170,640
                                                              ==========   ==========
  EBITDA....................................................  $  577,506   $  491,884
                                                              ==========   ==========
</TABLE>

 
    Net revenues for the year ended December 31, 1999 increased by
$411 million, or 14.3%, to $3.3 billion from $2.9 billion in 1998. Cost related
to revenues and other costs and expenses for the year ended December 31, 1999
increased by $326 million, or 13.6%, to $2.7 billion from $2.4 billion in 1998.
EBITDA for the year ended December 31, 1999 increased by $85.6 million, or
17.4%, to $577.5 million from $491.9 million in 1998.
 
    The following discussion provides an analysis of the pro forma revenues and
costs related to revenues and other costs and expenses by significant business
segment.
 
NETWORKS AND TELEVISION PRODUCTION
 
    Net revenues for the year ended December 31, 1999 increased by
$62.8 million, or 5.1%, to $1.3 billion from $1.2 billion in 1998. The increase
primarily resulted from an increase in advertising revenues due to higher
ratings at USA Network and a significant increase in advertising revenues and
affiliate revenues at Sci-Fi Channel due to an increase in subscribers and
higher ratings. The networks
 
                                       49

<PAGE>
increase was partially offset by lower revenues at Studios USA due to fewer
deliveries of network product, fewer pilots produced and significantly increased
usage of internally produced series for which revenue recognition is deferred
until aired on USA Network and Sci-Fi Channel.
 
    Cost related to revenues and other costs and expenses for the year ended
December 31, 1999 decreased by $39.4 million, or 4.3%, to $873.3 million from
$912.7 million in 1998. This decrease resulted primarily from lower overhead and
marketing costs, lower television production and increased usage of internally
developed product.
 
    EBITDA for the year ended December 31, 1999 increased by $102.2 million, or
30.9%, to $432.5 million from $330.3 million in 1998.
 
ELECTRONIC RETAILING
 
    Net revenues for the year ended December 31, 1999 increased by
$120.4 million, or 11.1%, to $1.2 billion from $1.1 billion in 1998. The
increase primarily resulted from Home Shopping Network's core business, which
generated increased sales of $115.0 million, including sales increases of
$93.9 million from Home Shopping Network and America's Store and $25.3 million
from continuity services. Furthermore, sales on Home Shopping en Espanol
increased by $5.4 million. Total units shipped increased by 10.8% to
32.0 million units compared to 28.9 million units in 1998. The increase in net
revenues also reflected a decrease in the return rate to 20.3% from 21.0% in
1998.
 
    Cost related to revenues and other costs and expenses for the year ended
December 31, 1999 increased by $90.6 million, or 10.0%, to $998.5 million from
$907.9 million in 1998. The increase resulted primarily from higher sales volume
and higher merchandising personnel costs. Also contributing to the increase in
costs were amounts associated with developing the company's Short Shopping
concept.
 
    EBITDA for the year ended December 31, 1999 increased by $29.8 million, or
16.9%, to $206.0 million from $176.2 million in 1998.
 
TICKETING OPERATIONS
 
    Net revenues for the year ended December 31, 1999 increased by
$73.5 million, or 19%, to $460.1 million from $386.6 million in 1998. The
increase resulted from an increase of 9.2% in the number of tickets sold,
including an increase in the number of tickets sold online of 7.1 million, and
an increase in revenue per ticket to $5.24 from $4.53 in 1998.
 
    Cost related to revenues and other costs and expenses for the year ended
December 31, 1999 increased by $39.7 million, or 12.2%, to $364.9 million from
$325.2 million in 1998. The increase resulted primarily from higher ticketing
operations costs as a result of higher ticketing volume, partially offset by a
reduction in overhead costs and start-up costs incurred in 1998 to launch
ticketing operations in Northern California, South America and France.
 
    EBITDA for the year ended December 31, 1999 increased by $33.7 million, or
55.0%, to $95.1 million from $61.4 million in 1998.
 
INTERNET SERVICES
 
    Net revenues for the year ended December 31, 1999 increased by
$23.0 million, or 60.6%, to $61.0 million in 1999 compared to $38.0 million in
1998. The increase resulted from an increase in online city guide revenue of
$19.4 million, or 115.2%, due to expansion into new cities and expansion into
the online personals business. The Company also launched a new electronic
commerce site, FIRSTJEWELRY.COM, at the end of the third quarter of 1999.
 
    Cost related to revenues and other costs and expenses for the year ended
December 31, 1999 increased by $78.2 million, or 94.4%, to $161.0 million from
$82.8 million in 1998. The increase resulted
 
                                       50

<PAGE>
primarily from increased costs to maintain and enhance the Internet Services;
the costs incurred to develop and launch FIRSTJEWELRY.COM; increased costs of
shipping product as FIRSTAUCTION.COM expanded its product mix; and the expansion
of local city guides into new markets.
 
    EBITDA loss for the year ended December 31, 1999 increased by
$55.2 million, or 123.0%, to $100.1 million from $44.9 million in 1998.
 
HOTEL RESERVATIONS
 
    Net revenues for the year ended December 31, 1999 increased by
$95.3 million, or 143.4%, to $161.8 million from $66.5 million in 1998. The
increase resulted from expansion of affiliate marketing programs, an increase in
the number of hotels for existing cities and expansion into new cities. Internet
generated sales for the year ended December 31, 1999 increased by
$103.0 million, or 357.2%, to $131.8 million compared to $28.8 million for the
year ended December 31, 1998. As a percentage of revenues, Internet generated
sales increased to 81% in 1999 from 44% in 1998.
 
    Cost related to revenues and other costs and expenses for the year ended
December 31, 1999 increased by $81.9 million, or 147.3%, to $137.5 million from
$55.6 million in 1998. The increase in costs is primarily due to increased
sales, including an increased percentage of revenue attributable to affiliate
and travel agent sales (for which commissions are paid), increased credit card
charge backs, and increased staffing levels and systems to support increased
operations, partially offset by lower telephone and telephone operator costs due
to the increase in Internet-related bookings.
 
    EBITDA for the year ended December 31, 1999 increased by $13.5 million, or
123.9%, to $24.3 million from $10.9 million in 1998.
 
FILMED ENTERTAINMENT
 
    Net revenues for the year ended December 31, 1999 increased by
$37.3 million, or 83.3%, to $82.1 million from $44.8 million in 1998. The
increase resulted primarily from increased theatrical revenues of
$19.2 million, home entertainment video of $14.7 million and distribution fees
of $4.7 million from the distribution of product for Universal. Revenues also
include revenue generated from the distribution of films from the Savoy library.
 
    Cost related to revenues and other costs and expenses for the year ended
December 31, 1999 increased by $35.9 million or 85.3%, to $78.0 million from
$42.1 million in 1998 due to the amortization of costs of increased theatrical
releases and costs related to the home entertainment.
 
    EBITDA for the year ended December 31, 1999 increased by $1.3 million, or
51.0%, to $4.0 million from $2.7 million in 1998.
 
BROADCASTING
 
    Net revenues increased by $7.0 million, or 452.9%, to $8.6 million from
$1.6 million in 1998 due to increased advertising revenue at the television
station in the Miami/Ft. Lauderdale market and the launch of stations in the
Dallas and Atlanta markets in November 1999. Cost related to revenue increased
by $30.8 million, due to increased program costs and operating expenses. An
increased loss is expected in the broadcasting segment in 2000 as costs are
incurred to launch more local television stations.
 
OTHER
 
    Other revenue relates to a business that was sold in 1999, which resulted in
decreased revenue of $7.6 million in 1999.
 
                                       51

<PAGE>
YEAR ENDED DECEMBER 31, 1998 VS. YEAR ENDED DECEMBER 31, 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. However, no significant
discussion of these fluctuations is presented.
 
NET REVENUES
 
    For the year ended December 31, 1998, revenues increased by $1.4 billion
compared to 1997 primarily due to increases of $1.1 billion, $230 million, and
$74 million from the Networks and Television Production business, Ticketing
Operations and Electronic Retailing, respectively.
 
OPERATING COSTS AND EXPENSES
 
    For the year ended December 31, 1998, operating expenses increased by
$1.2 billion compared to 1997 primarily due to increases of $824 million,
$206 million and $64 million from the Networks and Television Production
business, Ticketing Operations and Electronic Retailing, respectively.
 
OTHER INCOME (EXPENSE)
 
    For the year ended December 31, 1998, net interest expense increased by
$79 million, compared to 1997 primarily due to interest incurred to finance the
Universal transaction, interest on the $500.0 million 6 3/4% Notes (the "Notes")
and non-cash interest expense on long-term program liabilities at the Networks
and Television Production business.
 
    On January 20, 1998, USAi sold its Baltimore television station for a
pre-tax gain of $74.9 million. On July 16, 1998, USAi completed the sale of the
assets of SF Broadcasting for a pre-tax gain of $9.2 million. In the fourth
quarter of 1998, USAi recognized pre-tax gains totaling $109.0 million related
to the merger of Ticketmaster.com and CitySearch, Inc. and the subsequent
initial public offering of shares of Ticketmaster Online-CitySearch, Inc.
 
    In addition to the above items, for the year ended December 31, 1998,
miscellaneous expense increased by $11 million compared to 1997 primarily due to
losses from international joint ventures of Home Shopping Network and the
Networks and Television Production business.
 
INCOME TAXES
 
    USAi's effective tax rate of 45.0% for the year ended December 31, 1998 was
higher than the statutory rate due primarily to non-deductible goodwill and
other acquired intangible and state income taxes.
 
MINORITY INTEREST
 
    For the year ended December 31, 1998, minority interest represented
Universal's and Liberty's ownership interest in USANi LLC for the period
February 12 through December 31, 1998, Liberty's ownership interest in Holdco,
Fox Broadcasting Company's 50% ownership interest in SF Broadcasting for the
period January 1 through July 16, 1998, the public's ownership interest in
Ticketmaster for the period January 1 through June 24, 1998 and CitySearch's and
the public's ownership in Ticketmaster Online-CitySearch, Inc. for the period
September 28, through December 31, 1998.
 
              FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
 
    Net cash provided by operating activities was $366.5 million for the year
ended December 31, 1999 compared to $226.8 million for the year ended
December 31, 1998. These cash proceeds and available cash and borrowings were
used to pay for acquisitions of $195.5 million, to make capital expenditures of
$138.9 million, and to make mandatory tax distribution payments to the LLC
partners of $28.8 million.
 
                                       52

<PAGE>
Furthermore, USAi transferred $200.0 million to Universal under an
interest-bearing note related to the October Films/PFE Transaction, of which
$163.8 million is outstanding at December 31, 1999. The Company generated cash
proceeds of $107.2 million from the sale of securities in a publicly traded
entity during the year ended December 31, 1999.
 
    On February 12, 1998, USAi and USANi LLC, as borrower, entered into a credit
agreement which provides for a $1.6 billion credit facility. The credit facility
was used to finance the Universal Transaction and to refinance USAi's
then-existing $275.0 million revolving credit facility. The credit facility
consists of (1) a $600.0 million revolving credit facility with a $40.0 million
sub-limit for letters of credit, (2) a $750.0 million Tranche A Term Loan and,
(3) a $250.0 million Tranche B Term Loan. The Tranche A Term Loan and the
Tranche B Term Loan have been permanently repaid as of December 31, 1999, as
described below. The revolving credit facility expires on December 31, 2002.
 
    In 1999, the Company permanently repaid the Tranche A Term Loan in the
amount of $250.0 million from cash on hand, including payments of
$237.5 million in September 1999. On November 23, 1998, USAi completed an
offering of $500.0 million 6 3/4% Senior Notes due 2005 (the "Notes"). Proceeds
received from the sale of the Notes together with available cash were used to
repay and permanently reduce $500.0 million of the Tranche A Term Loan. On
August 5, 1998, USANi LLC permanently repaid the Tranche B Term Loan in the
amount of $250.0 million from cash on hand.
 
    The existing credit facility is guaranteed by substantially all of USAi's
material subsidiaries. The interest rate on borrowings under the existing credit
facility is tied to an alternate base rate or the London InterBank Rate, in each
case, plus an applicable margin, and $598.7 million was available for borrowing
as of December 31, 1999 after taking into account outstanding letters of credit.
On October 9, 1998, the parties to the credit agreement entered into an
amendment, which, among other things, (1) provided for the release of all
security interests in favor of the lenders, (2) increased the level of permitted
stock repurchases from $100 million to $300 million, and (3) lowered the maximum
ratio of Total Debt to EBITDA, each as defined in the credit agreement,
permitted under the credit agreement from 5.0x to 4.0x.
 
    Under the investment agreement relating to the Universal Transaction, USAi
has granted to Universal and Liberty preemptive rights with respect to future
issuances of USAi's common stock and Class B common stock. These preemptive
rights generally allow Universal and Liberty the right to maintain an ownership
percentage in USAi equal to the ownership percentage that entity held, on a
fully converted basis, immediately prior to the issuance. In July 1999,
Universal and Liberty exercised their preemptive rights, resulting in total cash
proceeds to the Company of $362.6 million. Universal purchased 14.8 million of
USANi LLC shares and Liberty purchased 7.2 million shares of USAi common stock.
 
    As part of the Universal transaction, USAi 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. USAi has elected
to not participate in the venture. Accordingly, during the year ended
December 31, 1999, USANi LLC reversed amounts previously recorded for its share
of losses of the joint venture.
 
    USAi implemented its plan to disaffiliate its television station in the
Miami/Ft. Lauderdale market in June 1998. USAi has incurred and will continue to
incur expenditures to develop programming for this station, which during the
development and transitional stage, may not be offset by sufficient advertising
revenues. USAi transitioned the stations serving the Dallas and Atlanta markets
in October 1999. USAi believes that the process of disaffiliation can be
successfully managed so as not to have a material adverse effect but rather to
maximize the value of the broadcasting stations. In connection with the launch
of the local television stations, the Company built a production center in
California to serve the stations. The total capital cost will be approximately
$25.0 million.
 
                                       53

<PAGE>
    On March 1, 1999, the Company made a mandatory tax distribution payment to
Universal and Liberty in the amount of $28.8 million. On February 29, 2000, the
Company made a mandatory tax distribution payment to Universal and Liberty in
the amount of $68.0 million.
 
    On May 10, 1999, the Company completed its acquisition of substantially all
of the assets and the assumption of substantially all of the liabilities of two
entities which operate Hotel Reservations Network, a leading consolidator of
hotel rooms for resale in the consumer market in the United States. The purchase
price was $149.2 million, net of a working capital adjustment of $0.8 million,
plus contingent payments based on operating performance during the year ended
December 31, 1999 and for the twelve month periods ended March 31, 2000, 2001
and 2002. The purchase price was paid in the form of a cash payment of
$145.0 million on May 11, 1999 and a promissory note of $5.0 million which was
paid on January 31, 2000 and which bore interest at 4.75% per annum. Through
December 31, 1999, the Company paid $37.5 million pursuant to these contingent
payment arrangements and the remaining $12.5 million was paid in February 2000.
See below for information regarding the contingent payments for the twelve month
periods March 31, 2000, 2001 and 2002.
 
    On May 28, 1999, the Company completed its acquisition of October
Films, Inc. The Company issued 600,000 shares of USAi common stock to Universal
and paid cash consideration of $12.0 million to October Films shareholders
(other than Universal) for total consideration of $23.6 million. To fund the
cash consideration portion of the transaction, Universal purchased from USAi
600,000 additional shares of USAi common stock at $20.00 per share. As part of
the transaction, the Company assumed the outstanding balance under October
Films' credit agreement, which totaled $83.2 million as of the acquisition date.
This balance was repaid from cash on hand on August 20, 1999.
 
    Also on May 28, 1999, USAi acquired from Universal the domestic film
distribution and development business previously operated by PFE and PFE's
domestic video and specialty video businesses. The acquisition included PFE's
domestic production assets such as Interscope Communications and Propaganda
Films, as well as the following distribution assets: PolyGram Video, Polygram
Filmed Entertainment Canada, Gramercy Pictures, and PolyGram Films. The
acquisition of the above assets is referred to as the "PFE Transaction". In
connection with the transaction, USAi agreed to assume certain liabilities
related to the PFE businesses acquired. In addition, USAi advanced
$200.0 million to Universal pursuant to an eight year, full recourse,
interest-bearing note in connection with a distribution agreement, under which
USAi will distribute, in the United States and Canada, certain Polygram Filmed
Entertainment, Inc. theatrical films that were not acquired in the transaction.
The advance is repaid as revenues are received under the distribution agreement
and, in any event, will be repaid in full at maturity. Through December 31,
1999, approximately $42.9 million has been offset against the advance.
 
    In July 1999, USAi announced that its Board of Directors authorized the
extension of the Company's stock repurchase program providing for the repurchase
of up to 10 million shares of USAi's 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
USAi's overall capital structure. Funds for these purchases will come from cash
on hand or borrowings under the Company's credit facility. During the year ended
December 31, 1999, the Company purchased 360,000 shares of its common stock for
aggregate consideration of $6.6 million. In September 1999, the Company
purchased 113,892 shares of its common stock for aggregate consideration of
$2.3 million from the Company's ESOP, representing shares forfeited by former
participants at the time the ESOP was merged with another USAi plan.
 
    On March 1, 2000, HRN completed an initial public offering for 6.2 million
shares of its class A common stock, generating net proceeds of approximately
$91 million. Pursuant to an agreement between USAi and HRN, USAi is required to
make a contingent cash payment to the sellers of the two entities which operated
HRN for the twelve month period ending March 31, 2000, which payment is expected
to be paid by June 2000. The payment will approximate $40.0 million. This
payment will result in additional
 
                                       54

<PAGE>
goodwill that will be amortized over the remaining ten-year life assigned to the
goodwill. In addition, certain other transactions related to the offering,
including the buy-out of the contingent payments for the twelve month periods
ending March 31, 2001 and 2002 in exchange for HRN common shares valued at the
time of the initial public offering at $81.6 million, resulted in additional
goodwill of $160.0 million that will be amortized over the remaining ten-year
life assigned to the goodwill.
 
    On January 12, 2000, the Company announced that it reached a definitive
agreement to acquire Precision Response Corp. ("PRC") in a stock-for-stock
transaction, whereby each share of PRC will be exchanged for 1.08 USAi shares
(approximately 23.6 million shares). The transaction is expected to close in
April 2000.
 
    On January 25, 2000, USAi and Styleclick.com Inc., a leading enabler of
e-commerce for manufacturers and retailers, announced an agreement to form a new
company by merging USA's Internet Shopping Network ("ISN") and Styleclick.com.
Under the terms of the agreement, USAi will also invest $40 million in cash,
contribute $10 million in dedicated media, and will receive warrants to purchase
additional shares of the new company. In the interim, USAi has agreed to extend
a $10 million bridge loan to Styleclick.com. The transaction is expected to
close in the second quarter of 2000.
 
    USAi anticipates that it will need to invest working capital towards the
development and expansion of its overall operations. Due primarily to the
expansion of its Internet businesses and the roll-out of new television
stations, future capital expenditures may be higher than current amounts.
 
    In management's opinion, available cash, internally generated funds and
available borrowings will provide sufficient capital resources to meet USAi's
foreseeable needs.
 
    During the year ended December 31, 1999, USAi did not pay any cash
dividends, and none are permitted under USAi's existing credit facility. USAi's
subsidiaries have no material restrictions on their ability to transfer amounts
to fund USAi's operations.
 
OTHER MATTERS
 
    The widespread use of computer programs that rely on two-digit dates to
perform computation and decision-making functions may cause computer systems,
including systems and software used by our company and our websites, to
malfunction in the Year 2000, and may lead to significant business delays and
disruptions in our business and operations in the United States and
internationally. We have completed our plan to minimize the impact of this Year
2000 problem on our operations. The dollar cost of our Year 2000 compliance was
approximately $10 million, substantially all of which has been spent through
December 31, 1999. To date, we have not experienced any significant Year 2000
problems and, therefore, the risk that any Year 2000 problems will occur in the
future has diminished significantly.
 
    In addition to our internal systems, several systems provided by third
parties are required for the operation of our services, any of which may contain
software code that still might prove not to be Year 2000 compliant. These
systems include server software used to operate our network servers, software
controlling routers, switchers and other components of our data network, disk
management software used to control out data disk arrays, firewall, security,
monitoring and back-up software, as well as desktop PC applications software. In
most cases, we employ widely available software applications and other products
from leading third-party vendors, and expect that these vendors will provide any
required upgrades or modifications in a timely fashion. However, any failure of
third-party suppliers to provide Year 2000 compliant versions of the products
used by us could result in a temporary disruption of our services or otherwise
disrupt our operations. Although to date we have not experienced any material
disruptions in our operations, an undiscovered failure to achieve Year 2000
compliance by third-party systems could result in complete failure or
inaccessibility of our services and could adversely affect our business,
financial condition and results of operations.
 
                                       55

<PAGE>
I
TEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
INTEREST RATE RISK
 
    The Company's exposure to market rate risk for changes in interest rates
relates primarily to the Company's short-term investment portfolio and issuance
of debt. The Company does not use derivative financial instruments in its
investment portfolio. The Company has a prescribed methodology whereby it
invests its excess cash in debt instruments of government agencies and high
quality corporate issuers. To further mitigate risk, the vast majority of the
securities have a maturity date within 60 days. The portfolio is reviewed on a
periodic basis and adjusted in the event that the credit rating of a security
held in the portfolio has deteriorated.
 
    At December 31, 1999, the Company's outstanding debt approximated
$585 million, substantially all of which is fixed rate obligations. If market
rates decline, the Company runs the risk that the related required payments on
the fixed rate debt will exceed those based on the current market rate.
 
FOREIGN CURRENCY EXCHANGE RISK
 
    The Company conducts business in certain foreign markets. However, the level
of operations in foreign markets is insignificant to the consolidated results.
 
EQUITY PRICE RISK
 
    The Company has a minimal investment in equity securities of a
publicly-traded Company. This investment, as of December 31, 1999, was
considered available-for-sale, with the unrealized gain deferred as a component
of stockholders' equity. It is not customary for the Company to make investments
in equity securities as part of its investment strategy.
 
                                  SEASONALITY
 
    USAi's businesses are subject to the effects of seasonality.
 
    Networks and Television Production revenues are influenced by advertiser
demand and the seasonal nature of programming, and generally peak in the spring
and fall.
 
    USAi 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.
 
    Hotel reservations revenues are influenced by the seasonal nature of holiday
travel in the markets it serves, and has historically peaked in the fall. As the
business expands into new markets, the impact of seasonality is expected to
lessen.
 
                                       56

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Directors and Stockholders
USA NETWORKS, INC.
 
    We have audited the accompanying consolidated balance sheets of USA
Networks, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. Our
audits also included the financial statement schedule listed in the Index at

Item 14(a). These financial statements and the financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the financial statement schedule
based on our audits.
 
    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
USA Networks, Inc. and subsidiaries at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
 
                                                           /s/ ERNST & YOUNG LLP
 
New York, New York
February 3, 2000

 
                                       57

<PAGE>

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                      USA NETWORKS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                           ---------------------------------------
                                                              1999          1998          1997
                                                           -----------   -----------   -----------
                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                        <C>           <C>           <C>
NET REVENUES
  Networks and television production.....................  $1,305,871    $1,085,685    $       --
  Electronic retailing...................................   1,204,524     1,084,139     1,008,162
  Ticketing operations...................................     460,058       386,555       156,378
  Hotel reservations.....................................     124,113            --            --
  Internet services......................................      60,949        26,645        12,857
  Filmed entertainment...................................      64,766         7,259        14,173
  Broadcasting...........................................       8,598         1,555            --
  Other..................................................       6,882        42,298        70,179
                                                           ----------    ----------    ----------
    Total net revenues...................................   3,235,761     2,634,136     1,261,749
                                                           ----------    ----------    ----------
Operating costs and expenses:
  Cost of sales and services.............................   1,236,530       924,619       645,299
  Program costs..........................................     630,956       597,681            --
  Selling and marketing..................................     400,054       359,017       217,358
  General and administrative.............................     311,003       203,059       129,700
  Other operating costs..................................      84,401        85,397        77,849
  Amortization of cable distribution fees................      26,680        22,089        19,261
  Depreciation and amortization..........................     333,117       224,058        77,763
                                                           ----------    ----------    ----------
    Total operating costs and expenses...................   3,022,741     2,415,920     1,167,230
                                                           ----------    ----------    ----------
  Operating profit.......................................     213,020       218,216        94,519
Other income (expense):
  Interest income........................................      31,778        16,188         5,313
  Interest expense.......................................     (79,726)     (121,266)      (31,579)
  Gain on sale of securities.............................      89,721            --            --
  Gain on disposition of broadcast stations..............          --        84,187            --
  Gain on sale of subsidiary stock.......................          --       108,967            --
  Miscellaneous..........................................       5,779       (22,478)      (11,752)
                                                           ----------    ----------    ----------
                                                               47,552        65,598       (38,018)
                                                           ----------    ----------    ----------
Earnings before income taxes and minority interest.......     260,572       283,814        56,501
Income tax expense.......................................     (90,906)     (127,645)      (41,051)
Minority interest........................................    (197,297)      (79,295)       (2,389)
                                                           ----------    ----------    ----------
NET EARNINGS (LOSS)......................................  $  (27,631)   $   76,874    $   13,061
                                                           ==========    ==========    ==========
Basic earnings (loss) per common share...................  $     (.08)   $      .27    $      .06
                                                           ==========    ==========    ==========
Diluted earnings (loss) per common share.................  $     (.08)   $      .21    $      .06
                                                           ==========    ==========    ==========
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                       58

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                              ---------------------------
                                                                  1999           1998
                                                              ------------   ------------
                                                              (IN THOUSANDS, EXCEPT SHARE
                                                                         DATA)
<S>                                                           <C>            <C>
                                         ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................   $  424,239     $  445,356
Accounts and notes receivable, net of allowance of $41,993
  and $20,610, respectively.................................      454,341        372,111
Inventories, net............................................      470,844        421,570
Investment held for sale....................................       11,512         27,737
Other current assets, net...................................       27,519         28,501
                                                               ----------     ----------
  Total current assets......................................    1,388,455      1,295,275
PROPERTY, PLANT AND EQUIPMENT
Computer and broadcast equipment............................      324,412        233,991
Buildings and leasehold improvements........................      110,403        100,339
Furniture and other equipment...............................       85,487         55,653
Land........................................................       16,094         16,044
Projects in progress........................................       41,438         18,130
                                                               ----------     ----------
                                                                  577,834        424,157
  Less accumulated depreciation and amortization............     (221,203)      (168,727)
                                                               ----------     ----------
                                                                  356,631        255,430
OTHER ASSETS
Intangible assets, net......................................    6,831,487      6,342,646
Cable distribution fees, net ($35,181 and $39,650,
  respectively, to related parties).........................      130,988        100,416
Long-term investments.......................................      121,383         35,628
Notes and accounts receivable, net of current portion

  ($2,562 and $3,356, respectively, from related parties)...       26,248         48,532
Advance to Universal........................................      163,814             --
Inventories, net............................................      166,477        151,828
Deferred income taxes.......................................           --         29,370
Deferred charges and other, net.............................       67,669         57,065
                                                               ----------     ----------
                                                               $9,253,152     $8,316,190
                                                               ==========     ==========
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                       59

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                              ---------------------------
                                                                  1999           1998
                                                              ------------   ------------
                                                              (IN THOUSANDS, EXCEPT SHARE
                                                                         DATA)
<S>                                                           <C>            <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations.................   $   10,801     $   36,538
Accounts payable, trade.....................................      188,343        186,690
Accounts payable, client accounts...........................       98,586         70,817
Obligations for program rights and film costs...............      272,945        184,583
Amount due under acquisition agreement......................       17,500             --
Cable distribution fees payable ($18,733 and $18,633,
  respectively, to related parties).........................       43,993         44,588
Deferred revenue............................................       83,811         45,619
Deferred income taxes.......................................        4,050          6,357
Other accrued liabilities...................................      311,724        276,675
                                                               ----------     ----------
Total current liabilities...................................    1,031,753        851,867
LONG-TERM OBLIGATIONS (net of current maturities)...........      574,979        775,683
OBLIGATIONS FOR PROGRAM RIGHTS AND FILM COSTS, net of
  current...................................................      262,810        409,956
OTHER LONG-TERM LIABILITIES.................................      116,695         73,682
DEFERRED INCOME TAXES.......................................        5,120             --
MINORITY INTEREST...........................................    4,492,066      3,633,597
COMMITMENTS AND CONTINGENCIES...............................           --             --
STOCKHOLDERS' EQUITY
Preferred stock--$.01 par value; authorized 15,000,000
  shares; no shares issued and outstanding..................           --             --
Common stock--$.01 par value; authorized 800,000,000 shares;
  issued and outstanding, 274,013,418 and 254,544,064
  shares, respectively......................................        2,740          2,545
Class B--convertible common stock--$.01 par value;
  authorized, 200,000,000 shares; issued and outstanding,
  63,033,452 shares.........................................          630            630
Additional paid-in capital..................................    2,830,506      2,592,456
Accumulated deficit.........................................      (54,358)       (26,727)
Accumulated other comprehensive income......................        4,773          8,852
Treasury stock..............................................       (9,564)            --
Unearned compensation.......................................           --         (1,353)
Note receivable from key executive for common stock
  issuance..................................................       (4,998)        (4,998)
                                                               ----------     ----------
Total stockholders' equity..................................    2,769,729      2,571,405
                                                               ----------     ----------
                                                               $9,253,152     $8,316,190
                                                               ==========     ==========
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                       60

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
 
                                                                       CLASS B                               ACCUM.
                                                                     CONVERTIBLE     ADDIT.                  OTHER
                                                           COMMON      COMMON       PAID-IN      ACCUM.      COMP.     TREASURY
                                               TOTAL       STOCK        STOCK       CAPITAL      DEFICIT     INCOME     STOCK
                                             ----------   --------   -----------   ----------   ---------   --------   --------
                                                                               (IN THOUSANDS)
<S>                                          <C>          <C>        <C>           <C>          <C>         <C>        <C>
BALANCE AT DECEMBER 31, 1996...............  $1,158,749    $1,440       $408       $1,283,891   $(116,662)  $    --    $    --
Issuance of common stock upon exercise of
  stock options............................       7,227        19         --            7,208          --        --         --
Income tax benefit related to stock options
  exercised................................       3,372        --         --            3,372          --        --         --
Issuance of Common Stock and Class B Common
  Stock in connection with Ticketmaster
  Acquisition..............................     262,817       290         80          262,447          --        --         --
Amortization of unearned compensation
  related to stock options and equity
  participation plan.......................       2,128        --         --               --          --        --         --
Net earnings for year ended December 31,
  1997.....................................      13,061        --         --               --      13,061        --         --
                                             ----------    ------       ----       ----------   ---------   -------    -------
BALANCE AT DECEMBER 31, 1997...............   1,447,354     1,749        488        1,556,918    (103,601)       --         --
Comprehensive income:
  Net earnings for the year ended
    December 31, 1998......................      76,874        --         --               --      76,874        --         --
  Increase in unrealized gains in available
    for sale securities....................      10,353        --         --               --          --    10,353         --
  Foreign currency translation.............      (1,501)       --         --               --                (1,501)        --
                                             ----------
    Comprehensive income...................      85,726
                                             ----------
Issuance of common stock upon exercise of
  stock options............................      26,070        47         --           26,023          --        --         --
Income tax benefit related to stock options
  exercised................................       6,959        --         --            6,959          --        --         --
Issuance of Common Stock and Class B Common
  Stock in connection with Universal
  Transaction..............................     302,154       142        152          301,860          --        --         --
Issuance of stock in connection with
  Ticketmaster tax-free merger.............     467,035       319         --          466,716          --        --         --
Issuance of stock in connection with
  conversion of debentures.................     199,147       244         --          198,903          --        --         --
Conversion of Class B Convertible Common
  Stock to Common Stock....................          --        17        (17)              --          --        --         --
Acquisition of interest in LLC shares in
  exchange for Common Stock and Class B
  Common Stock.............................      35,111        27          7           35,077          --                   --
Amortization of unearned compensation
  related to stock options and equity
  participation plans......................       1,849        --         --               --          --        --         --
                                             ----------    ------       ----       ----------   ---------   -------    -------
BALANCE AT DECEMBER 31, 1998...............   2,571,405     2,545        630        2,592,456     (26,727)    8,852         --
Comprehensive income:
  Net loss for the year ended December 31,
    1999...................................     (27,631)       --         --               --     (27,631)       --         --
  Decrease in unrealized gains in available
    for sale securities....................      (3,956)       --         --               --          --    (3,956)        --
  Foreign currency translation.............        (123)       --         --               --          --      (123)        --
                                             ----------
    Comprehensive loss.....................     (31,710)
                                             ----------
Issuance of common stock upon exercise of
  stock options............................      47,967       111         --           47,856          --        --         --
Income tax benefit related to stock options
  exercised................................      42,362        --         --           42,362          --        --         --
Issuance of stock in connection with
  October Films/PFE Transaction............      23,558        12         --           23,546          --        --         --
Issuance of stock in connection with other
  acquisitions.............................       4,498         3         --            4,495          --        --         --
Issuance of stock in connection with
  Liberty preemptive rights................     120,306        73         --          120,233          --        --         --
Purchase of Treasury Stock in connection
  with stock repurchase program............      (8,933)       (4)        --               --          --        --     (8,929)
Cancellation of employee equity program....        (355)       --         --             (442)         --        --       (635)
Amortization of unearned compensation
  related to stock options and equity
  participation plans......................         631        --         --               --          --        --         --
                                             ----------    ------       ----       ----------   ---------   -------    -------
BALANCE AT DECEMBER 31, 1999...............  $2,769,729    $2,740       $630       $2,830,506   $ (54,358)  $ 4,773    $(9,564)
                                             ==========    ======       ====       ==========   =========   =======    =======
 
<CAPTION>
                                                                NOTE
                                                             RECEIVABLE
                                                              FROM KEY
                                                             EXECUTIVE
                                                                FOR
                                                               COMMON
                                                UNEARN.        STOCK
                                             COMPENSATION     ISSUANCE
                                             -------------   ----------
                                                   (IN THOUSANDS)
<S>                                          <C>             <C>
BALANCE AT DECEMBER 31, 1996...............     $(5,330)      $(4,998)
Issuance of common stock upon exercise of
  stock options............................                        --
Income tax benefit related to stock options
  exercised................................          --            --
Issuance of Common Stock and Class B Common
  Stock in connection with Ticketmaster
  Acquisition..............................          --            --
Amortization of unearned compensation
  related to stock options and equity
  participation plan.......................       2,128            --
Net earnings for year ended December 31,
  1997.....................................          --            --
                                                -------       -------
BALANCE AT DECEMBER 31, 1997...............      (3,202)       (4,998)
Comprehensive income:
  Net earnings for the year ended
    December 31, 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 Common Stock and Class B Common
  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....................          --            --
Acquisition of interest in LLC shares in
  exchange for Common Stock and Class B
  Common Stock.............................          --            --
Amortization of unearned compensation
  related to stock options and equity
  participation plans......................       1,849            --
                                                -------       -------
BALANCE AT DECEMBER 31, 1998...............      (1,353)       (4,998)
Comprehensive income:
  Net loss for the year ended December 31,
    1999...................................          --            --
  Decrease in unrealized gains in available
    for sale securities....................          --            --
  Foreign currency translation.............          --            --
 
    Comprehensive loss.....................
 
Issuance of common stock upon exercise of
  stock options............................          --            --
Income tax benefit related to stock options
  exercised................................          --            --
Issuance of stock in connection with
  October Films/PFE Transaction............          --            --
Issuance of stock in connection with other
  acquisitions.............................          --            --
Issuance of stock in connection with
  Liberty preemptive rights................          --            --
Purchase of Treasury Stock in connection
  with stock repurchase program............          --            --
Cancellation of employee equity program....         722            --
Amortization of unearned compensation
  related to stock options and equity
  participation plans......................         631            --
                                                -------       -------
BALANCE AT DECEMBER 31, 1999...............     $    --       $(4,998)
                                                =======       =======
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                       61

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                              -----------------------------------
                                                                1999         1998         1997
                                                              ---------   -----------   ---------
                                                                        (IN THOUSANDS)
<S>                                                           <C>         <C>           <C>
Cash flows from operating activities:
  Net earnings (loss).......................................  $ (27,631)  $    76,874   $  13,061
  Adjustments to reconcile net earnings (loss) to net cash
    provided by operating activities:
    Depreciation and amortization...........................    333,117       224,058      77,763
    Amortization of cable distribution fees.................     26,680        22,089      19,261
    Amortization of program rights and film costs...........    577,248       513,844          --
    Amortization of deferred financing costs................      5,035         7,303       2,256
    Deferred income taxes...................................     12,145        94,466      22,474
    Equity in (earnings) losses of unconsolidated
      affiliates............................................     (1,356)       18,220      12,007
    Gain on disposition of broadcast stations...............         --       (84,187)         --
    Gain on sale of subsidiary stock........................         --      (108,967)         --
    Gain on sale of securities..............................    (89,721)           --          --
    Non-cash stock compensation.............................      6,645         8,808       2,128
    Minority interest.......................................    197,297        79,295       2,389
    Changes in current assets and liabilities:
      Accounts receivable...................................    (45,211)     (144,472)     (7,107)
      Inventories...........................................    (24,311)     (150,905)    (37,443)
      Accounts payable......................................     13,792        91,172      (7,371)
      Accrued liabilities and deferred revenue..............     53,835         5,703     (35,859)
    Payment for program rights and film costs...............   (616,638)     (427,106)         --
    Increase in cable distribution fees.....................    (42,887)      (11,338)    (16,959)
    Other, net..............................................    (11,572)       11,899       1,073
                                                              ---------   -----------   ---------
      NET CASH PROVIDED BY OPERATING ACTIVITIES.............    366,467       226,756      47,673
                                                              ---------   -----------   ---------
Cash flows from investing activities:
  Acquisition of Universal Transaction, net of cash
    acquired................................................         --    (1,297,233)         --
  Acquisitions, net of cash acquired........................   (195,504)     (102,873)     (7,633)
  Capital expenditures......................................   (138,937)      (86,992)    (45,869)
  Advance to Universal......................................   (200,000)           --          --
  Recoupment of advance to Universal........................     42,951            --          --
  Increase in long-term investments and notes receivable....    (69,061)      (26,626)    (39,844)
  Proceeds from sale of securities..........................    107,231            --          --
  Proceeds from disposition of broadcast stations...........         --       356,769          --
  Payment of merger and financing costs.....................     (4,765)      (34,740)     (6,349)
  Other, net................................................     14,676        (1,894)     17,402
                                                              ---------   -----------   ---------
      NET CASH USED IN INVESTING ACTIVITIES.................   (443,409)   (1,193,589)    (82,293)
                                                              ---------   -----------   ---------
Cash flows from financing activities:
  Borrowings................................................         --     1,641,380     393,949
  Net proceeds from issuance of Senior Notes................         --       494,350          --
  Principal payments on long-term obligations...............   (339,349)   (1,700,073)   (385,329)
  Cash acquired in Ticketmaster Transaction.................         --            --      89,663
  Purchase of treasury stock................................     (8,933)           --          --
  Payment of mandatory tax distribution to LLC partners.....    (28,830)           --          --
  Cash acquired in CitySearch Transaction...................         --        57,877          --
  Advance to CitySearch for promissory note.................         --       (50,000)         --
  Proceeds from sale of subsidiary stock....................      4,268       104,989          --
  Redemption in minority interest in SF Broadcasting........         --       (81,664)         --
  Proceeds from issuance of common stock and LLC shares.....    422,544       831,701       7,227
  Other, net................................................      6,248          (906)      2,540
                                                              ---------   -----------   ---------
      NET CASH PROVIDED BY FINANCING ACTIVITIES.............     55,948     1,297,654     108,050
                                                              ---------   -----------   ---------
  Effect of exchange rate changes on cash and cash
    equivalents.............................................       (123)       (1,501)         --
                                                              ---------   -----------   ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........    (21,117)      329,320      73,430
Cash and cash equivalents at beginning of period............    445,356       116,036      42,606
                                                              ---------   -----------   ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................  $ 424,239   $   445,356   $ 116,036
                                                              =========   ===========   =========
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                       62

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1--ORGANIZATION
 
    USA Networks, Inc. (the "Company" or "USAi") 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 Ticketmaster in a tax-free merger, pursuant to which each
outstanding share of Ticketmaster common stock not owned by the Company was
exchanged for 2.252 shares of USAi common stock. See Note 3.
 
    On February 12, 1998, the Company acquired USA Networks, a New York general
partnership, consisting of cable television networks USA Network and 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 3.
 
    On May 10, 1999, the Company acquired substantially all of the assets and
assumed substantially all of the liabilities of two entities which operate Hotel
Reservations Network (the "Hotel Reservations Network Transaction"). See
Note 3.
 
    On May 28, 1999, the Company acquired October Films, Inc. ("October Films"),
in which Universal owned a majority interest, and the domestic film distribution
and development business of Universal previously operated by Polygram Filmed
Entertainment, Inc. ("PFE") (the "October Films/PFE Transaction"). See Note 3.
 
    As of December 31, 1999, the Company engages in seven principal areas of
business:
 
    - NETWORKS AND TELEVISION PRODUCTION, which includes Networks and Studios
      USA. Networks operates the USA Network and 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 United States, and
      Ticketmaster.com, Ticketmaster's exclusive agent for online ticket sales.
 
    - HOTEL RESERVATIONS, consisting of Hotel Reservations Network, a leading
      consolidator of hotel rooms for resale in the consumer market in the
      United States.
 
    - INTERNET SERVICES, which includes Internet Shopping Network, the Company's
      online retailing networks business, and local city guide business.
 
    - FILMED ENTERTAINMENT, which primarily represents the Company's domestic
      theatrical film distribution and production businesses.
 
    - BROADCASTING, which owns and operates television stations.
 
    On January 20, 2000, the Board of Directors declared a two-for-one stock
split of USAi's common stock and Class B common stock, payable in the form of a
dividend to stockholders of record as of the close of business on February 10,
2000. The 100% stock dividend was paid on February 24, 2000. On February 20,
1998, the Board of Directors declared a two-for-one stock split of USAi's common
stock and Class B common stock, payable in the form of a dividend to
stockholders of record as of the close of
 
                                       63

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
business on March 12, 1998. The 100% stock dividend was paid on March 26, 1998.
All share data and earnings per share amounts presented have been adjusted to
reflect these stock splits.
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
CONSOLIDATION
 
    The 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 not in excess of 50%,
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.
 
REVENUES
 
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 commencement 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.
 
ELECTRONIC RETAILING
 
    Revenues from Home Shopping primarily consist of merchandise sales and are
reduced by incentive discounts and sales returns to arrive at net sales.
Revenues are recorded for credit card sales upon transaction authorization, and
for check sales upon receipt of customer payment, which does not vary
significantly from the time goods are shipped. Home Shopping's sales policy
allows merchandise to be returned at the customer's discretion within 30 days of
the date of delivery. Allowances for returned merchandise and other adjustments
are provided based upon past experience.
 
TICKETING
 
    Revenue from Ticketmaster and Ticketmaster.com primarily consists of revenue
from ticketing operations which is recognized as tickets are sold.
 
                                       64

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
HOTEL RESERVATIONS
 
    Charges for hotel accommodations are billed to customers in advance. The
related payments are included in deferred revenue and recognized as income at
the conclusion of the customer's stay at the hotel.
 
    The Company offers rooms that are contracted for in advance or are prepaid.
Unsold contracted rooms may be returned by the Company based on a cancellation
period, which generally expires before the date the customer may cancel the
hotel reservation. Customers are subject to a penalty for all cancellations or
changes to the reservation. The Company bears the risk of loss for all prepaid
rooms and rooms cancelled by a customer subsequent to the period in which the
Company can return the unsold rooms. To date, the Company has not incurred
significant losses under the room contracts with hotels.
 
BROADCASTING AND OTHER
 
    Net revenues represent amounts generated at the television station in the
Miami/Ft. Lauderdale market, which was launched in June 1998, and stations in
the Dallas/Ft. Worth and Atlanta markets, which were launched in October 1999.
 
    Revenues from all other sources are recognized either upon delivery or when
the service is provided.
 
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,
 
                                       65

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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.
 
MERCHANDISE INVENTORIES, NET
 
    Merchandise inventories are valued at the lower of cost or market, cost
being determined using the first-in, first-out method. Cost includes freight,
certain warehouse costs and other allocable overhead. Market is determined on
the basis of net realizable value, giving consideration to obsolescence and
other factors. Merchandise inventories are presented net of an inventory
carrying adjustment of $32.7 million and $23.4 million at December 31, 1999 and
1998, respectively.
 
CASH AND CASH EQUIVALENTS
 
    Cash and cash equivalents include cash and short-term investments.
Short-term investments consist primarily of U.S. Treasury Securities, U.S.
Government agencies and certificates of deposit with original maturities of less
than 91 days.
 
PROPERTY, PLANT AND EQUIPMENT
 
    Property, plant and equipment, including significant improvements, are
recorded at cost. Repairs and maintenance and any gains or losses on
dispositions are included in operations.
 
    Depreciation and amortization is provided for on a straight-line basis to
allocate the cost of depreciable assets to operations over their estimated
service lives.
 

<TABLE>
<CAPTION>
ASSET CATEGORY                                      DEPRECIATION/AMORTIZATION PERIOD
--------------                                      --------------------------------
<S>                                                 <C>
Computer and broadcast equipment..................  3 to 13 Years
Buildings.........................................  30 to 40 Years
Leasehold improvements............................  4 to 20 Years
Furniture and other equipment.....................  3 to 10 Years
</TABLE>

 
    Depreciation and amortization expense on property, plant and equipment was
$66.8 million, $51.3 million and $26.2 million for the years ended December 31,
1999, 1998 and 1997, respectively.
 
LONG-LIVED ASSETS INCLUDING INTANGIBLES
 
    The Company's accounting policy regarding the assessment of the
recoverability of the carrying value of long-lived assets, including goodwill
and other intangibles and property, plant and equipment, is to review the
carrying value of the assets if the facts and circumstances suggest that they
may be impaired. If this review indicates that the carrying value will not be
recoverable, as determined based on the projected undiscounted future cash
flows, the carrying value is reduced to its estimated fair value.
 
CABLE DISTRIBUTION FEES
 
    Cable distribution fees relate to upfront fees paid in connection with long
term cable contracts for carriage of Home Shopping's programming. These fees are
amortized to expense on a straight line basis over the terms of the respective
contracts, with original terms from 5 to 15 years.
 
                                       66

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
ADVERTISING
 
    Advertising costs are primarily expensed in the period incurred. Advertising
expense for the years ended December 31, 1999, 1998 and 1997 were
$124.2 million, $90.2 million and $13.2 million, respectively.
 
INCOME TAXES
 
    The Company accounts for income taxes under the liability method, and
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected to be
recovered or settled.
 
EARNINGS (LOSS) 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
then shares in the earnings of the Company.
 
STOCK-BASED COMPENSATION
 
    The Company is subject to Statement of Financial Accounting Standards
No. 123 "Accounting and Disclosure of Stock-Based Compensation" ("SFAS 123"). As
allowed by SFAS 123, the Company accounts for stock-based compensation in
accordance with APB 25, "Accounting for Stock Issued to Employees." In cases
where exercise prices are less than fair value as of the grant date,
compensation is recognized over the vesting period.
 
MINORITY INTEREST
 
    Minority interest represents the ownership interests of third parties in the
net assets and results of operations of certain consolidated subsidiaries.
 
ACCOUNTING ESTIMATES
 
    Management of the Company is required to make certain estimates and
assumptions during the preparation of consolidated financial statements in
accordance with generally accepted accounting principles. These estimates and
assumptions impact the reported amount of assets and liabilities and disclosures
of contingent assets and liabilities as of the date of the consolidated
financial statements. They also impact the reported amount of net earnings
during any period. Actual results could differ from those estimates.
 
    Significant estimates underlying the accompanying consolidated financial
statements include the inventory carrying adjustment, program rights and film
cost amortization, sales return and other revenue allowances, allowance for
doubtful accounts, recoverability of intangibles and other long-lived assets,
estimates of film revenue ultimates and various other operating allowances and
accruals.
 
RECLASSIFICATIONS
 
    Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform to the 1999 presentation.
 
                                       67

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 3--BUSINESS ACQUISITIONS
 
UNIVERSAL TRANSACTION
 
    In connection with the Universal Transaction in February 1998, 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 2,356,644 shares of Class B Common Stock were
issued in accordance with Liberty Media Corporation's ("Liberty") contingent
right to receive such shares as part of the Home Shopping Merger in 1996.
 
    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 AT&T
Corporation ("AT&T") 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 30,000,000
LLC shares.
 
TICKETMASTER TRANSACTION
 
    In the third quarter of 1997, the Company acquired a controlling interest in
Ticketmaster through the issuance of Common Stock to Paul G. Allen and purchases
of Ticketmaster shares in the open market for total consideration of
$210.0 million (the "Ticketmaster Acquisition"). In connection with the issuance
of new shares to Mr. Allen, the Company also issued shares of the Company's
Class B common stock in accordance with Liberty's contingent right to receive
such shares as part of the Home Shopping Merger in 1996.
 
    In connection with the Ticketmaster tax-free merger, as of June 24, 1998,
the Company issued 31,934,400 shares of Common Stock to the public shareholders
of Ticketmaster and converted 3.6 million options to acquire Ticketmaster common
stock into options to acquire Common Stock for a total consideration of
$467.7 million. The acquisition of the controlling interest in Ticketmaster and
the tax-free merger are collectively referred to as the "Ticketmaster
Transaction."
 
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.com) 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.com as part of the Ticketmaster Transaction and
allocated to Ticketmaster.com a total of $154.8 million of the goodwill
resulting from the Ticketmaster Transaction. The CitySearch Merger was accounted
for using the "reverse purchase" method of accounting, pursuant to which
Ticketmaster.com was treated as the acquiring entity for
 
                                       68

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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.
 
    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.com. The total purchase
price for the acquisition of the additional CitySearch interest was
approximately $120.8 million, substantially all of which was allocated to
goodwill.
 
    In connection with the CitySearch Merger, the Company purchased 1,997,502
TMCS shares pursuant to a 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 owned approximately 67.9% of TMCS outstanding shares.
 
    In connection with the CitySearch Merger, the Company recorded a gain of
$67.9 million by exchanging a 35.2% interest in Ticketmaster Online with a basis
of $52.9 million for a 50.7% interest in CitySearch, which had a fair value of
$120.8 million.
 
    On December 8, 1998, TMCS completed an initial public offering of 8,050,000
shares of its common stock (the "CitySearch IPO"), which generated proceeds of
$105.0 million. In connection with the CitySearch IPO, the Company recognized a
gain of $41.1 million. The CitySearch Merger, the Tender Offer and the
CitySearch IPO are referred to as the "CitySearch Transaction".
 
HOTEL RESERVATIONS NETWORK TRANSACTION
 
    On May 10, 1999, the Company completed its acquisition of substantially all
of the assets and the assumption of substantially all of the liabilities of two
entities which operate Hotel Reservations Network, a leading consolidator of
hotel rooms for resale in the consumer market in the United States. The assets
acquired and liabilities assumed comprise Hotel Reservations Network, Inc.
("HRN"), a wholly owned subsidiary of USAi. The purchase price was
$149.2 million, net of a working capital adjustment of $0.8 million, plus
contingent payments based on operating performance during the year ended
December 31, 1999 and for the twelve month periods ended March 31, 2000, 2001
and 2002 (See Note 23 for information about an amendment to this obligation and
an initial public offering of HRN stock). The purchase price was paid in the
form of a cash payment of $145.0 million on May 11, 1999 and a promissory note
of $5.0 million which was paid on January 30, 2000 and which bore interest at
4.75% per annum. Interest for the period May 11 to December 31, 1999 on the
promissory note was $0.2 million.
 
    The initial contingent payments total $50.0 million, of which $37.5 million
was paid through December 31, 1999. The remaining $12.5 million was paid in
February 2000. The purchase price, including the initial contingent payments of
$50 million for the year ended December 31, 1999, has been allocated to the
assets acquired and liabilities assumed based on their respective fair values at
the date of purchase. The unallocated excess of acquisition costs as of
December 31, 1999 over net assets acquired of $200.3 million has been allocated
to goodwill, which is being amortized over 10 years.
 
See note 23 for information about additional goodwill.
 
OCTOBER FILMS/PFE TRANSACTION
 
    In connection with the acquisition of October Films, Inc., as of May 28,
1999, the Company issued 600,000 shares of Common Stock to Universal and paid
cash consideration of approximately $12 million to October Films shareholders
(other than Universal) for total consideration of $23.6 million. To fund the
 
                                       69

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
cash consideration portion of the transaction, Universal purchased from USAi
600,000 additional shares of Common Stock at $20.00 per share. In addition, the
Company assumed $83.2 million of outstanding debt under October Films' credit
agreement which was repaid from cash on hand on August 20, 1999.
 
    Also on May 28, 1999, USAi acquired from Universal the domestic film
distribution and development business previously operated by PFE and PFE's
domestic video and specialty video businesses. The acquisition included PFE's
domestic production assets such as Interscope Communications and Propaganda
Films, as well as the following distribution assets: PolyGram Video, Polygram
Filmed Entertainment Canada, Gramercy Pictures, and PolyGram Films. In
connection with the transaction, USAi agreed to assume certain liabilities
related to the PFE businesses acquired. In addition, USAi advanced
$200.0 million to Universal pursuant to an eight year, full recourse,
interest-bearing note in connection with a distribution agreement pursuant to
which USAi will distribute, in the U.S. and Canada, certain Polygram theatrical
films which were not acquired in the transaction. The advance is repaid as
revenues are received under the distribution agreement and, in any event, will
be repaid in full at maturity. Through December 31, 1999, approximately
$42.9 million had been offset against the advance and $6.7 million of interest
had accrued.
 
    The October Films/PFE Transaction has been accounted for under the purchase
method of accounting. The purchase price has been preliminarily allocated to the
assets acquired and liabilities assumed based on their respective fair values at
the date of purchase. The unallocated excess of acquisition costs over net
assets acquired of $160.2 million has been preliminarily allocated to goodwill,
which is being amortized over 20 years.
 
    The following unaudited pro forma condensed consolidated financial
information for the years ended December 31, 1999 and 1998, is presented to show
the results of the Company, as if the Universal Transaction, Ticketmaster
Transaction, including significant acquisitions by Ticketmaster, the CitySearch
Merger, the sale of SF Broadcasting (see Note 20), the Hotel Reservations
Network Transaction and the October Films/ PFE Transaction had occurred at the
beginning of the periods presented. The pro forma results include certain
adjustments, including increased amortization related to goodwill and other
intangibles, changes in programming and film costs amortization and an increase
in interest expense, and are not necessarily indicative of what the results
would have been had the transactions actually occurred on the aforementioned
dates.
 

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                                       -------------------------
                                                          1999          1998
                                                       -----------   -----------
                                                       (IN THOUSANDS, EXCEPT PER
                                                              SHARE DATA)
<S>                                                    <C>           <C>
Net revenues.........................................  $3,290,749    $2,879,662
Net earnings (loss)..................................     (33,738)       22,808
Basic earnings (loss) per common share...............  $     (.10)   $      .07
                                                       ==========    ==========
Diluted earnings (loss) per common share.............  $     (.10)   $      .07
                                                       ==========    ==========
</TABLE>

 
    The following unaudited pro forma condensed financial information for the
year ended December 31, 1997, is presented to show the results of the Company,
as if the Universal Transaction, the Ticketmaster Transaction, including
significant acquisitions by Ticketmaster, the CitySearch Merger and the sale of
SF Broadcasting had occurred at the beginning of the year presented. The pro
forma results include certain adjustments, including increased amortization
related to goodwill and other intangibles, changes in
 
                                       70

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
programming and film costs amortization and an increase in interest expense, and
are not necessarily indicative of what the results would have been had these
transactions actually occurred on January 1, 1997.
 

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                                                   1997
                                                         -------------------------
                                                         (IN THOUSANDS, EXCEPT PER
                                                                SHARE DATA)
<S>                                                      <C>
Net revenues...........................................           $2,527,922
Net loss...............................................              (77,443)
Basic loss per common share............................           $     (.27)
                                                                  ==========
Diluted loss per common share..........................           $     (.27)
                                                                  ==========
</TABLE>

 
NOTE 4--INTANGIBLE ASSETS
 
    Intangible assets are amortized using the straight-line method and include
the following:
 

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                       -----------------------
                                                          1999         1998
                                                       ----------   ----------
                                                           (IN THOUSANDS)
<S>                                                    <C>          <C>
Intangible Assets, net:
Goodwill.............................................  $6,399,378   $6,232,975
Broadcast licenses...................................      78,564       81,244
Other................................................     353,545       28,427
                                                       ----------   ----------
                                                       $6,831,487   $6,342,646
                                                       ==========   ==========
</TABLE>

 
    Goodwill primarily relates to the excess of purchase price over the fair
value of assets acquired in the Hotel Reservations Network Transaction, the
October Films/ PFE Transaction, the Universal Transaction, Ticketmaster
Transaction, CitySearch Merger, as discussed in Note 3, and the mergers with
Home Shopping Network, Inc. ("Holdco") and Savoy Pictures, Inc. ("Savoy") which
occurred in 1996, and is net of accumulated amortization of $424.1 million and
$192.1 million at December 31, 1999 and 1998, respectively. Goodwill is
generally amortized over 40 years, except for goodwill associated with USA Films
which is amortized over 20 years and Internet businesses which are amortized
over 5 to 10 years.
 
    Broadcast licenses represent the costs of acquiring FCC licenses related to
broadcast operations and is net of accumulated amortization of $26.6 million and
$23.6 million as of December 31, 1999 and 1998, respectively. Broadcast licenses
are generally amortized over 40 years.
 
    Other intangibles represent costs allocated to intangibles related to the
acquisition of certain assets associated with the entertainment city guide
portion of the Sidewalk.com web site from Microsoft Corporation in
September 1999, and contracts with event venues associated with ticketing
operations, and are net of accumulated amortization of $40.5 million and
$16.2 million as of December 31, 1999 and 1998, respectively. The amounts are
generally amortized over 3 to 10 years.
 
                                       71

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 5--LONG-TERM OBLIGATIONS
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Unsecured Senior Credit Facility ("New Facility"); with a
  $40,000,000 sub-limit for letters of credit, entered into
  February 12, 1998, which matures on December 31, 2002. At
  the Company's option, the interest rate on borrowings is
  tied to the London Interbank Offered Rate ("LIBOR") or the
  Alternate Base Rate ("ABR"), plus an applicable margin.
  Interest rate at December 31, 1998 was 6.0%...............  $     --   $250,000
$500,000,000 6 3/4% Senior Notes (the "Senior Notes") due
  November 15, 2005; interest payable May 15 and
  November 15 commencing May 15, 1999. Interest rate at
  December 31, 1999 was 6.84%...............................   497,914    496,896
Unsecured $37,782,000 7% Convertible Subordinated Debentures
  ("Savoy Debentures") due July 1, 2003 convertible into
  USAi Common Stock at a conversion price of $33.22 per
  share.....................................................    34,319     33,573
Other long-term obligations maturing through 2007...........    53,547     31,752
                                                              --------   --------
Total long-term obligations.................................   585,780    812,221
Less current maturities.....................................    10,801     36,538
                                                              --------   --------
Long-term obligations, net of current maturities............  $574,979   $775,683
                                                              ========   ========
</TABLE>

 
    On February 12, 1998, USAi and USANi LLC, as borrower, entered into a
$1.6 billion credit facility. The credit facility was used to finance the
Universal Transaction and to refinance USAi's then-existing $275.0 million
revolving credit facility. The credit facility consists of (1) a $600.0 million
revolving credit facility with a $40.0 million sub-limit for letters of credit,
(2) a $750.0 million Tranche A Term Loan and, (3) a $250.0 million Tranche B
Term Loan. The Tranche A Term Loan and the Tranche B Term Loan have been
permanently repaid as described below. The revolving credit facility expires on
December 31, 2002.
 
    On November 23, 1998, USAi and USANi LLC as co-issuers, completed an
offering of $500.0 million 6 3/4% Senior Notes due 2005 (the "Notes"). Proceeds
received from the sale of the Notes together with available cash were used to
repay and permanently reduce $500.0 million of the Tranche A Term Loan. On
August 5, 1998, USANi LLC permanently repaid the Tranche B Term Loan in the
amount of $250.0 million from cash on hand. In 1999 the Company permanently
repaid the Tranche A Term Loan in the amount of $250.0 million from cash on
hand.
 
    The existing credit facility is guaranteed by substantially all of USAi's
material subsidiaries. The interest rate on borrowings under the existing credit
facility is tied to an alternate base rate or the London InterBank Rate, in each
case, plus an applicable margin, and $598.7 million was available for borrowing
as of December 31, 1999 after taking into account outstanding letters of credit.
The credit facility includes covenants requiring, among other things,
maintenance of specific operating and financial ratios and places restrictions
on payment of dividends, incurrence of indebtedness and investments. The Company
pays a commitment fee of .1875% on the unused portion of the credit facility.
 
    The Savoy Debentures are redeemable at the option of the Company at varying
percentages of the principal amount each year, ranging from 105.25% to 100.75%,
plus applicable interest. In connection with the Savoy Merger, USAi became a
joint and several obligor with respect to the Savoy Debentures.
 
                                       72

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    Aggregate contractual maturities of long-term obligations are as follows:
 

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,                                     (IN THOUSANDS)
-------------------------                                     --------------
<S>                                                           <C>
2000........................................................     $ 10,801
2001........................................................        9,478
2002........................................................        4,690
2003........................................................       38,784
2004........................................................          301
Thereafter..................................................      521,726
                                                                 --------
                                                                 $585,780
                                                                 ========
</TABLE>

 
NOTE 6--INCOME TAXES
 
    A reconciliation of total income tax expense to the amounts computed by
applying the statutory federal income tax rate to earnings (loss) before income
taxes is shown as follows:
 

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
Income tax expense at the federal statutory rate of 35%.....  $ 91,200   $ 99,335   $19,776
Amortization of goodwill and other intangibles..............    21,508     32,423    13,690
TMCS and foreign losses not consolidated into group.........    43,912      5,000        --
State income taxes, net of effect of federal tax benefit....    11,941     17,404     2,896
Increase (decrease) in valuation allowance for deferred tax
  assets....................................................        --     (8,665)    5,471
Impact of minority interest.................................   (85,419)   (28,910)       --
Other, net..................................................     7,764     11,058      (782)
                                                              --------   --------   -------
Income tax expense..........................................  $ 90,906   $127,645   $41,051
                                                              ========   ========   =======
</TABLE>

 
    The components of income tax expense are as follows:
 

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
Current income tax expense:
  Federal...................................................  $60,663    $ 21,137   $21,603
  State.....................................................   15,841      10,820     3,029
  Foreign...................................................    2,257       1,222       919
                                                              -------    --------   -------
    Current income tax expense..............................   78,761      33,179    25,551
                                                              -------    --------   -------
Deferred income tax expense:
  Federal...................................................  $ 9,615    $ 78,511   $13,614
  State.....................................................    2,530      15,955     1,886
  Foreign...................................................       --          --        --
                                                              -------    --------   -------
    Deferred income tax expense.............................   12,145      94,466    15,500
                                                              -------    --------   -------
    Total income tax expense................................  $90,906    $127,645   $41,051
                                                              =======    ========   =======
</TABLE>

 
    The tax effects of cumulative temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 1999 and 1998, are presented below. The
 
                                       73

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
valuation allowance represents items for which it is more likely than not that
the tax benefit will not be realized.
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Current deferred tax assets (liabilities):
  Inventory costing.........................................  $ 11,522   $ 14,792
  Provision for accrued expenses............................     6,735      6,523
    Investments in affiliates...............................     3,932      2,982
  Deferred revenue..........................................   (21,179)   (25,901)
  Other.....................................................    20,883     21,190
                                                              --------   --------
    Total current deferred tax assets.......................    21,893     19,586
    Less valuation allowance................................   (25,943)   (25,943)
                                                              --------   --------
    Net current deferred tax assets (liabilities)...........    (4,050)    (6,357)
                                                              --------   --------
Non-current deferred tax assets (liabilities):
  Broadcast and cable fee contracts.........................     4,230     10,311
  Depreciation for tax in excess of financial statements....   (10,139)    (9,663)
  Amortization of FCC licenses and broadcast related
    intangibles.............................................    (8,162)    (9,287)
  Amortization of tax deductible goodwill...................   (29,271)   (10,912)
  Programming costs.........................................    44,832     33,430
  Investment in subsidiaries................................     6,320      6,320
  Gain on sale of subsidiary stock..........................   (46,415)   (46,405)
  Gain on sale of broadcast station.........................   (16,743)   (16,743)
  Net federal operating loss carryforward...................    30,383     30,383
  Other.....................................................    54,127     76,218
                                                              --------   --------
    Total non-current deferred tax assets...................    29,162     63,652
    Less valuation allowance................................   (34,282)   (34,282)
                                                              --------   --------
    Net non-current deferred tax assets (liabilities).......    (5,120)    29,370
                                                              --------   --------
Total deferred tax assets (liabilities).....................  $ (9,170)  $ 23,013
                                                              ========   ========
</TABLE>

 
    The Company recognized income tax deductions related to the issuance of
common stock pursuant to the exercise of stock options for which no compensation
expense was recorded for accounting purposes. The related income tax benefits of
$42.4 million, $7.0 million and $3.4 million for the years ended December 31,
1999, 1998 and 1997, respectively, were recorded as increases to additional
paid-in capital.
 
    At December 31, 1999 and 1998, the Company has net operating loss
carryforwards ("NOL") for federal income tax purposes of $87.0 million, which
are available to offset future federal taxable income, if any, through 2012,
substantially all of which are pre-acquisition losses which are subject to
certain tax loss limitations. Accordingly, the Company has established a
valuation allowance for those pre-acquisition losses. Amounts recognized, if
any, of these tax benefits in future periods will be applied as a reduction of
goodwill associated with the acquisition.
 
    The Company has Federal income tax returns under examination by the Internal
Revenue Service. The Company has received proposed adjustments related to
certain examinations. Management believes that the resolution of the proposed
adjustments will not have a material adverse effect on the Company's
consolidated financial statements.
 
                                       74

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 7--COMMITMENTS AND CONTINGENCIES
 
    The Company leases satellite transponders, computers, warehouse and office
space, as well as broadcast and production facilities, equipment and services
used in connection with its operations under various operating leases and
contracts, many of which contain escalation clauses.
 
    Future minimum payments under non-cancellable agreements are as follows:
 

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,                                     (IN THOUSANDS)
-------------------------                                     --------------
<S>                                                           <C>
2000........................................................     $ 75,942
2001........................................................       60,480
2002........................................................       49,956
2003........................................................       29,105
2004........................................................       22,004
Thereafter..................................................       49,099
                                                                 --------
                                                                 $286,586
                                                                 ========
</TABLE>

 
    Expenses charged to operations under these agreements were $66.4 million,
$58.7 million and $37.7 million for the years ended December 31, 1999, 1998 and
1997, respectively.
 
    HRN has non-cancelable commitments for hotel rooms totaling $4.6 million,
which relate to the period January 1, 2000 to December 31, 2000.
 
    The Company is required to provide funding, from time to time, for the
operations of its investments in joint ventures accounted for under the equity
method.
 
NOTE 8--INVENTORIES
 

<TABLE>
<CAPTION>
                                                         DECEMBER 31,            DECEMBER 31,
                                                             1999                    1998
                                                     ---------------------   ---------------------
                                                     CURRENT    NONCURRENT   CURRENT    NONCURRENT
                                                     --------   ----------   --------   ----------
                                                                   (IN THOUSANDS)
<S>                                                  <C>        <C>          <C>        <C>
Film costs:
  Released, net of amortization....................  $ 93,775    $ 67,986    $ 98,082    $ 61,310
  In process and unreleased........................    45,906       4,366         138          --
Programming costs, net of amortization.............   159,991      94,125     158,138      90,518
Sales merchandise, net.............................   170,234          --     165,212          --
Other..............................................       938          --          --          --
                                                     --------    --------    --------    --------
      Total........................................  $470,844    $166,477    $421,570    $151,828
                                                     ========    ========    ========    ========
</TABLE>

 
    The Company estimates that approximately 90% of unamortized film costs at
December 31, 1999 will be amortized within the next three years.
 
NOTE 9--STOCKHOLDERS' EQUITY
 
    On January 20, 2000, the Board of Directors declared a two-for-one stock
split of USAi's common stock and Class B common stock, payable in the form of a
dividend to stockholders of record as of the close of business on February 10,
2000. The 100% stock dividend was paid on February 24, 2000. On
 
                                       75

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
February 20, 1998, the Board of Directors declared a two-for-one stock split of
USAi's common stock and Class B common stock, payable in the form of a dividend
to stockholders of record as of the close of business on March 12, 1998. The
100% stock dividend was paid on March 26, 1998. All share data give effect to
such stock splits, applied retroactively as if the splits occurred on
January 1, 1997.
 
DESCRIPTION OF COMMON STOCK AND CLASS B--CONVERTIBLE COMMON STOCK
 
    Holders of USAi Common Stock have the right to elect 25% of the entire Board
of Directors, rounded upward to the nearest whole number of directors. As to the
election of the remaining directors, the holders of USAi Class B Common Stock
are entitled to 10 votes for each USAi Class B Common Stock share, and the
holders of the USAi Common Stock are entitled to one vote per share. There are
no cumulative voting rights.
 
    The holders of both classes of the Company's common stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors out of funds legally available for the payment of dividends. Under the
Company's existing credit facility, the Company is not permitted to pay any
dividends. In the event of the liquidation, dissolution or winding up of the
Company, the holders of both classes of common stock are entitled to share
ratably in all assets of the Company remaining after provision for payment of
liabilities. USAi Class B Common Stock is convertible at the option of the
holder into USAi Common Stock on a share-for-share basis. Upon conversion, the
USAi Class B Common Stock will be retired and not subject to reissue.
 
NOTE RECEIVABLE FROM KEY EXECUTIVE FOR COMMON STOCK ISSUANCE
 
    In connection with Mr. Diller's employment in August 1995, the Company
agreed to sell Mr. Diller 1,767,952 shares of USAi Common Stock ("Diller
Shares") at $5.6565 per share for cash and a non-recourse promissory note in the
amount of $5.0 million, secured by approximately 1,060,000 shares of USAi Common
Stock. The promissory note is due on the earlier of (i) the termination of
Mr. Diller's employment, or (ii) September 5, 2007.
 
STOCKHOLDERS' AGREEMENT
 
    Mr. Diller, Chairman of the Board and Chief Executive Officer of the
Company, through BDTV, INC., BDTV II, INC., BDTV III, INC., BDTV IV, INC., his
own holdings and pursuant to the Stockholders Agreement with Universal, Liberty,
the Company and Seagram (the "Stockholders Agreement"), has the right to vote
approximately 13.5% (37,223,724 shares) of USAi's outstanding common stock, and
100% (63,033,452 shares) of USAi's outstanding Class B Common Stock. Each share
of Class B Common Stock is entitled to ten votes per share with respect to
matters on which Common and Class B stockholders vote as a single class. As a
result, Mr. Diller controls 74.9% of the outstanding total voting power of the
Company. Mr. Diller, subject to the Stockholders Agreement, is effectively able
to control the outcome of nearly all matters submitted to a vote of the
Company's stockholders. Liberty HSN holds substantially all of the economic
interest in, and Mr. Diller holds all of the voting power in, the shares of USAi
stock held by the BDTV entities listed above.
 
    In connection with option plans, convertible debt securities pending
acquisitions and other matters 466,663,750 shares of Common Stock were reserved.
 
                                       76

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 10--LITIGATION
 
    In the ordinary course of business, the Company is engaged in various
lawsuits, including certain class action lawsuits initiated in connection with
the Home Shopping Merger and the Ticketmaster Transaction. In the opinion of
management, the ultimate outcome of the various lawsuits should not have a
material impact on the liquidity, results of operations or financial condition
of the Company.
 
NOTE 11--BENEFIT PLANS
 
    The Company offers various plans pursuant to Section 401(k) of the Internal
Revenue Code covering substantially all full-time employees who are not party to
collective bargaining agreements. The Company's share of the matching employer
contributions is set at the discretion of the Board of Directors or the
applicable committee thereof.
 
NOTE 12--STOCK OPTION PLANS
 
    The following describes the stock option plans. Share numbers, prices and
earnings per share reflect the Company's two two-for-one stock splits which
became effective for holders of record as of the close of business on March 12,
1998 and February 10, 2000, respectively.
 
    The Company has outstanding options to employees or consultants of the
Company under several plans (the "Plans") which provide for the grant of options
to purchase the Company's common stock at not less than fair market value on the
date of the grant. The options under the Plans vest ratably, generally over a
range of three to five years from the date of grant and generally expire not
more than 10 years from the date of grant. Four of the Plans have options
available for future grants.
 
    The Company also has outstanding options to outside directors under one plan
(the "Directors Plan") which provides for the grant of options to purchase the
Company's common stock at not less than fair market value on the date of the
grant. The options under the Directors Plan vest ratably, generally over three
years from the date of grant and expire not more than 10 years from the date of
grant. A summary of changes in outstanding options under the stock option plans
following the Company's two-for-one stock split, is as follows:
 

<TABLE>
<CAPTION>
                                                                                  DECEMBER 31,
                                                  ----------------------------------------------------------------------------
                                                            1999                      1998                      1997
                                                  ------------------------   -----------------------   -----------------------
                                                                 PRICE                     PRICE                     PRICE
                                                   SHARES        RANGE        SHARES       RANGE        SHARES       RANGE
                                                  --------   -------------   --------   ------------   --------   ------------
                                                                             (SHARES IN THOUSANDS)
<S>                                               <C>        <C>             <C>        <C>            <C>        <C>
Outstanding at beginning of period..............   78,428    $        1-37    65,872    $       1-37    45,744    $       1-37
  Granted or issued in connection with
    mergers.....................................   10,007    $       16-28    18,906    $       6-15    23,160    $       5-10
Exercised.......................................  (11,155)   $        1-13    (4,690)   $       1-11    (1,936)   $        1-8
Cancelled.......................................   (1,325)   $        6-18    (1,660)   $       3-37    (1,096)   $       3-37
                                                  -------                     ------                    ------
Outstanding at end of period....................   75,955    $        1-37    78,428    $       1-37    65,872    $       1-37
                                                  =======                     ======                    ======
Options exercisable.............................   47,987    $        1-37    39,806    $       1-37    21,680    $       1-37
                                                  =======                     ======                    ======
Available for grant.............................   27,225                     15,048                    24,384
                                                  =======                     ======                    ======
</TABLE>

 
    The weighted average exercise prices during the year ended December 31,
1999, were $23.77, $6.05 and $11.56 for options granted, options exercised and
options cancelled, respectively. The weighted average fair value of options
granted during the year was $9.52.
 
                                       77

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    The weighted average exercise prices during the year ended December 31,
1998, were $12.09, $5.46 and $11.79 for options granted, exercised and
cancelled, respectively. The weighted average fair value of options granted
during the year was $12.06.
 
    The weighted average exercise prices during the year ended December 31,
1997, were $9.38, $3.70 and $7.35 for options granted, exercised and cancelled,
respectively. The weighted average fair value of options granted during the year
was $5.91.
 

<TABLE>
<CAPTION>
                                                OPTIONS OUTSTANDING                  OPTIONS EXERCISABLE
                                     ------------------------------------------   -------------------------
                                                          WEIGHTED
                                                           AVERAGE     WEIGHTED                    WEIGHTED
                                                          REMAINING    AVERAGE    EXERCISABLE AT   AVERAGE
                                      OUTSTANDING AT     CONTRACTUAL   EXERCISE    DECEMBER 31,    EXERCISE
RANGE OF EXERCISE PRICE              DECEMBER 31, 1999      LIFE        PRICE          1999         PRICE
-----------------------              -----------------   -----------   --------   --------------   --------
                                      (IN THOUSANDS)                              (IN THOUSANDS)
<S>                                  <C>                 <C>           <C>        <C>              <C>
$0.01 to $5.00.....................       20,954             5.8       $  4.71        20,945        $ 4.71
$5.01 to $10.00....................       35,632             7.0          8.20        24,754          7.68
$10.01 to $15.00...................        9,295             8.6         12.51         2,141         12.50
$15.01 to $20.00...................        4,015             9.1         18.71            22         19.44
$20.01 to $25.00...................          736             8.4         21.42           125         21.44
$25.01 to $37.00...................        5,323             9.9         27.91            --            --
                                          ------                                      ------
                                          75,955             7.2          9.83        47,987          6.64
                                          ======                                      ======
</TABLE>

 
    In connection with Mr. Diller's employment in August 1995, the Company
granted Mr. Diller an option (the "Diller Option") to acquire 7,583,388 shares
of common stock and recorded unearned compensation of $4.0 million. The unearned
compensation resulted from the difference in the exercise price and fair market
value of the common stock at the date of grant and is being amortized over the
four year vesting period of the options. As of December 31, 1998, the
compensation expense has been fully amortized.
 
    Pro forma information regarding net income and earnings per share is
required by SFAS 123. The information is determined as if the Company had
accounted for its employee stock options granted subsequent to December 31, 1994
under the fair market value method. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for 1999, 1998 and 1997: risk-free
interest rates of 5.0%, 5.0% and 5.5%, respectively; a dividend yield of zero; a
volatility factor of .44, .56 and .71, respectively, based on the expected
market price of USAi Common Stock based on historical trends; and a
weighted-average expected life of the options of five years.
 
    The Black-Scholes option valuation model was developed for use in estimating
the fair market value of traded options which have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair market value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
 
                                       78

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
 

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Pro forma net income (loss) (in thousands)..................  $(68,858)  $42,906    $(4,871)
Pro forma basic earnings (loss) per share...................  $   (.02)  $   .15    $  (.02)
Pro forma diluted earnings (loss) per share.................  $   (.02)  $   .07    $  (.02)
</TABLE>

 
    These pro forma amounts may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense over the
vesting period and additional options may be granted in future years.
 
NOTE 13--STATEMENTS OF CASH FLOWS
 
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS FOR THE YEAR ENDED
DECEMBER 31, 1999:
 
    On March 29, 1999, TMCS completed its acquisition of City Auction, Inc.
("City Auction"), a person-to-person online auction community, by issuing
approximately 800,000 shares of TMCS Class B Common Stock for all the
outstanding stock of City Auction, for a total value of $27.2 million.
 
    On May 28, 1999, in connection with the October Films/PFE Transaction, the
Company issued 600,000 shares of Common Stock, with a value of approximately
$12.0 million.
 
    On June 14, 1999, TMCS completed the acquisition of Match.com, Inc
("Match.com"), an Internet personals company. In connection with the
acquisition, TMCS issued approximately 1.9 million shares of TMCS Class B Common
Stock to the former owners of Match.com representing a total purchase price of
approximately $43.3 million.
 
    On September 13, 1999, TMCS purchased all the outstanding limited liability
company units ("Units") of Web Media Ventures, L.L.C., an Internet personals
company distributing its services through a network of affiliated Internet
sites. In connection with the acquisition, TMCS issued 1.2 million shares of
TMCS Class B Common Stock in exchange for all of the Web Media Units. In
addition, TMCS is obligated to issue additional contingent shares related to
certain revenue targets. The total purchase price recorded at September 13,
1999, without considering the contingent shares, was $36.6 million.
 
    On September 18, 1999, TMCS acquired certain assets associated with the
entertainment city guide portion of the Sidewalk.com web site ("Sidewalk") from
Microsoft Corporation ("Microsoft"). The Company also entered into a four year
distribution agreement with Microsoft pursuant to which the Company will become
the exclusive provider of local city guide content on the Microsoft Network
("MSN") and the Company's internet personals Web sites will become the premier
provider of personals content to MSN. In addition, the Company and Microsoft
entered into additional cross-promotional arrangements. TMCS issued Microsoft
7.0 million shares of TMCS Class B Common Stock. The fair value of the
consideration provided in exchange for the Sidewalk assets and distribution
agreement amounted to $338.0 million.
 
    For the period May 28 to December 31, 1999, interest accrued on the
$200.0 million advance to Universal amounted to $6.7 million.
 
    In 1999, the Company acquired post-production and other equipment through
capital leases totaling $2.5 million.
 
                                       79

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    In 1999, TMCS issued shares with a value of $10.5 million in exchange for an
equity investment.
 
    In 1999, the Company leased an airplane which was accounted for as a capital
lease in the amount of $20.8 million. See Note 14.
 
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS FOR THE YEAR ENDED
  DECEMBER 31, 1998:
 

<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)
                                                              --------------
<S>                                                           <C>
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
</TABLE>

 
    As of March 1, 1998 the 5 7/8% Convertible Subordinated Debentures were
converted to 14,998,044 shares of Common Stock.
 
    In connection with the Universal Transaction, the Company issued 2,356,644
shares of Class B Common Stock to Liberty, which represented the remaining
contingently issuable shares in connection with the Home Shopping Merger.
 
    During the year ended December 31, 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 31,934,400 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.
 
    In connection with the CitySearch Transaction, the Company exchanged an
effective 35.2% interest in Ticketmaster Online for a 50.7% interest in
CitySearch.
 
    On December 30, 1998, the Company acquired from Universal an entity which
owned 3,411,308 Class B LLC shares in exchange for issuing to Universal 670,000
shares of Class B Common Stock and 2,741,308 shares of Common Stock. The
transaction resulted in the Class B LLC shares being converted into Class A LLC
shares with a corresponding reduction in minority interest.
 
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS FOR THE YEARS ENDED
  DECEMBER 31, 1997:
 
    During July 1997, the Company acquired a controlling interest in
Ticketmaster by issuing Common Stock as discussed in Note 3.
 
                                       80

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    In connection with the Ticketmaster Acquisition, the Company issued
8,010,364 shares of Class B Common Stock in accordance with Liberty's contingent
right to receive such shares as part of the Home Shopping Merger in 1996.
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 

<TABLE>
<CAPTION>
                                                                       YEARS ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
CASH PAID DURING THE PERIOD FOR:
  Interest..................................................  $51,368    $78,873    $26,798
  Income tax payments.......................................   36,745     31,366     21,453
  Income tax refund.........................................      632        666      5,822
</TABLE>

 
NOTE 14--RELATED PARTY TRANSACTIONS
 
    As of December 31, 1999, the Company was involved in several agreements with
related parties as follows:
 
    The Company has a secured, non-recourse note receivable of $5.0 million from
its Chairman and Chief Executive Officer. See Note 9.
 
    The Company entered into a lease agreement with an entity owned by the
Chairman of the Board and Chief Executive Officer of the Company providing for
the use of an aircraft for corporate purposes. The lease has a five-year term
and is terminable by either party on thirty days' notice. In the years ended
December 31, 1999, 1998 and 1997, the Company paid a total of $2.1 million,
$2.0 million and $2.7 million, respectively, related to the use of the aircraft.
 
    Universal provides certain support services to the Company under a
Transition Services agreement entered into in connection with the Universal
Transaction. For these services, which include use of pre-production, production
and post-production facilities, information technology services, physical
distribution, contract administration, legal services and office space,
Universal charged the Company $12.5 million and $15.0 million for the years
ended December 31, 1999 and 1998, respectively, of which $8.0 million and
$8.5 million was capitalized to production costs, respectively.
 
    Universal and the Company entered into an International Television
Distribution Agreement under which the Company pays to Universal a distribution
fee of 10% on all programming owned or controlled by the Company distributed
outside of the United States. For the years ended December 31, 1999 and 1998,
the fee totaled $9.0 million and $1.3 million, respectively.
 
    In addition, the Company and Universal entered into a Domestic Television
Distribution Agreement under which the Company distributes in the United States
certain of Universal's television programming. For the years ended December 31,
1999 and 1998, Universal paid the Company $1.5 million in each year.
 
    In the normal course of business, Home Shopping Network and Networks enter
into agreements with the operators of cable television systems and operators of
broadcast television stations for the carriage of Home Shopping, USA Network and
Sci-Fi Channel programming. Home Shopping Network and Networks have entered into
agreements with a number of cable operators that are affiliates of AT&T. The
long-term contracts for Home Shopping Network provide for a minimum subscriber
guarantee and incentive payments based on the number of subscribers. Cash paid
by Home Shopping Network to AT&T and certain of its affiliates under these
contracts for cable commissions and advertising was $9.5 million, $9.5 million,
and $9.6 million for the years ended 1999, 1998, and 1997, respectively. The
long-term
 
                                       81

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
contracts for Networks provide for subscriber fee payments to Networks. For the
years ended December 31, 1999 and 1998, AT&T paid $70.4 and $62.2 million
respectively to Networks under these agreements.
 
    Under the USANi LLC Operating Agreement, USANi LLC is obligated to make a
distribution to each of the LLC members in an amount equal to each member's
share of USANi LLC's taxable income at a specified tax rate. The first such
payment was made on March 1, 1999 to Universal and Liberty covering the year
ended December 31, 1998 in the amount of $28.8 million. In March 2000, the
Company made a mandatory tax distribution payment to Universal and Liberty in
the amount of $68.0 million.
 
    Pursuant to the October Films/PFE Transaction, the company entered into a
series of agreements on behalf of its filmed entertainment division ("Films")
with entities owned by Universal, to provide distribution services, video
fulfillment and other interim and transitional services. These agreements are
described below.
 
    Under a distribution agreement covering approximately fifty films owned by
Universal, Films earns a distribution fee and remits the balance of revenues to
a Universal entity. For the seven month period ending December 31, 1999, Films
earned distribution fees of approximately $4.5 million from the distribution of
these films. Films is responsible for collecting the full amount of the sale and
remitting the net amount after its fee to Universal, except for amounts applied
against the Universal Advance (see Note 3).
 
    In addition, Films acquired home video distribution rights to a number of
"specialty video" properties. Universal holds a profit participation in certain
of these titles. For the seven month period ending December 31, 1999, no amounts
were earned by Universal under this agreement.
 
    Films is party to a "Videogram Fulfillment Agreement" with a Universal
entity pursuant to which such entity provides certain fulfillment services for
the United States and Canadian home video markets. For the seven month period
ending December 31, 1999, Films incurred fees to Universal of approximately
$2.5 million for such services.
 
    Films has entered into other agreements with Universal pursuant to which
Universal administers certain music publishing rights controlled by Films and
has licensed to Universal certain foreign territorial distribution rights in
specified films from which it received $4.8 million in revenue during the seven
months ending December 31, 1999.
 
    The parties have entered into other miscellaneous agreements for
transitional services including technical support, office space and services,
communications services and accounting. Universal charged Films approximately
$.8 million for the seven months ending December 31, 1999.
 
    In 1999, USAi and an entity owned by Mr. Diller acquired rights to a new
aircraft. This entity assigned to USAi its rights under the purchase agreement.
Thereafter, USAi assigned all of its rights under the purchase agreement to a
third party that purchased the aircraft for approximately $22 million and leases
it to USAi. The lease has a seven-year term and provides USAi with an option to
purchase the aircraft. Mr. Diller has the option to acquire the aircraft from
USAi.
 
                                       82

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 15--QUARTERLY RESULTS (UNAUDITED)
 

<TABLE>
<CAPTION>
                                                    QUARTER         QUARTER      QUARTER     QUARTER
                                                     ENDED           ENDED        ENDED       ENDED
                                                  DECEMBER 31,   SEPTEMBER 30,   JUNE 30,   MARCH 31,
                                                  ------------   -------------   --------   ---------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                               <C>            <C>             <C>        <C>
YEAR ENDED DECEMBER 31, 1999
Net revenues....................................    $936,137       $793,248      $777,429   $728,947
Operating profit................................      61,654         38,332        51,721     61,207
Net earnings (loss)(a)..........................     (17,778)        (7,680)       (9,716)     7,543
Basic earnings per common share(b) (c)..........        (.05)          (.02)         (.03)       .02
Diluted earnings per common share(b) (c)........        (.05)          (.02)         (.03)       .02
YEAR ENDED DECEMBER 31, 1998
Net revenues....................................    $767,118       $640,514      $703,393   $523,111
Operating profit................................      57,969         50,002        75,475     34,770
Net earnings (loss)(d)..........................      50,832         (4,849)       (3,040)    33,931
Basic earnings (loss) per common share(b) (c)...         .16           (.02)         (.01)       .14
Diluted earnings per common share(b) (c)........         .11           (.02)         (.01)       .09
</TABLE>

 
(a) In the first quarter of 1999, the Company recorded a pre-tax gain of
    $11.5 million related to the reversal of equity losses which were previously
    recorded in 1998 as a result of the Universal Transaction. Furthermore, the
    Company recorded pre-tax gains on the sale of securities of $47.3 million,
    $3.0 million and $39.5 million in the first, second and third quarters of
    1999, respectively.
 
(b) Per common share amounts for the quarters do not add to the annual amount
    because of differences in the average common shares outstanding during each
    period.
 
(c) Earnings (loss) per common share data and shares outstanding retroactively
    reflect the impact of the two-for-one stock splits of USAi's common stock
    and Class B common stock paid on February 24, 2000 and March 26, 1998. All
    share numbers give effect to such stock splits.
 
(d) In the first quarter of 1998, the Company recorded a pre-tax gain of
    $74.9 million on the sale of a broadcast station. In the second quarter of
    1998, the Company recorded a pre-tax gain of $9.2 million on the sale of SF
    Broadcasting. In the fourth quarter of 1998, the Company recorded pre-tax
    gains totaling $109.0 million related to the CitySearch Transaction.
 
NOTE 16--INDUSTRY SEGMENTS
 
    For the year ended December 31, 1999, the Company operated principally in
seven industry segments: Networks and television production, Electronic
retailing, Ticketing operations, Hotel reservations, Internet services, Filmed
entertainment and Broadcasting. The Networks and television production segment
consists of the cable networks USA Network and Sci-Fi Channel and Studios USA,
which produces and distributes television programming. The Electronic retailing
segment consists of Home Shopping Network and America's Store, which are engaged
in the sale of merchandise through electronic retailing. The Ticketing
operations segment provides automated ticketing services primarily in the United
States. The Hotel reservations segment was formed on May 10, 1999 in conjunction
with the acquisition of Hotel Reservations Network, a leading consolidator of
hotel rooms for resale in the consumer market in the United States. The Internet
services segment represents the Company's on-line retailing networks business
and local city guide business. The Filmed entertainment segment represents USA
Films, which consists of domestic theatrical film distribution and production
businesses which were acquired May 28, 1999, and Savoy. The Broadcasting segment
includes the operations of broadcast television stations in twelve markets
 
                                       83

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
that principally transmit Home Shopping Network programming. Through July 16,
1998, Other included the operations of SF Broadcasting, the owner of
network-affiliated television stations.
 

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                           ------------------------------------
                                                              1999         1998         1997
                                                           ----------   ----------   ----------
                                                                      (IN THOUSANDS)
<S>                                                        <C>          <C>          <C>
Revenue
  Networks and television production.....................  $1,305,871   $1,085,685   $       --
  Electronic retailing...................................   1,204,524    1,084,139    1,008,162
  Ticketing operations...................................     460,058      386,555      156,378
  Hotel reservations.....................................     124,113           --           --
  Internet services......................................      60,949       26,645       12,857
  Filmed entertainment...................................      64,766        7,259       14,173
  Broadcasting...........................................       8,598        1,555           --
  Other..................................................       6,882       42,298       70,179
                                                           ----------   ----------   ----------
                                                           $3,235,761   $2,634,136   $1,261,749
                                                           ==========   ==========   ==========
Operating profit (loss)
  Networks and television production.....................  $  319,500   $  190,191   $       --
  Electronic retailing...................................     122,174      101,245      109,120
  Ticketing operations...................................      15,144       14,307       12,240
  Hotel reservations.....................................       5,654           --           --
  Internet services......................................    (150,236)     (33,023)      (9,852)
  Filmed entertainment...................................        (845)         330        3,024
  Broadcasting...........................................     (56,978)     (31,294)     (11,233)
  Corporate and other....................................     (41,393)     (23,540)      (8,780)
                                                           ----------   ----------   ----------
                                                           $  213,020   $  218,216   $   94,519
                                                           ==========   ==========   ==========
Assets
  Networks and television production.....................  $4,822,105   $5,030,762   $       --
  Electronic retailing...................................   1,640,311    1,730,518    1,650,682
  Ticketing operations...................................   1,004,276    1,008,808      518,273
  Hotel reservations.....................................     202,666           --           --
  Internet services......................................     678,571      279,166        6,197
  Filmed entertainment...................................     214,582       38,755       39,623
  Broadcasting...........................................     180,121      147,876       83,729
  Corporate and other....................................     510,520       80,305      372,292
                                                           ----------   ----------   ----------
                                                           $9,253,152   $8,316,190   $2,670,796
                                                           ==========   ==========   ==========
Depreciation and amortization
  Networks and television production.....................  $  113,034   $   99,225   $       --
  Electronic retailing...................................      83,808       72,312       62,811
  Ticketing operations...................................      79,974       47,077       13,180
  Hotel reservations.....................................      13,237           --           --
  Internet services......................................      50,167       10,144        1,903
  Filmed entertainment...................................       5,629        4,588       11,239
  Broadcasting...........................................       8,695        8,247        6,532
  Corporate and other....................................       5,253        4,554        1,359
                                                           ----------   ----------   ----------
                                                           $  359,797   $  246,147   $   97,024
                                                           ==========   ==========   ==========
</TABLE>

 
                                       84

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                           ------------------------------------
                                                              1999         1998         1997
                                                           ----------   ----------   ----------
                                                                      (IN THOUSANDS)
<S>                                                        <C>          <C>          <C>
Capital expenditures
  Networks and television production.....................  $    6,771   $    5,616   $       --
  Electronic retailing...................................      47,197       42,269       27,188
  Ticketing operations...................................      23,789       18,476        7,788
  Hotel reservations.....................................       1,092           --           --
  Internet services......................................      24,946        3,825           --
  Filmed entertainment...................................         448           --           --
  Broadcasting...........................................      30,021       15,574        8,262
  Corporate and other....................................       4,673        1,232        2,631
                                                           ----------   ----------   ----------
                                                           $  138,937   $   86,992   $   45,869
                                                           ==========   ==========   ==========
</TABLE>

 
    The Company operates principally within the United States.
 
NOTE 17--FINANCIAL INSTRUMENTS
 
    The additional disclosure below of the estimated fair value of financial
instruments was made in accordance with the requirements of Statements of
Financial Accounting Standards No. 107. The estimated fair value amounts have
been determined by the Company using available market information and
appropriate valuation methodologies when available. The carrying value of all
current assets and current liabilities approximates fair value due to their
short-term nature.
 

<TABLE>
<CAPTION>
                                                     DECEMBER 31, 1999       DECEMBER 31, 1998
                                                   ---------------------   ---------------------
                                                   CARRYING      FAIR      CARRYING      FAIR
                                                    AMOUNT       VALUE      AMOUNT       VALUE
                                                   ---------   ---------   ---------   ---------
                                                                  (IN THOUSANDS)
<S>                                                <C>         <C>         <C>         <C>
Cash and cash equivalents........................  $ 424,239   $ 424,239   $ 445,356   $ 445,356
Long-term investments............................    121,383     121,383      35,628      35,628
Long-term obligations............................   (585,780)   (585,780)   (812,221)   (812,221)
</TABLE>

 
NOTE 18--SAVOY SUMMARIZED FINANCIAL INFORMATION (UNAUDITED)
 
    The Company has not prepared 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.
 
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
 

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
Net sales...................................................   $7,890    $34,383    $67,107
Operating expenses..........................................    3,431     31,465     65,200
Operating income............................................    4,459      2,918      1,907
Net income (loss)...........................................    7,143     36,256     (5,972)
</TABLE>

 
                                       85

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
SUMMARY CONSOLIDATED BALANCE SHEETS
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Current assets..............................................  $    191   $ 24,115
Non-current assets..........................................   150,236    132,937
Current liabilities.........................................    12,273     12,596
Non-current liabilities.....................................    39,081     52,532
</TABLE>

 
    For the year ended December 31, 1998, net income includes an after-tax gain
of $36.3 million for the sale of the SF Broadcasting television stations. This
gain has been eliminated in the consolidation of the Company's financial
statements due to the fair value adjustments recorded in connection with the
merger with Savoy. 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 20.
 
NOTE 19--PROGRAM RIGHTS AND FILM COSTS
 
    As of December 31, 1999, the liability for program rights, representing
future payments to be made under program contract agreements amounted to
$482.7 million. Annual payments required are $227.3 million in 2000,
$122.7 million in 2001, $79.7 million in 2002, $31.4 million in 2003,
$15.1 million in 2004 and $6.5 million in 2005 and thereafter. Amounts
representing interest are $50.0 million and the present value of future payments
is $432.7 million.
 
    As of December 31, 1999, the liability for film costs amounted to
$103.1 million. Annual payments are $72.6 million in 2000 and $30.5 million in
2001.
 
    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 December 31, 1999, the unrecorded commitments amounted to $814.2 million.
Annual commitments are $152.7 million in 2000, $156.2 million in 2001,
$139.7 million in 2002, $133.7 million in 2003, $108.2 million in 2004 and
$123.7 million in 2005 and thereafter.
 
NOTE 20--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.
 
                                       86

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 21--EARNINGS (LOSS) PER SHARE
 
    The following table sets forth the computation of Basic and Diluted earnings
per share. All share numbers have been adjusted to retroactively reflect the
impact of the two-for-one stock splits of USAi's common stock and Class B common
stock paid on February 24, 2000 and March 26, 1998. All share numbers give
effect to such stock splits.
 

<TABLE>
<CAPTION>
                                                                         YEARS ENDED DECEMBER 31,
                                                                  ---------------------------------------
                                                                    1999           1998           1997
                                                                  ---------      ---------      ---------
                                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                               <C>            <C>            <C>
Numerator:
Net earnings (loss).........................................      $(27,631)      $ 76,874        $13,061
Elimination of minority interest............................            --         50,841             --
                                                                  --------       --------        -------
Numerator for diluted earnings (loss) per share.............      $(27,631)      $127,715         13,061
                                                                  ========       ========        =======
Denominator:
Denominator for basic earnings per share--weighted average
  shares....................................................       327,816        286,146        209,560
  Effect of dilutive securities:
    Stock options...........................................            --         31,014         14,928
    LLC shares exchangeable into Common Stock...............            --        276,864             --
                                                                  --------       --------        -------
Diluted weighted average shares.............................       327,816        594,024        224,488
                                                                  --------       --------        -------
Basic earnings (loss) per share.............................      $   (.08)      $    .27        $   .06
                                                                  ========       ========        =======
Diluted earnings (loss) per share...........................      $   (.08)      $    .21        $   .06
                                                                  ========       ========        =======
</TABLE>

 
    The effect of the convertible debentures is excluded from the computation of
Diluted EPS through the date of conversion on March 1, 1998 as their effect is
antidilutive.
 
NOTE 22-- NOTES OFFERING AND GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
 
    On November 23, 1998, the Company and USANi LLC as co-issuers completed an
offering of $500.0 million 6 3/4% Senior Notes due 2005 (the "Old Notes"). In
May 1999, the Old Notes were exchanged in full for $500.0 million of new 6 3/4%
Senior Notes due 2005 (the "Notes") that have terms that are substantially
identical to the Old Notes. Interest is payable on the Notes on May 15 and
November 15 of each year, commencing May 15, 1999. The Notes are jointly,
severally, fully and unconditionally guaranteed by certain subsidiaries of the
Company, including Holdco, a non-wholly owned, direct subsidiary of the Company,
and all of the subsidiaries of USANi LLC (other than subsidiaries that are,
individually and in the aggregate, inconsequential to USANi LLC on a
consolidated basis) (collectively, the "Subsidiary Guarantors"). All of the
Subsidiary Guarantors (other than Holdco) (the "Wholly Owned Subsidiary
Guarantors") are wholly owned, directly or indirectly, by the Company or USANi
LLC, as the case may be.
 
    The following tables present condensed consolidating financial information
for the years ended December 31, 1999, 1998 and 1997 for: (1) the Company on a
stand-alone basis, (2) Holdco on a stand-alone basis, (3) USANi LLC on a
stand-alone basis, (4) the combined Wholly Owned Subsidiary Guarantors
(including Wholly Owned Subsidiary Guarantors that are wholly owned subsidiaries
of USANi LLC), (5) the combined non-guarantor subsidiaries of the Company
(including the non-guarantor subsidiaries of USANi LLC (collectively, the
"Non-Guarantor Subsidiaries")), and (6) the Company on a consolidated basis.
 
                                       87

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    Separate financial statements for each of the Wholly Owned Subsidiary
Guarantors are not presented and such Wholly Owned Subsidiary Guarantors are not
filing separate reports under the Securities Exchange Act of 1934 because the
Company's management has determined that the information contained in such
documents would not be material to investors.
 
    As of and for the Year Ended December 31, 1999
 

<TABLE>
<CAPTION>
                                                                         WHOLLY
                                                                          OWNED
                                                            USANI      SUBSIDIARY    NON-GUARANTOR                       USAI
                                   USAI        HOLDCO        LLC       GUARANTORS     SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                ----------   ----------   ----------   -----------   --------------   ------------   ------------
<S>                             <C>          <C>          <C>          <C>           <C>              <C>            <C>
Current assets................  $   23,002   $       --   $  282,706   $  760,033      $  322,714     $        --    $ 1,388,455
Property and equipment net....          --           --       26,922      247,300          82,409              --        356,631
Goodwill and other intangible
  assets, net.................      75,787           --           --    5,119,382       1,636,318              --      6,831,487
Investment in subsidiaries....   2,710,073    2,039,790    5,527,428       19,717              --     (10,297,008)            --
Other assets..................     163,814           --      828,890      351,137          83,363        (750,625)       676,579
                                ----------   ----------   ----------   -----------     ----------     ------------   -----------
Total assets..................  $2,972,676   $2,039,790   $6,665,946   $6,497,569      $2,124,804     $(11,047,633)  $ 9,253,152
                                ==========   ==========   ==========   ===========     ==========     ============   ===========
Current liabilities...........  $   22,107   $       --   $   20,056   $  661,325      $  328,265     $        --    $ 1,031,753
Long-term debt, less current
  portion.....................          --           --      518,145        9,194          47,640              --        574,979
Other liabilities.............     180,840      697,247      286,066      293,709         279,352      (1,352,589)       384,625
Minority interest.............          --           --           --          531         525,099       3,966,436      4,492,066
Interdivisional equity........          --           --           --    5,532,810         944,448      (6,477,258)            --
Stockholders' equity..........   2,769,729    1,342,543    5,841,679           --              --      (7,184,222)     2,769,729
                                ----------   ----------   ----------   -----------     ----------     ------------   -----------
Total liabilities and
  shareholders' equity........  $2,972,676   $2,039,790   $6,665,946   $6,497,569      $2,124,804     $(11,047,633)  $ 9,253,152
                                ==========   ==========   ==========   ===========     ==========     ============   ===========
Revenue.......................  $       --   $       --   $       --   $2,530,820      $  704,941     $        --    $ 3,235,761
Operating expenses............     (10,074)          --      (27,171)  (2,186,222)       (799,274)             --     (3,022,741)
Interest expense, net.........     (10,713)          --      (11,837)     (21,909)         (3,489)             --        (47,948)
Gain on sale of securities....          --           --           --       89,721              --              --         89,721
Other income (expense), net...     (14,709)     153,016      433,996       49,694          20,939        (637,157)         5,779
Provision for income taxes....       7,865           --           --      (82,366)        (16,405)             --        (90,906)
Minority interest.............          --           --           --           91          56,650        (254,038)      (197,297)
                                ----------   ----------   ----------   -----------     ----------     ------------   -----------
Net (loss) income.............  $  (27,631)  $  153,016   $  394,988   $  379,829      $  (36,638)    $  (891,195)   $   (27,631)
                                ==========   ==========   ==========   ===========     ==========     ============   ===========
Cash flows from operations....  $  (33,127)  $       --      (31,200)  $  456,728      $  (25,934)    $        --    $   366,467
Cash flows used in investing
  activities..................    (401,082)          --      (53,645)       4,680           6,638              --       (443,409)
Cash flows from financing
  activities..................     434,209           --      212,973     (570,075)        (21,159)             --         55,948
Effect of exchange rate.......          --           --           --           --            (123)             --           (123)
Cash at the beginning of the
  period......................          --           --      151,160      102,308         191,888              --        445,356
                                ----------   ----------   ----------   -----------     ----------     ------------   -----------
Cash at the end of the
  period......................  $       --   $       --      279,288   $   (6,359)     $  151,310     $        --    $   424,239
                                ==========   ==========   ==========   ===========     ==========     ============   ===========
</TABLE>

 
                                       88

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    As of and for the Year Ended December 31, 1998
 

<TABLE>
<CAPTION>
                                                                         WHOLLY
                                                                          OWNED
                                                            USANI      SUBSIDIARY    NON-GUARANTOR                       USAI
                                  USAI        HOLDCO         LLC       GUARANTORS     SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                               ----------   ----------   -----------   -----------   --------------   ------------   ------------
<S>                            <C>          <C>          <C>           <C>           <C>              <C>            <C>
Current assets...............  $    1,791   $       --   $   151,773   $  867,070      $ 274,641      $        --    $ 1,295,275
Property and equipment net...          --           --         5,275      193,523         56,632               --        255,430
Goodwill and other intangible
  assets, net................      77,883           --            --    5,865,824        398,939               --      6,342,646
Investment in subsidiaries...   2,591,170    1,895,144     5,527,428           --             --      (10,013,742)            --
Other assets.................          --           --       193,979      222,288        180,109         (173,537)       422,839
                               ----------   ----------   -----------   -----------     ---------      ------------   -----------
Total assets.................  $2,670,844   $1,895,144   $ 5,878,455   $7,148,705      $ 910,321      $(10,187,279)  $ 8,316,190
                               ==========   ==========   ===========   ===========     =========      ============   ===========
Current liabilities..........  $       --   $       --   $    38,664   $  553,294      $ 259,909      $        --    $   851,867
Long-term debt, less current
  portion....................          --           --       721,896       10,411         43,376               --        775,683
Other liabilities............      99,439      574,972         2,490      352,994         28,715         (574,972)       483,638
Minority interest............          --           --            --      233,380        114,121        3,286,096      3,633,597
Interdivisional equity.......          --           --            --    5,998,626        464,200       (6,462,826)            --
Stockholders' equity.........   2,571,405    1,320,172     5,115,405           --             --       (6,435,577)     2,571,405
                               ----------   ----------   -----------   -----------     ---------      ------------   -----------
Total liabilities and
  shareholders' equity.......  $2,670,844   $1,895,144   $ 5,878,455   $7,148,705      $ 910,321      $(10,187,279)  $ 8,316,190
                               ==========   ==========   ===========   ===========     =========      ============   ===========
Revenue......................  $       --           --            --   $2,176,554      $ 457,582               --    $ 2,634,136
Operating expenses...........      (8,822)          --       (13,258)  (1,961,484)      (432,356)              --     (2,415,920)
Interest expense, net........      (7,121)          --       (65,005)     (17,788)       (15,164)              --       (105,078)
Gain on disposition of
  broadcast stations.........          --           --            --       74,940          9,247               --         84,187
Gain on sale of subsidiary
  stock......................          --           --            --      108,967             --               --        108,967
Other income (expense),
  net........................     115,719       37,392       203,798      (18,824)         1,116         (361,679)       (22,478)
Provision for income taxes...     (22,902)          --            --      (94,534)       (10,209)              --       (127,645)
Minority interest............          --           --            --           --         10,798          (90,093)       (79,295)
                               ----------   ----------   -----------   -----------     ---------      ------------   -----------
Net (loss) income............  $   76,874   $   37,392   $   125,535   $  267,831      $  21,014      $  (451,772)   $    76,874
                               ==========   ==========   ===========   ===========     =========      ============   ===========
Cash flows from operations...  $  (30,787)  $       --   $  (227,064)  $  516,074      $ (31,467)     $        --    $   226,756
Cash flows used in investing
  activities.................     (47,382)          --    (1,026,000)    (412,555)       292,348               --     (1,193,589)
Cash flows from financing
  activities.................      78,127           --     1,405,725      (16,807)      (169,391)              --      1,297,654
Effect of exchange rate......          --           --            --           --         (1,501)              --         (1,501)
Cash at the beginning of the
  period.....................          42           --            --       14,093        101,901               --        116,036
                               ----------   ----------   -----------   -----------     ---------      ------------   -----------
Cash at the end of the
  period.....................  $       --   $       --   $   152,661   $  100,805      $ 191,890      $        --    $   445,356
                               ==========   ==========   ===========   ===========     =========      ============   ===========
</TABLE>

 
    For the Year Ended December 31, 1997
 

<TABLE>
<CAPTION>
                                                                         WHOLLY
                                                                          OWNED
                                                             USANI     SUBSIDIARY    NON-GUARANTOR                       USAI
                                        USAI      HOLDCO      LLC      GUARANTORS     SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                      --------   --------   --------   -----------   --------------   ------------   ------------
<S>                                   <C>        <C>        <C>        <C>           <C>              <C>            <C>
Revenue.............................  $     --   $    --      $--      $1,032,513      $ 229,236        $     --     $ 1,261,749
Operating expenses..................    (8,338)       --       --        (948,385)      (210,507)             --      (1,167,230)
Interest expense, net...............      (129)       --       --         (11,260)       (14,877)             --         (26,266)
Other income (expense), net.........    62,579    13,809    16,255        (11,825)           439         (93,009)        (11,752)
Provision for income taxes..........   (41,051)       --       --              --             --              --         (41,051)
Minority interest...................        --        --       --          (2,994)           605              --          (2,389)
                                      --------   -------      ---      ----------      ---------        --------     -----------
Net (loss) income...................  $ 13,061   $13,809    16,255     $   58,049      $   4,896        $(93,009)    $    13,061
                                      ========   =======      ===      ==========      =========        ========     ===========
Cash flows from operations..........  $ (8,338)       --       --      $   31,058      $  24,953              --     $    47,673
Cash flows used in investing
  activities........................   (30,064)       --       --         (52,000)          (229)             --         (82,293)
Cash flows from financing
  activities........................    38,444        --       --          15,461         54,145              --         108,050
Cash at the beginning of the
  period............................        --        --       --          19,574         23,032              --          42,606
                                      --------   -------      ---      ----------      ---------        --------     -----------
Cash at the end of the period.......  $     42   $    --      $--      $   14,093      $ 101,901        $     --     $   116,036
                                      ========   =======      ===      ==========      =========        ========     ===========
</TABLE>

 
                                       89

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 23--SUBSEQUENT EVENTS (UNAUDITED)
 
HOTEL RESERVATIONS NETWORK INITIAL PUBLIC OFFERING AND OTHER TRANSACTIONS
 
    On March 1, 2000, HRN completed an initial public offering for 6.2 million
shares of its class A common stock. At the completion of the offering, USAi
owned approximately 70.6% of the outstanding shares of HRN. USAi was required to
issue the sellers the number of shares of HRN class A common stock equal to 10%
of the aggregate value of the equity of HRN immediately prior to a transaction,
as defined, including an initial public offering or sale or merger of HRN. This
resulted in additional goodwill of $78.4 million that will be amortized over the
remaining ten-year life assigned to the goodwill. Furthermore, pursuant to an
amendment of the asset purchase agreement with the sellers of HRN's predecessor
business entered into contemplation of the initial public offering, HRN agreed
to issue HRN class A common stock to the sellers in exchange for releasing the
obligation to make additional performance-based payments covering the twelve
month periods ending March 31, 2001 and 2002. The number of shares issued was
determined by dividing $81.6 million by the initial public offering price per
share (5.1 million shares). This resulted in additional goodwill of
$81.6 million that will be amortized over the remaining ten-year life assigned
to the goodwill.
 
    In January 2000, HRN entered into an exclusive affiliate distribution and
marketing agreement with Travelocity and issued to Travelocity a performance
warrant at the completion of the public offering. The performance warrants are
subject to vesting based on achieving certain performance targets. If the
performance warrants become fully vested and exercisable it will entitle the
holder to acquire 2,447,955 shares of HRN class A common stock at the initial
public offering price. The Company also entered into other exclusive affiliate
distribution and marketing agreements and issued 1,428,365 warrants to purchase
HRN class A common stock at the initial public offering price at the completion
of the public offering.
 
    All stock warrants will be accounted for in accordance with EITF 96-18. In
relation to warrants to purchase 1,428,365 shares of class A common stock, the
Company recorded an asset of approximately $15.0 million based on the fair
market value of the warrants at the initial public offering price of $16.00 per
share. The asset will be amortized ratably over the terms of the exclusive
affiliation agreements, which range from two to five years. The amount of
estimated non-cash deferred distribution and marketing expense will be
$4.6 million, $4.0 million, $3.4 million, $1.5 million and $1.5 million in each
of the next five years, respectively.
 
    The performance warrants, which will be subject to vesting based on the
achievement of defined performance targets will be valued at the time the award
is probable of being earned. The portion of the value related to the completed
term of the related affiliation agreement will be expensed, and the remaining
non-cash deferred distribution and marketing expense will be amortized over the
remaining term of the affiliation agreement. The value of such related warrants
may be subject to adjustment until such time that the warrant is nonforfeitable,
fully vested and exercisable.
 
ACQUISITION OF PRECISION RESPONSE CORPORATION
 
    On January 12, 2000, the Company announced that it reached a definitive
agreement to acquire Precision Response Corp. ("PRC") in a stock-for-stock
transaction, whereby each share of PRC will be exchanged for 1.08 USAi shares
(approximately 23 million shares). The transaction is expected to close in the
second quarter of 2000.
 
MERGER OF INTERNET SHOPPING NETWORK AND STYLECLICK.COM
 
    On January 25, 2000, USAi and Styleclick.com Inc., a leading enabler of
e-commerce for manufacturers and retailers, announced an agreement to form a new
company by merging USA's Internet Shopping Network ("ISN") and Styleclick.com.
The new company, which will be named Styleclick, Inc., will own and
 
                                       90

<PAGE>
                      USA NETWORKS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
operate the combined properties of Styleclick.com Inc. and ISN. Under the terms
of the agreement, USAi will also invest $40 million in cash, contribute
$10 million in dedicated media, and will receive warrants to purchase additional
shares of the new company. Upon both the closing of the transaction and on a
fully diluted basis, USAi will own approximately 75% of the new company and
Styleclick.com stockholders will own approximately 25%. In the interim, USAi has
agreed to extend a $10 million bridge loan to Styleclick.com. The transaction is
expected to close in the second quarter of 2000.
 

I
TEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURES
 
    Not applicable.
 

                                    PART III
 
    The information required by Part III (Items 10, 11, 12 and 13) has been
incorporated herein by reference to USAi's definitive Proxy Statement to be used
in connection with the 2000 Annual Meeting of Stockholders (the "2000 Proxy
Statement") as set forth below, in accordance with General Instruction G(3) of
Form 10-K.
 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    Information relating to directors and executive officers of USAi is set
forth in the section entitled "Item 1--Election of Directors and Management
Information" in the 2000 Proxy Statement and is incorporated herein by
reference.
 

ITEM 11. EXECUTIVE COMPENSATION
 
    Information regarding compensation of officers and directors of USAi is set
forth in the section entitled "Executive Compensation" in the 2000 Proxy
Statement and is incorporated herein by reference.
 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    Information regarding ownership of USAi's common stock and Class B common
stock is set forth in the section entitled "Security Ownership of Certain
Beneficial Owners and Management" in the 2000 Proxy Statement and is
incorporated herein by reference.
 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
 
    Information regarding certain relationships and related transactions with
USAi is set forth in the section entitled "Certain Relationships and Related
Party Transactions" in the 2000 Proxy Statement and is incorporated herein by
reference.
 
                                       91

<PAGE>

                                    PART IV
 

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 

<TABLE>
<S>                     <C>                                                            <C>
                        (a) List of Documents filed as part of this Report
 
                        (1)--Consolidated Financial Statements
 
                        Report of Independent Auditors--Ernst & Young LLP.
 
                        Consolidated Statement of Operations for the Years Ended December 31,
                        1999, 1998 and 1997.
 
                        Consolidated Balance Sheets as of December 31, 1999 and 1998.
 
                        Consolidated Statement of Stockholders' Equity for the Years Ended
                        December 31, 1999, 1998 and 1997.
 
                        Consolidated Statements of Cash Flows for Years Ended December 31,
                        1999, 1998 and 1997.
 
                        Notes to Consolidated Financial Statements.
 
                        (2)--Consolidated Financial Statement Schedules
</TABLE>

 

<TABLE>
<CAPTION>
      SCHEDULE                                                                           PAGE
       NUMBER                                                                           NUMBER
---------------------                                                                  --------
<S>                     <C>                                                            <C>
  II                    --Valuation and Qualifying Accounts.........................      101
 
                        (3)--Home Shopping Network, Inc. and Subsidiaries Financial
                        Statements
                        Report of Independent Auditors..............................      102
                        Consolidated Statements of Operations for the Years Ended
                        December 31, 1999, 1998 and 1997............................      103
                        Consolidated Balance Sheets as of December 31, 1999 and
                                1998................................................      104
                        Consolidated Statements of Stockholders' Equity for the
                        Years Ended December 31, 1999, 1998 and 1997................      106
                        Consolidated Statements of Cash Flows for the Years Ended
                        December 31, 1999, 1998 and 1997............................      107
                        Notes to Consolidated Financial Statements..................      108
 
                        (4)--USANi LLC and Subsidiaries (Including Predecessor Company)
                        Financial Statements
                        Report of Independent Auditors..............................      111
                        Consolidated Statements of Operations for the Years Ended
                        December 31, 1999, 1998 and 1997............................      112
                        Consolidated Balance Sheets as of December 31, 1999 and
                                1998................................................      113
                        Consolidated Statements of Members' Equity for the Years
                        Ended December 31, 1999, 1998 and 1997......................      115
                        Consolidated Statements of Cash Flows for the Years Ended
                        December 31, 1999, 1998 and 1997............................      116
                        Notes to Consolidated Financial Statements..................      117
</TABLE>

 
    All other financial statements and schedules not listed have been omitted
since the required information is included in the Consolidated Financial
Statements or the notes thereto, or is not applicable or required.
 

<TABLE>
<S>                     <C>                                                            <C>
                        (5)--Exhibits (numbered in accordance with Item 601 of
                        Regulation S-K)
</TABLE>

 
                                       92

<PAGE>
 

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION                            NUMBER
---------------------                           -----------                           --------
<S>                     <C>                                                           <C>
2.1                     Agreement and Plan of Exchange and Merger, dated as of
                        August 25, 1996, by and among Silver King Communications,
                        Inc., HouseAcquisition Corp., Home Shopping Network, Inc.
                        and Liberty HSN,Inc., filed as Appendix B to USAi's
                        Definitive Proxy Statement, dated November 20, 1996, is
                        incorporated herein by reference.
 
2.2                     Agreement and Plan of Merger by and among Silver King
                        Communications, Inc., Thames Acquisition Corporation and
                        Savoy Pictures Entertainment, Inc., as amended and restated
                        as of August 13, 1996, filed as Appendix A to USAi's
                        Definitive Proxy Statement, dated November 20, 1996, is
                        incorporated herein by reference.
 
2.3                     Investment Agreement, dated as of October 19, 1997, among
                        Universal Studios, Inc., HSN, Inc., Home Shopping Network,
                        Inc. and Liberty Media Corporation, as amended and restated
                        as of December 18, 1997, filed as Appendix A to USAi's
                        Definitive Proxy Statement, dated January 12, 1998, is
                        incorporated herein by reference.
 
2.4                     Amended and Restated Agreement and Plan of Reorganization,
                        dated as of August 12, 1998, among CitySearch, Inc.,
                        Tiberius, Inc., USA Networks, Inc., Ticketmaster Group,
                        Inc., Ticketmaster Corporation and Ticketmaster Multimedia
                        Holdings, Inc., filed as Exhibit 10 to USAi's Form 10-Q, for
                        the quarter ended September 30, 1998, is incorporated herein
                        by reference.
 
2.5                     Agreement and Plan of Merger, dated as of March 20, 1998, by
                        and among USAi, Brick Acquisition Corp. and Ticketmaster
                        Group, Inc., filed as Exhibit 10.61 to USAi's Annual Report
                        on Form 10-K for the fiscal year ended December 31, 1997, is
                        incorporated herein by reference.
 
2.6                     Contribution Agreement, dated as of February 8, 1999, by and
                        among USAi, USANi LLC and USA Interactive Inc., filed as
                        Exhibit 2.2 to USAi's Form 8-K filed on February 26, 1999,
                        is incorporated herein by reference.
 
2.7                     Agreement and Plan of Merger, dated as of January 12, 2000,
                        by and among Precision Response Corporation, USAi and P
                        Acquisition Corp., filed as Exhibit 1 to USAi's Schedule 13D
                        filed on January 19, 2000 is incorporated herein by
                        reference.
 
3.1                     Restated Certificate of Incorporation of USAi filed as
                        Exhibit 3.1 to USAi's Form 8-K, dated February 23, 1998, is
                        incorporated herein by reference.
 
3.2                     Amended and Restated By-Laws of USAi filed as Exhibit 3.1 to
                        USAi's Form 8-K, dated January 9, 1998, is incorporated
                        herein by reference.
 
4.1                     Indenture, dated as of November 23, 1998, among USAi, USANi
                        LLC, the Guarantors party thereto, and The Chase Manhattan
                        Bank, as Trustee, filed as Exhibit 4.1 to USAi's
                        Registration Statement on Form S-4, dated January 27, 1999
                        (the "S-4") is incorporated herein by reference.
 
4.2                     Form of 6 3/4% Senior Notes due 2005 (included as Exhibit B
                        to Exhibit 4.1 to USAi's S-4).
 
4.3                     Exchange and Registration Rights Agreement, dated as of
                        November 23, 1998, among USAi, USANi LLC, the Guarantors
                        party thereto, and Chase Securities Inc., Bear, Stearns &
                        Co. Inc., BNY Capital Markets, Inc. and NationsBanc
                        Montgomery Securities LLC, filed as Exhibit 4.3 to the S-4
                        is incorporated herein by reference.
</TABLE>

 
                                       93

<PAGE>
 

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION                            NUMBER
---------------------                           -----------                           --------
<S>                     <C>                                                           <C>
4.4                     Indenture, dated as of June 25, 1993, for the Savoy 7%
                        Convertible Subordinated Debentures due July 1, 2003, filed
                        as Exhibit 4(d) to Savoy's S-1 Registration Statement No.
                        33-63192, is incorporated herein by reference.
 
4.5                     First Supplemental Indenture, dated as of October 24, 1993,
                        for the Savoy 7% Convertible Debentures due July 1, 2003,
                        filed as Exhibit 4(e) to Savoy's S-1 Registration Statement
                        No. 33-70160, is incorporated herein by reference.
 
4.6                     Second Supplemental Indenture, dated as of December 17,
                        1993, for the Savoy 7% Convertible Debentures due July 1,
                        2003, filed as Exhibit 4(e) to Savoy's Annual Report on Form
                        10-K for the fiscal year ended December 31, 1993, is
                        incorporated herein by reference.
 
4.7                     Third Supplemental Indenture, dated as of December 19, 1996,
                        for the Savoy 7% Convertible Debentures due July 1, 2003
                        filed as Exhibit 4.1 to Savoy's Form 8-K, dated December 19,
                        1996, is incorporated herein by reference.
 
10.1                    Form of Affiliation Agreements between USAi and Home
                        Shopping, filed as Exhibit 10.2 to USAi's Registration
                        Statement on Form 10, as amended, is incorporated herein by
                        reference.
 
10.2*                   Form of 1992 Stock Option and Restricted Stock Plan between
                        USAi and Home Shopping, filed as Exhibit 10.6 to USAi's
                        Registration Statement on Form 8, as amended, is
                        incorporated herein by reference.
 
10.3*                   Form of Retirement Savings and Employment Stock Ownership
                        Plan, filed as Exhibit 10.8 to USAi's Registration Statement
                        on Form 8, as amended, is incorporated herein by reference.
 
10.4                    Form of Indemnification Agreement, filed as Exhibit 10.10 to
                        USAi's Registration Statement on Form 10, as amended, is
                        incorporated herein by reference.
 
10.5                    Form of Loan Agreement, as amended, by and between Silver
                        King Capital Corporation, Inc. and Roberts Broadcasting
                        Company of Denver, filed as Exhibit 10.17 to USAi's Annual
                        Report on Form 10-K, for the fiscal year ended August 31,
                        1994, is incorporated herein by reference.
 
10.6                    Form of Shareholder Agreement by and among Silver King
                        Capital Corporation, Inc., Roberts Broadcasting Company of
                        Denver, Michael V. Roberts and Steven C. Roberts, filed as
                        Exhibit 10.18 to USAi's Annual Report on Form 10-K, for the
                        fiscal year ended August 31, 1994, is incorporated herein by
                        reference.
 
10.7                    Limited Liability Company Agreement, Funding Agreement and
                        Form of First Amendment to LLC, Registration Rights
                        Agreement and associated documents between USAi, the Class A
                        Shareholders of Blackstar Communications, Inc. and Fox
                        Television Stations, Inc., dated as of June 27, 1995 and
                        August 18, 1995, filed as Exhibit 10.23 to USAi's Annual
                        Report on Form 10-K, for the fiscal year ended August 31,
                        1995, are incorporated herein by reference.
 
10.8*                   1986 Stock Option Plan for Employees, dated as of August 1,
                        1986, filed as Exhibit 10.33 to Home Shopping's Form S-1
                        Registration Statement No. 33-8560, is incorporated herein
                        by reference.
 
10.9*                   First, Second, Third and Fourth Amendments to the 1986 Stock
                        Option Plan for Employees, filed as Exhibit 10.31 to Home
                        Shopping's Annual Report on Form 10-K, for the fiscal year
                        ended December 31, 1993, are incorporated herein by
                        reference.
</TABLE>

 
                                       94

<PAGE>
 

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION                            NUMBER
---------------------                           -----------                           --------
<S>                     <C>                                                           <C>
10.10*                  Form of 1990 Executive Stock Award Program, dated as of
                        October 17, 1990, as amended, filed as Exhibit 10.23 to Home
                        Shopping's Annual Report on Form 10-K, for the fiscal year
                        ended August 31, 1991, is incorporated herein by reference.
 
10.11                   Stock Purchase Agreement by and between Home Shopping and
                        The National Registry Inc., dated as of April 28, 1992,
                        filed as Exhibit 10.29 to Home Shopping's Annual Report on
                        Form 10-K, for the fiscal year ended August 31, 1992, is
                        incorporated herein by reference.
 
10.12*                  Home Shopping Network, Inc. Employee Stock Purchase Plan and
                        Part-Time Employee Stock Purchase Plan, filed as Exhibit
                        10.30 to Home Shopping's Annual Report on Form 10-K for the
                        fiscal year ended December 31, 1994, is incorporated herein
                        by reference.
 
10.13*                  Home Shopping Network, Inc. Employee Equity Participation
                        Plan and Agreement and Declaration of Trust, filed as
                        Exhibit 10.31 to Home Shopping's Annual Report on Form 10-K,
                        for the fiscal year ended December 31, 1994, is incorporated
                        herein by reference.
 
10.14*                  Home Shopping Network, Inc. 1996 Stock Option Plan for
                        Employees, filed as Exhibit A to the Home Shopping
                        Definitive Proxy Statement, dated March 28, 1996, is
                        incorporated herein by reference.
 
10.15*                  Home Shopping Network, Inc. 1996 Stock Option Plan for
                        Outside Directors, filed as Exhibit B to the Home Shopping
                        Definitive Proxy Statement, dated March 28, 1996, is
                        incorporated herein by reference.
 
10.16                   Binding Term Sheet for the Stockholders Agreement, dated as
                        of August 24, 1995, between Barry Diller and Liberty Media
                        Corporation and the First Amendment thereto, dated August
                        25, 1996, filed as Appendix I to USAi's Definitive Proxy
                        Statement, dated November 20, 1996, are incorporated herein
                        by reference.
 
10.17                   Exchange Agreement, dated as of December 20, 1996, by and
                        between the Registrant and Liberty HSN, Inc. filed as
                        Exhibit 10.25 to USAi's Annual Report on Form 10-K, for the
                        fiscal year ended December 31, 1996, is incorporated herein
                        by reference.
 
10.18*                  Equity and Bonus Compensation Agreement, dated as of August
                        24, 1995, between Barry Diller and the Registrant filed as
                        Exhibit 10.26 to USAi's Annual Report on Form 10-K, for the
                        fiscal year ended December 31, 1996, is incorporated herein
                        by reference.
 
10.19*                  Silver King Communications, Inc. 1995 Stock Incentive Plan
                        filed as Appendix G to USAi's Definitive Proxy Statement,
                        dated November 20, 1996, is incorporated herein by
                        reference.
 
10.20*                  Silver King Communications, Inc. Directors' Stock Option
                        Plan filed as Appendix H to USAi's Definitive Proxy
                        Statement, dated November 20, 1996, is incorporated herein
                        by reference.
 
10.21                   Letter Agreement, dated April 3, 1996, between Home Shopping
                        Network, Inc. and Gen. H. Norman Schwarzkopf filed as
                        Exhibit 10.34 to USAi's Annual Report on Form 10-K, for the
                        fiscal year ended December 31, 1996, is incorporated herein
                        by reference.
</TABLE>

 
                                       95

<PAGE>
 

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION                            NUMBER
---------------------                           -----------                           --------
<S>                     <C>                                                           <C>
10.22                   Shareholders Agreement, dated December 12, 1996, relating to
                        Jupiter Shop Channel Co. Ltd. among Jupiter Programming Co.
                        Ltd., Home Shopping Network, Inc. and Jupiter Shop Channel
                        Co. Ltd. filed as Exhibit 10.35 to USAi's Annual Report on
                        Form 10-K, for the fiscal year ended December 31, 1996, is
                        incorporated herein by reference.
 
10.23                   Services and Trademark License Agreement, dated as of
                        December 12, 1996, between Home Shopping Network, Inc. and
                        Jupiter Shop Channel Co. Ltd., filed as Exhibit 10.36 to
                        USAi's Annual Report on Form 10-K for the fiscal year ended
                        December 31, 1996, is incorporated herein by reference.
 
10.24                   Purchase and Sale Agreement among Home Shopping Network
                        GmbH, Home Shopping Network, Inc., Quelle Schickedanz AG &
                        Co., Mr. Thomas Kirch and Dr. Georg Kofler, dated as of
                        January 16, 1997, filed as Exhibit 10.37 to USAi's Annual
                        Report on Form 10-K for the fiscal year ended December 31,
                        1996, is incorporated herein by reference.
 
10.25                   Joint Venture Agreement between Quelle Schickedanz AG & Co.,
                        Home Shopping Network, Inc., Home Shopping Network GmbH, Mr.
                        Thomas Kirch and Dr. Georg Kofler, filed as Exhibit 5.3 to
                        the Purchase and Sale Agreement, filed as Exhibit 10.38 to
                        USAi's Annual Report on Form 10-K for the fiscal year ended
                        December 31, 1996, is incorporated herein by reference.
 
10.26                   License Agreement, dated as of January 1, 1996, between
                        Ronald A. Katz Technology Licensing, L.P. and Home Shopping
                        Network, Inc., filed as Exhibit 10.39 to USAi's Annual
                        Report on Form 10-K for the fiscal year ended December 31,
                        1996, is incorporated herein by reference.
 
10.27                   Shareholder Agreement, dated as of April 26, 1996, by and
                        among Channel 66 of Vallejo, California, Inc., Whitehead
                        Media of California, Inc. and Silver King Capital
                        Corporation, Inc., filed as Exhibit 10.40 to USAi's Annual
                        Report on Form 10-K for the fiscal year ended December 31,
                        1996, is incorporated herein by reference.
 
10.28                   Loan Agreement, dated as of April 26, 1996, by and between
                        SKC Investments, Inc. and Channel 66 of Vallejo, California,
                        Inc., filed as Exhibit 10.41 to USAi's Annual Report on Form
                        10-K for the fiscal year ended December 31, 1996, is
                        incorporated herein by reference.
 
10.29                   Joint Venture and License Agreement, dated as of June 12,
                        1992, between Savoy Pictures Entertainment, Inc. and Home
                        Box Office, Inc. (confidential treatment for portions
                        thereof granted), filed as Exhibit 10(a) to Savoy's S-1
                        Registration Statement No. 33-57956, is incorporated herein
                        by reference.
 
10.30                   License Agreement, dated as of June 12, 1992, among Savoy
                        Pictures Entertainment, Inc. and Home Box Office, Inc.
                        (confidential treatment of portions thereof granted), filed
                        as Exhibit 10(b) to Savoy's S-1 Registration Statement No.
                        33-57956, is incorporated herein by reference.
 
10.31                   Warrant Agreement, dated as of March 2, 1992, between Savoy
                        Pictures Entertainment, Inc. and Allen & Company
                        Incorporated, filed as Exhibit 10(f) to Savoy's S-1
                        Registration Statement No. 33-57956, is incorporated herein
                        by reference.
 
10.32                   Warrant Agreement, dated as of March 2, 1992, between Savoy
                        Pictures Entertainment, Inc. and GKH Partners, L.P., filed
                        as Exhibit 10(g) to Savoy's S-1 Registration Statement No.
                        33-57956, is incorporated herein by reference.
</TABLE>

 
                                       96

<PAGE>
 

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION                            NUMBER
---------------------                           -----------                           --------
<S>                     <C>                                                           <C>
10.33                   Warrant Agreement, dated as of April 20, 1994, between Savoy
                        and GKH Partners, L.P., filed as Exhibit 10.2 to Savoy's
                        Form 10-Q for the quarter ended March 31, 1994, is
                        incorporated herein by reference.
 
10.34*                  Amended and Restated Stock Option Plan (including form of
                        Stock Options Agreement) filed as Exhibit 4.1 to Savoy's
                        Registration Statement No. 33-70740, is incorporated herein
                        by reference.
 
10.35*                  Savoy 1995 Stock Option Plan filed as Exhibit 10(+) to
                        Savoy's Annual Report on Form 10-K for the fiscal year ended
                        December 31, 1995, is incorporated herein by reference.
 
10.36                   $1,600,000,000 Credit Agreement, dated February 12, 1998,
                        among USAi, USANi LLC, as Borrower, Various Lenders, The
                        Chase Manhattan Bank as Administrative Agent, Syndication
                        Agent and Collateral Agent, and Bank of America National
                        Trust & Savings Association and The Bank of New York as
                        Co-Documentation Agents, filed as Exhibit 10.50 to USAi's
                        Annual Report on Form 10-K for the fiscal year ended
                        December 31, 1997 is incorporated herein by reference.
 
10.37                   First Amendment and Consent, dated as of June 24, 1998, to
                        the Credit Agreement, dated February 12, 1998, among USAi,
                        USANi LLC, as Borrower, Various Lenders, The Chase Manhattan
                        Bank, as Administrative Agent, Syndication Agent and
                        Collateral Agent, and Bank of America National Trust &
                        Savings Association and The Bank of New York, as
                        Co-Documentation Agents, filed as Exhibit 10.39 to the S-4,
                        is incorporated herein by reference.
 
10.38                   Second Amendment, dated as of October 9, 1998, to the Credit
                        Agreement, dated February 12, 1998, among USAi, USANi LLC,
                        as Borrower, Various Lenders, The Chase Manhattan Bank, as
                        Administrative Agent, Syndication Agent and Collateral
                        Agent, and Bank of America National Trust & Savings
                        Association and The Bank of New York, as Co-Documentation
                        Agents, filed as Exhibit 10.40 to the S-4, is incorporated
                        herein by reference.
 
10.39**                 Third Amendment, dated as of April 29, 1999, to the Credit
                        Agreement, dated February 12, 1998, among USAi, USANi LLC,
                        as Borrower, Various Lenders, The Chase Manhattan Bank, as
                        Administrative Agent, Syndication Agent and Collateral
                        Agent, and Bank of America National Trust & Savings
                        Association and The Bank of New York, as Co-Documentation
                        Agents.
 
10.40**                 Fourth Amendment, dated as of January 31, 2000, to the
                        Credit Agreement, dated February 12, 1998, among USAi, USANi
                        LLC, as Borrower, Various Lenders, The Chase Manhattan Bank,
                        as Administrative Agent, Syndication Agent and Collateral
                        Agent, and Bank of America National Trust & Savings
                        Association and The Bank of New York, as Co-Documentation
                        Agents.
 
10.41                   Form of Governance Agreement among HSN, Inc., Universal
                        Studios, Inc., Liberty Media Corporation and Barry Diller,
                        dated as of October 19, 1997, filed as Appendix B to USAi's
                        Definitive Proxy Statement, dated January 12, 1998, is
                        incorporated herein by reference.
 
10.42                   Form of Stockholders Agreement among Universal Studios,
                        Inc., Liberty Media Corporation, Barry Diller, HSN, Inc. and
                        The Seagram Company Ltd. dated as of October 19, 1997, filed
                        as Appendix C to USAi's Definitive Proxy Statement, dated
                        January 12, 1998, is incorporated herein by reference.
</TABLE>

 
                                       97

<PAGE>
 

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION                            NUMBER
---------------------                           -----------                           --------
<S>                     <C>                                                           <C>
10.43                   Form of Spinoff Agreement between Liberty Media Corporation
                        and Universal Studios, Inc. dated as of October 19, 1997,
                        filed as Appendix D to USAi's Definitive Proxy Statement,
                        dated January 12, 1998, is incorporated herein by reference.
 
10.44*                  HSN, Inc. 1997 Stock and Annual Incentive Plan filed as
                        Exhibit F to USAi's Definitive Proxy Statement, dated
                        January 12, 1998, is incorporated herein by reference.
 
10.45*                  Employment Agreement between Thomas J. Kuhn and HSN, Inc.
                        dated February 9, 1998 filed as Exhibit 10.56 to USAi's
                        Annual Report on Form 10-K, for the fiscal year ended
                        December 31, 1997 is incorporated herein by reference.
 
10.46*                  Employment Agreement between Michael P. Durney and USAi,
                        dated March 30, 1998, filed as Exhibit 10.9 to USAi's 10-Q
                        for the quarter ended March 31, 1998, is incorporated herein
                        by reference.
 
10.47*/**               Employment Agreement between Michael Sileck and USAi, dated
                        October 12, 1999.
 
10.48*/**               Employment Agreement between Barry Baker and USAi, dated
                        Fabruary 19, 1999.
 
10.49*                  HSN, Inc. Retirement Savings Plan ("Savings Plan"), filed as
                        Exhibit 10.58 to USAi's Form 10-K for the fiscal year ended
                        December 31, 1997 is incorporated herein by reference.
 
10.50*                  Amendment to the Savings Plan, filed as Exhibit 10.49 to the
                        S-4, is incorporated herein by reference.
 
10.51                   Exchange Agreement, dated as of October 19, 1997, by and
                        among HSN, Inc. (renamed USA Networks, Inc.), Universal
                        Studios, Inc. (and certain of its subsidiaries) and Liberty
                        Media Corporation (and certain of its subsidiaries) filed as
                        Exhibit 10.60 to USAi's Annual Report on Form 10-K, for the
                        fiscal year ended December 31, 1997, is incorporated herein
                        by reference.
 
10.52                   License and Services Agreement, dated as of August 12, 1998,
                        by and between Ticketmaster Corporation, Ticketmaster
                        Multimedia Holdings, Inc., and USAi(confidential treatment
                        for portions thereof granted), filed as Exhibit 10.29 to
                        Ticketmaster Online-CitySearch, Inc.'s Form S-1 Registration
                        Statement No. 333-64855, is incorporated herein by
                        reference.
 
21.1**                  Subsidiaries of USAi
 
23.1**                  Consent of Ernst & Young LLP
 
27.1**                  Financial Data Schedule for the year ended December 31, 1999
                        (for SEC use only)
 
27.2**                  Financial Data Schedule for the year ended December 31, 1998
                        (for SEC use only)
 
27.3**                  Financial Data Schedule for the year ended December 31, 1997
                        (for SEC use only)
</TABLE>

 
  * Reflects management contracts and compensatory plans.
 
 ** Filed herewith.
 
    (b) Reports on Form 8-K filed during the quarter ended December 31, 1999:
 
    None
 
                                       98

<PAGE>

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

<TABLE>
<S>                                                    <C>  <C>
March [1], 2000
                                                       USA NETWORKS, INC.
 
                                                       By:               /s/ BARRY DILLER
                                                            -----------------------------------------
                                                                           Barry Diller
                                                               CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>

 
    Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March [1], 2000.
 

<TABLE>
<CAPTION>
                      SIGNATURE                                            TITLE
                      ---------                                            -----
<C>                                                    <S>
                  /s/ BARRY DILLER                     Chairman of the Board, Chief Executive Officer
     -------------------------------------------         and Director
                    Barry Diller
 
                   /s/ BARRY BAKER                     Director and Chief Operating Officer
     -------------------------------------------
                     Barry Baker
 
                /s/ MICHAEL P. DURNEY                  Vice President and Controller (Chief
     -------------------------------------------         Accounting Officer)
                  Michael P. Durney
 
                /s/ VICTOR A. KAUFMAN                  Director and Vice Chairman
     -------------------------------------------
                  Victor A. Kaufman
 
                 /s/ MICHAEL SILECK                    Senior Vice President and Chief Financial
     -------------------------------------------         Officer (Principal Financial Officer)
                   Michael Sileck
 
                  /s/ PAUL G. ALLEN                    Director
     -------------------------------------------
                    Paul G. Allen
 
               /s/ EDGAR BRONFMAN, JR.                 Director
     -------------------------------------------
                 Edgar Bronfman, Jr.
 
                 /s/ ANNE M. BUSQUET                   Director
     -------------------------------------------
                   Anne M. Busquet
</TABLE>

 
                                       99

<PAGE>
 

<TABLE>
<CAPTION>
                      SIGNATURE                                            TITLE
                      ---------                                            -----
<C>                                                    <S>
                /s/ DONALD R. KEOUGH                   Director
     -------------------------------------------
                  Donald R. Keough
 
              /s/ ROBERT W. MATSCHULLAT                Director
     -------------------------------------------
                Robert W. Matschullat
 
                 /s/ SAMUEL MINZBERG                   Director
     -------------------------------------------
                   Samuel Minzberg
 
                 /s/ BRIAN MULLIGAN                    Director
     -------------------------------------------
                   Brian Mulligan
 
                /s/ WILLIAM D. SAVOY                   Director
     -------------------------------------------
                  William D. Savoy
 
              /s/ H. NORMAN SCHWARZKOPF                Director
     -------------------------------------------
                H. Norman Schwarzkopf
 
              /s/ DIANE VON FURSTENBERG                Director
     -------------------------------------------
                Diane Von Furstenberg
</TABLE>

 
                                      100

<PAGE>
                                                                     SCHEDULE II
 
                      USA NETWORKS, INC. AND SUBSIDIARIES
                       VALUATION AND QUALIFYING ACCOUNTS
 

<TABLE>
<CAPTION>
                                            BALANCE AT   CHARGES TO     CHARGES                    BALANCE
                                            BEGINNING    COSTS AND     TO OTHER     DEDUCTIONS-    AT END
                                            OF PERIOD     EXPENSES    ACCOUNTS(2)   DESCRIBE(1)   OF PERIOD
                                            ----------   ----------   -----------   -----------   ---------
                                                                    (IN THOUSANDS)
<S>                                         <C>          <C>          <C>           <C>           <C>
Allowance for doubtful accounts:
Year ended December 31, 1999..............    $20,610      $22,808      $ 6,634       $(8,109)     $41,943
                                              =======      =======      =======       =======      =======
Year ended December 31, 1998..............    $ 3,588      $ 7,914      $14,933       $(5,825)     $20,610
                                              =======      =======      =======       =======      =======
Year ended December 31, 1997..............    $ 2,679      $ 3,432      $   813       $(3,336)     $ 3,588
                                              =======      =======      =======       =======      =======
</TABLE>

 
(1) Write-off fully reserved accounts receivable.
 
(2) Amounts relate to mergers with Savoy Pictures Entertainment, Inc. and
    subsidiaries, Home Shopping Network, Inc. and subsidiaries for 1996, the
    acquisition of USA Networks, Inc.'s interest in Ticketmaster Group, Inc. in
    1997, the acquisition of USA Network as part of the Universal Transaction in
    1998 and the acquisition of October Films as part of the October Films/PFE
    Transaction in 1999.
 
                                      101

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Directors and Stockholders
HOME SHOPPING NETWORK, INC.
 
    We have audited the accompanying consolidated balance sheets of Home
Shopping Network, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Home Shopping Network, Inc. and subsidiaries at December 31, 1999 and 1998, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
 
                                                           /s/ ERNST & YOUNG LLP
 
New York, New York
February 3, 2000

 
                                      102

<PAGE>
                  HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                           ------------------------------------
                                                              1999         1998         1997
                                                           ----------   ----------   ----------
                                                                      (IN THOUSANDS)
<S>                                                        <C>          <C>          <C>
NET REVENUES
  Networks and television production.....................  $1,305,871   $1,085,685   $       --
  Electronic retailing...................................   1,204,524    1,084,139    1,008,162
  Internet services......................................      24,620       21,191       12,857
  Other..................................................       6,882       14,495       16,041
                                                           ----------   ----------   ----------
Total net revenues.......................................   2,541,897    2,205,510    1,037,060
Operating costs and expenses:
  Cost of sales and services.............................     760,830      682,689      614,799
  Program costs..........................................     630,956      592,095           --
  Selling and marketing..................................     277,257      264,937      134,101
  General and administrative.............................     237,317      172,419       80,838
  Other operating costs..................................      89,723       87,014       81,028
  Amortization of cable distribution fees................      26,680       22,089       19,261
  Depreciation and amortization..........................     175,539      152,537       45,891
                                                           ----------   ----------   ----------
    Total operating costs and expenses...................   2,198,302    1,973,780      975,918
                                                           ----------   ----------   ----------
  Operating profit.......................................     343,595      231,730       61,142
Other income (expense):
  Interest income........................................      37,573       19,745        1,684
  Interest expense.......................................     (73,106)    (103,258)      (9,728)
  Gain on sale of securities.............................      89,721           --           --
  Miscellaneous..........................................       2,103      (19,077)     (11,799)
                                                           ----------   ----------   ----------
                                                               56,291     (102,590)     (19,843)
                                                           ----------   ----------   ----------
Earnings before income taxes.............................     399,886      129,140       41,299
Income tax expense.......................................     (73,318)     (37,313)     (27,490)
Minority interest expense................................    (241,369)     (87,262)          --
                                                           ----------   ----------   ----------
NET EARNINGS.............................................  $   85,199   $    4,565   $   13,809
                                                           ==========   ==========   ==========
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                      103

<PAGE>
                  HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>          <C>
                                       ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................  $  247,474   $  234,903
Accounts and notes receivable, net of allowance of $33,317
  and $20,572, respectively.................................     381,175      317,298
Inventories, net............................................     432,520      411,727
Investment held for sale....................................          --       27,737
Deferred income taxes.......................................      12,077        9,448
Other current assets, net...................................       8,542       14,685
                                                              ----------   ----------
  Total current assets......................................   1,081,788    1,015,798
PROPERTY, PLANT AND EQUIPMENT
Computer and broadcast equipment............................     123,606       79,465
Buildings and leasehold improvements........................      59,074       55,136
Furniture and other equipment...............................      67,246       45,616
Land........................................................      10,246       10,242
Projects in progress........................................      31,736       14,587
                                                              ----------   ----------
                                                                 291,908      205,046
  Less accumulated depreciation and amortization............     (79,350)     (43,262)
                                                              ----------   ----------
                                                                 212,558      161,784
 
OTHER ASSETS
Intangible assets, net......................................   5,029,769    5,231,776
Cable distribution fees, net ($35,181 and $39,650,
  respectively, to related parties).........................     130,988      100,416
Long-term investments.......................................      93,742       71,601
Notes and accounts receivable, net..........................      19,506           --

Inventories, net............................................     154,497      150,293
Advances to USAI and Subsidiaries...........................     410,107      132,175
Deferred income taxes.......................................      61,755       99,646
Deferred charges and other, net.............................      36,934       39,075
                                                              ----------   ----------
                                                              $7,231,644   $7,002,564
                                                              ==========   ==========
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                      104

<PAGE>
                  HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>          <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations.................  $    3,758   $   28,223
Accounts payable, trade.....................................     147,864      159,288
Obligations for program rights and film costs...............     265,235      184,074
Cable distribution fees payable ($18,733 and $18,633,
  respectively, to related parties).........................      43,993       44,588
Deferred revenue............................................      47,536       30,813
Other accrued liabilities...................................     271,846      260,441
                                                              ----------   ----------
Total current liabilities...................................     780,232      707,427
LONG-TERM OBLIGATIONS (net of current maturities)...........     527,339      732,307
OBLIGATIONS FOR PROGRAM RIGHTS AND FILM COSTS,
  net of current............................................     256,260      409,716
OTHER LONG-TERM LIABILITIES.................................      81,156       49,857
MINORITY INTEREST...........................................   4,244,114    3,783,085
COMMITMENTS AND CONTINGENCIES...............................          --           --
STOCKHOLDERS' EQUITY
 
Common Stock................................................   1,221,408    1,221,408
Additional paid-in capital..................................      70,312       70,755
Retained earnings...........................................      50,823       18,379
Accumulated other comprehensive income......................          --       10,353
Unearned compensation.......................................          --         (723)
                                                              ----------   ----------
Total stockholders' equity..................................   1,342,543    1,320,172
                                                              ----------   ----------
                                                              $7,231,644   $7,002,564
                                                              ==========   ==========
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                      105

<PAGE>
                  HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                                                                   ACCUMULATED
                                                           ADDITIONAL                                 OTHER
                                                COMMON      PAID-IN     RETAINED     UNEARNED     COMPREHENSIVE
                                   TOTAL        STOCK       CAPITAL     EARNINGS   COMPENSATION      INCOME
---------------------------------------------------------------------------------------------------------------
                                                                 (IN THOUSANDS)
<S>                              <C>          <C>          <C>          <C>        <C>            <C>
BALANCE AT DECEMBER 31, 1996...  $1,289,463   $1,221,408     $70,755    $      5      $(2,705)       $     --
Amortization of unearned
  compensation related to stock
  options and equity
  participation plans..........       1,132           --          --          --        1,132              --
Net earnings for the year ended
  December 31, 1997............      13,809           --                  13,809           --              --
                                 ----------   ----------     -------    --------      -------        --------
BALANCE AT DECEMBER 31, 1997...   1,304,404    1,221,408      70,755      13,814       (1,573)             --
Comprehensive Income:
  Net earnings for the year
    ended December 31, 1998....       4,565           --          --       4,565           --              --
  Increase in unrealized gains
    in available for sale
    securities.................      10,353           --          --          --           --          10,353
                                 ----------
    Comprehensive income.......      14,918
                                 ----------
Amortization of unearned
  compensation related to stock
  options and equity
  participation plans..........         850           --          --          --          850              --
                                 ----------   ----------     -------    --------      -------        --------
BALANCE AT DECEMBER 31, 1998...  $1,320,172   $1,221,408     $70,755    $ 18,379      $  (723)       $ 10,353
Comprehensive Income:
  Net earnings for the year
    ended December 31, 1999....      85,199           --          --      85,199           --              --
  Decrease in unrealized gains
    in available for sale
    securities.................     (10,353)          --          --          --           --         (10,353)
                                 ----------
    Comprehensive income.......      74,846
                                 ----------
Mandatory tax distribution to
  LLC partners.................     (52,755)          --          --     (52,755)          --              --
Amortization of unearned
  compensation related to stock
  options and equity
  participation plans..........         280           --        (443)         --          723              --
                                 ----------   ----------     -------    --------      -------        --------
BALANCE AT DECEMBER 31, 1999...  $1,342,543   $1,221,408     $70,312    $ 50,823      $    --        $     --
                                 ==========   ==========     =======    ========      =======        ========
</TABLE>

 
        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
 
                                      106

<PAGE>
                  HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                             ----------------------------------
                                                               1999         1998         1997
                                                             ---------   -----------   --------
                                                                       (IN THOUSANDS)
<S>                                                          <C>         <C>           <C>
Cash flows from operating activities:
  Net earnings (loss)......................................  $  85,199   $     4,565   $ 13,809
  Adjustments to reconcile net earnings (loss) to net cash
    provided by operating activities:
    Depreciation and amortization..........................    175,539       152,537     45,891
    Amortization of cable distribution fees................     26,680        22,089     19,261
    Amortization of program rights and film costs..........    532,900       509,397         --
    Amortization of deferred financing costs...............      5,035         5,503        825
    Deferred income taxes..................................     13,298        12,500     13,583
    Equity in (earnings) losses of unconsolidated
      affiliates...........................................     (1,866)       18,238     12,492
    Minority interest......................................    241,369        87,262         --
    Changes in current assets and liabilities:
      Accounts receivable..................................    (33,879)     (115,955)    (5,290)
      Inventories..........................................    (16,805)     (136,160)   (37,389)
      Accounts payable.....................................    (11,233)       75,058     14,839
      Accrued liabilities and deferred revenue.............     28,738        84,152      3,174
    Payment for program rights and film costs..............   (555,383)     (426,949)        --
    Increase in cable distribution fees....................    (42,887)      (11,338)   (16,959)
    Other, net.............................................    (19,007)       (2,625)   (30,168)
                                                             ---------   -----------   --------
      NET CASH PROVIDED BY OPERATING ACTIVITIES............    427,698       278,274     34,068
                                                             ---------   -----------   --------
Cash flows from investing activities:
  Acquisition of Universal Transaction, net of cash
    acquired...............................................         --    (1,297,233)        --
  Acquisitions, net of cash acquired.......................     (7,500)           --         --
  Capital expenditures.....................................    (70,681)      (52,085)   (27,812)
  Increase in long-term investments and notes receivable...    (54,478)      (23,226)   (26,979)
  Proceeds from sale of securities.........................    107,231            --         --
  Payment of merger and financing costs....................         --       (24,105)        --
  Other, net...............................................      8,654        (3,910)     5,000
                                                             ---------   -----------   --------
      NET CASH USED IN INVESTING ACTIVITIES................    (16,774)   (1,400,559)   (49,791)
                                                             ---------   -----------   --------
Cash flows from financing activities:
  Advances (to)/from USAi..................................   (493,985)     (105,105)    23,390
  Borrowings...............................................         --     1,641,380         --
  Net proceeds from issuance of Senior Notes...............         --       494,350         --
  Principal payments on long-term obligations..............   (253,224)   (1,491,484)      (919)
  Payment of mandatory tax distribution to LLC partners....    (52,755)           --         --
  Repurchase of LLC shares.................................     (8,934)           --         --
  Proceeds from issuance of LLC shares.....................    410,545       795,025         --
                                                             ---------   -----------   --------
      NET CASH PROVIDED BY (USED IN) FINANCING
        ACTIVITIES.........................................   (398,353)    1,334,166     22,471
                                                             ---------   -----------   --------
  NET INCREASE IN CASH AND CASH EQUIVALENTS................     12,571       211,881      6,748
Cash and cash equivalents at beginning of period...........    234,903        23,022     16,274
                                                             ---------   -----------   --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................  $ 247,474   $   234,903   $ 23,022
                                                             =========   ===========   ========
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                      107

<PAGE>
                  HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION
 
    Home Shopping Network, Inc. (the "Company" or "Home Shopping"), is a holding
company, whose subsidiary USANi LLC is engaged in diversified media and
electronic commerce businesses. In December 1996, the Company consummated a
merger with USA Networks, Inc. ("USAi"), formerly known as HSN, Inc., and became
a subsidiary of USAi (the "Home Shopping Merger").
 
    On February 12, 1998, USAi acquired USA Networks, a New York general
partnership, consisting of cable television networks, USA Network and 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") (the "Universal Transaction").
 
    In connection with the Universal Transaction, the Company formed a new
subsidiary, USANi LLC, and contributed the operating assets of the Home Shopping
Network services ("HSN") to USANi LLC. Furthermore, USAi contributed Networks
and Studios USA to USANi LLC on February 12, 1998.
 
    As of December 31, 1999, the Company engages in three principal areas of
business:
 
    - NETWORKS AND TELEVISION PRODUCTION, which includes Networks and Studios
      USA. Networks operates the USA Network and 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.
 
    - INTERNET SERVICES, which represents Internet Shopping Network, the
      Company's on-line retailing networks business.
 
BASIS OF PRESENTATION
 
    As Home Shopping has no operations, its notes to consolidated financial
statements cover substantially the same subject manner as its subsidiary, USANi
LLC, which statements are filed as part of this filing. As permitted by
Regulation S-X, Section 4.04, the Holdco notes to consolidated financial
statements omit disclosure which covers substantially the same subject manner as
USANi LLC's notes to consolidated financial statements, which is presented
beginning on page 111 in the USAi Form 10-K for the year ended December 31,
1999.
 
NOTE 2--INCOME TAXES
 
    In connection with the Home Shopping Merger on December 20, 1996, Home
Shopping became a subsidiary of USAi and began to be included in the
consolidated federal tax returns of USAi. Federal income tax expense represents
an allocation of income tax expense from USAi, calculated as if Home Shopping
was a separate filer for federal tax purposes.
 
                                      108

<PAGE>
                  HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    A reconciliation of total income tax expense to the amounts computed by
applying the statutory federal income tax rate to earnings before income taxes
is shown as follows:
 

<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                          YEARS ENDED
                                                 ------------------------------
                                                   1999       1998       1997
                                                 --------   --------   --------
                                                         (IN THOUSANDS)
<S>                                              <C>        <C>        <C>
Income tax expense at the federal statutory
  rate of 35%..................................  $140,064   $ 45,199   $14,454
Amortization of goodwill and other
  intangibles..................................    11,618     12,369    10,916
State income taxes, net of effect of federal
  tax benefit..................................    10,128      4,363       723
Impact of minority interest....................   (87,246)   (26,509)       --
Other, net.....................................    (1,246)     1,891     1,397
                                                 --------   --------   -------
Income tax expense.............................  $ 73,318   $ 37,313   $27,490
                                                 ========   ========   =======
</TABLE>

 
    The components of income tax expense are as follows:
 

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                            YEARS ENDED
                                                   ------------------------------
                                                     1999       1998       1997
                                                   --------   --------   --------
                                                           (IN THOUSANDS)
<S>                                                <C>        <C>        <C>
Current income tax expense (benefit):
Federal..........................................  $47,265    $20,061    $12,795
  State..........................................   12,755      4,752      1,112
                                                   -------    -------    -------
      Current income tax expense (benefit).......   60,020     24,813     13,907
                                                   -------    -------    -------
Deferred income tax expense:
  Federal........................................   10,472     10,541     12,955
  State..........................................    2,826      1,959        628
                                                   -------    -------    -------
      Deferred income tax expense................   13,298     12,500     13,583
                                                   -------    -------    -------
      Total income tax expense...................  $73,318    $37,313    $27,490
                                                   =======    =======    =======
</TABLE>

 
    The tax effects of cumulative temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 1999 and 1998, are presented below. The
 
                                      109

<PAGE>
                  HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
valuation allowance represents items for which it is more likely than not that
the tax benefit will not be realized.
 

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                          -------------------
                                                            1999       1998
                                                          --------   --------
                                                            (IN THOUSANDS)
<S>                                                       <C>        <C>
Current deferred tax assets (liabilities):
Inventory costing.......................................  $  5,141   $  6,860
  Provision for accrued expenses........................     4,682      5,742
  Deferred revenue......................................   (19,336)   (20,212)
  Other.................................................    21,590     17,058
                                                          --------   --------
      Total current deferred tax assets.................  $ 12,077   $  9,448
                                                          ========   ========
Non-current deferred tax assets:
  Broadcast and cable fee contracts.....................  $  4,300   $ 10,381
  Programming costs.....................................    43,249     31,847
  Amortization of tax deductible goodwill...............   (39,353)   (19,464)
  Other.................................................    57,156     80,479
                                                          --------   --------
      Total non-current deferred tax assets.............    65,352    103,243
      Less valuation allowance..........................    (3,597)    (3,597)
                                                          --------   --------
      Net non-current deferred tax assets...............  $ 61,755   $ 99,646
                                                          ========   ========
</TABLE>

 
    The Company has Federal income tax returns under examination by the Internal
Revenue Service. The Company has received proposed adjustments related to
certain examinations. Management believes that the resolution of the proposed
adjustments will not have a material adverse effect on the Company's
consolidated financial statements.
 
NOTE 3--GUARANTEE OF NOTES
 
    USAi issued $500.0 million 6 3/4% Senior Notes due 2005 (the "Notes"). USANi
LLC is a co-issuer and co-obligor of the Notes. The Notes are jointly,
severally, fully and unconditionally guaranteed by certain subsidiaries of USAi,
including the Company and all of the subsidiaries of USANi LLC (other than
subsidiaries that are, individually and in the aggregate, inconsequential to
USANi LLC on a consolidated basis) (collectively, the "Subsidiary Guarantors").
All of the Subsidiary Guarantors (other than the Company) (the "Wholly Owned
Subsidiary Guarantors") are wholly owned, directly or indirectly, by the Company
or USANi LLC, as the case may be.
 
    Separate financial statements for each of the Wholly Owned Subsidiary
Guarantors are not presented and such Wholly Owned Subsidiary Guarantors are not
filing separate reports under the Securities Exchange Act of 1934 because the
Company's management has determined that the information contained in such
documents would not be material to investors.
 
                                      110

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS
 
The Members of USANi LLC
 
    We have audited the accompanying consolidated balance sheets of USANi LLC
and subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, members' equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
 
    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
USANi LLC and subsidiaries at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
 
                                                           /s/ ERNST & YOUNG LLP
 
New York, New York
February 3, 2000

 
                                      111

<PAGE>
                           USANI LLC AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                          ------------------------------------------
                                                             1999           1998            1997
                                                          ----------   --------------   ------------
                                                                       (IN THOUSANDS)   (PREDECESSOR
                                                                                          COMPANY)
<S>                                                       <C>          <C>              <C>
NET REVENUES
  Networks and television production....................  $1,305,871     $1,085,685      $       --
  Electronic retailing..................................   1,204,524      1,084,139       1,008,162
  Internet services.....................................      24,620         21,191          12,857
  Other.................................................       6,882         14,495          16,041
                                                          ----------     ----------      ----------
Total net revenues......................................   2,541,897      2,205,510       1,037,060
Operating costs and expenses:
  Cost of sales and services............................     760,830        682,689         614,799
  Program costs.........................................     630,956        592,095              --
  Selling and marketing.................................     277,257        264,937         134,101
  General and administrative............................     237,317        172,419          80,838
  Other operating costs.................................      89,723         87,014          81,028
  Amortization of cable distribution fees...............      26,680         22,089          19,261
  Depreciation and amortization.........................     175,539        152,537          45,891
                                                          ----------     ----------      ----------
    Total operating costs and expenses..................   2,198,302      1,973,780         975,918
                                                          ----------     ----------      ----------
  Operating profit......................................     343,595        231,730          61,142
Other income (expense):
  Interest income.......................................      37,573         19,745           1,684
  Interest expense......................................     (73,106)      (102,377)         (4,464)
  Gain on sale of securities............................      89,721             --              --
  Miscellaneous.........................................       2,103        (19,077)        (11,799)
                                                          ----------     ----------      ----------
                                                              56,291       (101,709)        (14,579)
                                                          ----------     ----------      ----------
Earnings before income taxes............................     399,886        130,021          46,563
Minority interest benefit...............................         603            881              --
Income tax expense......................................      (5,501)        (5,367)        (30,308)
                                                          ----------     ----------      ----------
NET EARNINGS............................................  $  394,988     $  125,535      $   16,255
                                                          ==========     ==========      ==========
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                      112

<PAGE>
                           USANI LLC AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>          <C>
                           ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................  $  247,474   $  234,903
Accounts and notes receivable, net of allowance of $33,317
  and $20,572, respectively.................................     381,175      317,298
Inventories, net............................................     432,520      411,727
Investments held for sale...................................          --       35,234
Other current assets, net...................................       8,542       14,685
                                                              ----------   ----------
  Total current assets......................................   1,069,711    1,013,847
PROPERTY, PLANT AND EQUIPMENT
Computer and broadcast equipment............................     123,606       79,465
Buildings and leasehold improvements........................      59,074       55,136
Furniture and other equipment...............................      67,246       45,616
Land........................................................      10,246       10,242
Projects in progress........................................      31,736       14,587
                                                              ----------   ----------
                                                                 291,908      205,046
  Less accumulated depreciation and amortization............     (79,350)     (43,262)
                                                              ----------   ----------
                                                                 212,558      161,784
OTHER ASSETS
Intangible assets, net......................................   5,105,510    5,307,517
Cable distribution fees, net ($35,181 and $39,650,
  respectively, to related parties).........................     130,988      100,416
Long-term investments.......................................      93,742       71,601
Notes and accounts receivable, net..........................      19,506           --
Inventories, net............................................     154,497      150,293
Advances to USAI and Subsidiaries...........................     649,480      158,152
Deferred charges and other, net.............................      36,934       39,075
                                                              ----------   ----------
                                                              $7,472,926   $7,002,685
                                                              ==========   ==========
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                      113

<PAGE>
                           USANI LLC AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>          <C>
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations.................  $    3,758   $   28,223
Accounts payable, trade.....................................     147,864      159,288
Obligations for program rights and film costs...............     265,235      184,074
Cable distribution fees payable ($18,733 and $18,633,
  respectively, to related parties).........................      43,993       44,588
Deferred revenue............................................      47,536       30,813
Other accrued liabilities...................................     257,575      248,271
                                                              ----------   ----------
Total current liabilities...................................     765,961      695,257
LONG-TERM OBLIGATIONS
  (net of current maturities)...............................     527,339      732,307
OBLIGATIONS FOR PROGRAM RIGHTS AND FILM COSTS,
  net of current............................................     256,260      409,716
OTHER LONG-TERM LIABILITIES.................................      81,156       49,857
MINORITY INTEREST...........................................         531          143
COMMITMENTS AND CONTINGENCIES...............................          --           --
MEMBERS' EQUITY
Class A (245,601,782 and 227,557,484 shares,
  respectively).............................................   1,912,514    1,753,618
Class B (282,161,532 and 267,379,778 shares,
  respectively).............................................   2,978,635    2,736,363
Class C (45,774,708 shares).................................     466,252      466,252
Retained earnings...........................................     484,278      142,045
Accumulated other comprehensive income......................          --       17,850
Unearned compensation.......................................          --         (723)
                                                              ----------   ----------
Total members' equity.......................................   5,841,679    5,115,405
                                                              ----------   ----------
                                                              $7,472,926   $7,002,685
                                                              ==========   ==========
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                      114

<PAGE>
                           USANI LLC AND SUBSIDIARIES
 
                   CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
 

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                                            MEMBERS'    RETAINED     UNEARNED
                                                                TOTAL        EQUITY     EARNINGS   COMPENSATION
----------------------------------------------------------------------------------------------------------------
                                                                                (IN THOUSANDS)
<S>                                                           <C>          <C>          <C>        <C>
BALANCE AT JANUARY 1, 1997..................................  $1,390,975   $1,393,425   $   255       $(2,705)
                                                              ----------   ----------   -------       -------
Net earnings for the year ended December 31, 1997...........      16,255           --    16,255            --
Amortization of unearned compensation related to stock
  options and equity participation plans....................       1,132           --        --         1,132
                                                              ----------   ----------   -------       -------
BALANCE AT DECEMBER 31, 1997................................  $1,408,362   $1,393,425   $16,510       $(1,573)
                                                              ==========   ==========   =======       =======
</TABLE>

 

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                    ACCUMULATED
                                                  CLASS A      CLASS B      CLASS C                    OTHER
                                                    LLC          LLC          LLC       RETAINED   COMPREHENSIVE      UNEARNED
                                      TOTAL        SHARES       SHARES       SHARES     EARNINGS       INCOME       COMPENSATION
---------------------------------------------------------------------------------------------------------------------------------
                                                                           (IN THOUSANDS)
<S>                                 <C>          <C>          <C>          <C>          <C>        <C>              <C>
CONTRIBUTION OF EQUITY EFFECTIVE
  AT
  JANUARY 1, 1998.................  $1,408,362   $1,393,425   $       --   $       --   $16,510       $     --         $(1,573)
Comprehensive income:
  Net earnings for the year ended
    December 31, 1998.............     125,535           --           --           --   125,535             --              --
  Increase in unrealized gains in
    available for sale
    securities....................      17,850           --           --           --        --         17,850              --
                                    ----------
    Comprehensive income..........     143,385
                                    ----------
Distribution of net deferred tax
  assets to USAi on February 12,
  1998............................     (46,765)     (46,765)          --           --        --             --              --
LLC Shares issued on February 12,
  1998 in connection with
  Universal Transaction...........   2,514,548      277,898    2,236,650           --        --             --              --
Other LLC Shares issued...........   1,095,025       93,949      534,824      466,252        --             --              --
Exchange of Class B LLC Shares for
  Class A LLC Shares (See Note
  9)..............................          --       35,111      (35,111)          --        --             --              --
Amortization of unearned
  compensation related to stock
  options and equity participation
  plans...........................         850           --           --           --        --             --             850
                                    ----------   ----------   ----------   ----------   --------      --------         -------
BALANCE AT DECEMBER 31, 1998......   5,115,405    1,753,618    2,736,363      466,252   142,045         17,850            (723)
Comprehensive income:
  Net earnings for the year ended
    December 31, 1999                  394,988           --           --           --   394,988             --              --
  Decrease in unrealized gains in
    available for sale
    securities....................     (17,850)          --           --           --        --        (17,850)             --
                                    ----------
    Comprehensive income..........     377,138
                                    ----------
Issuance of LLC shares............     410,545      168,273      242,272           --        --             --              --
Repurchase of LLC shares..........      (8,934)      (8,934)          --           --        --             --              --
Mandatory tax distribution to LLC
  partners........................     (52,755)          --           --           --   (52,755)            --              --
Cancellation of employee equity
  program.........................         280         (443)          --           --        --             --             723
                                    ----------   ----------   ----------   ----------   --------      --------         -------
BALANCE AT DECEMBER 31, 1999......  $5,841,679   $1,912,514   $2,978,635   $  466,252   $484,278      $     --         $    --
                                    ==========   ==========   ==========   ==========   ========      ========         =======
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                      115

<PAGE>
                           USANI LLC AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 

<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31,
                                                              --------------------------------------
                                                                1999         1998           1997
                                                              ---------   -----------   ------------
                                                                                        (PREDECESSOR
                                                                                          COMPANY)
                                                                          (IN THOUSANDS)
<S>                                                           <C>         <C>           <C>
Cash flows from operating activities:
  Net earnings..............................................  $ 394,988   $   125,535   $     16,255
  Adjustments to reconcile net earnings (loss) to net cash
    provided by operating activities:
    Depreciation and amortization...........................    175,539       152,537         45,891
    Amortization of cable distribution fees.................     26,680        22,089         19,261
    Amortization of program rights and film costs...........    532,900       509,397             --
    Gain on sale of securities..............................    (89,721)           --             --
    Amortization of deferred financing costs................      5,035         5,423            188
    Deferred income taxes...................................         --            --         13,583
    Equity in (earnings) losses of unconsolidated
      affiliates............................................     (1,866)       18,238         12,492
    Minority interest.......................................       (603)         (881)            --
    Changes in current assets and liabilities:
      Accounts receivable...................................    (33,879)     (115,955)        (5,290)
      Inventories...........................................    (16,805)     (136,160)       (37,389)
      Accounts payable......................................    (11,233)       75,058         14,839
      Accrued liabilities and deferred revenue..............     28,738        92,932          5,992
    Payment for program rights and film costs...............   (555,383)     (426,949)            --
    Increase in cable distribution fees.....................    (42,887)      (11,338)       (16,959)
    Other, net..............................................     16,195       (31,652)       (28,626)
                                                              ---------   -----------   ------------
      NET CASH PROVIDED BY OPERATING ACTIVITIES.............    427,698       278,274         40,237
                                                              ---------   -----------   ------------
Cash flows from investing activities:
  Acquisition of Universal Transaction, net of cash
    acquired................................................         --    (1,297,233)            --
  Acquisitions, net of cash acquired........................     (7,500)           --             --
  Capital expenditures......................................    (70,681)      (52,085)       (27,812)
  Increase in long-term investments and notes receivable....    (54,478)      (23,226)       (26,979)
  Proceeds from sale of securities..........................    107,231            --             --
  Payment of merger and financing costs.....................         --       (24,105)            --
  Other, net................................................      8,654        (3,910)         5,000
                                                              ---------   -----------   ------------
      NET CASH USED IN INVESTING ACTIVITIES.................    (16,774)   (1,400,559)       (49,791)
                                                              ---------   -----------   ------------
Cash flows from financing activities:
  Advances (to)/from USAi...................................   (493,985)     (105,105)        16,302
  Borrowings................................................         --     1,641,380             --
  Net proceeds from issuance of Senior Notes................         --       494,350             --
  Payment of mandatory tax distribution to LLC partners.....    (52,755)           --             --
  Principal payments on long-term obligations...............   (253,224)   (1,491,484)            --
  Repurchase of LLC shares..................................     (8,934)           --             --
  Proceeds from issuance of LLC shares......................    410,545       795,025             --
                                                              ---------   -----------   ------------
      NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES...   (398,353)    1,334,166         16,302
                                                              ---------   -----------   ------------
  NET INCREASE IN CASH AND CASH EQUIVALENTS.................     12,571       211,881          6,748
Cash and cash equivalents at beginning of period............    234,903        23,022         16,274
                                                              ---------   -----------   ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................  $ 247,474   $   234,903   $     23,022
                                                              =========   ===========   ============
</TABLE>

 
The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.
 
                                      116

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 1--COMPANY FORMATION, BUSINESS AND BASIS OF PRESENTATION
 
COMPANY FORMATION
 
    USANi LLC (the "Company" or "LLC"), a Delaware limited liability company,
was formed on February 12, 1998 and is a subsidiary of Home Shopping
Network, Inc. ("Home Shopping" or "Holdco"), which is a subsidiary of USA
Networks, Inc. ("USAi"), formerly known as HSN, Inc. At its formation, USAi and
Home Shopping contributed substantially all of the operating assets and
liabilities of Home Shopping to the Company in exchange for Class A LLC Shares
of the Company.
 
    On February 12, 1998, the Company acquired USA Networks, a New York general
partnership, consisting of cable television networks, USA Network and 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") (the "Universal Transaction")--See Note 3.
 
    In connection with the Universal Transaction, the Company paid Universal
approximately $4.1 billion in the form of a cash payment of approximately
$1.6 billion, and an effective 45.8% interest in USAi through shares of common
stock, par value $.01 per share, of USAi (the "USAi Common Stock") and Class B
common stock, par value $.01 per share, of USAi (the "USAi Class B Common
Stock"), and Class B LLC Shares exchangeable (subject to regulatory
restrictions) into shares of USAi Common Stock and USAi Class B Common Stock.
 
    The Investment Agreement, as amended and restated as of December 18, 1997,
among USAi, Home Shopping, Universal and Liberty Media Corporation ("Liberty")
(the "Investment Agreement"), relating to the Universal Transaction also
contemplated that, on or prior to June 30, 1998, USAi and Liberty, now a
subsidiary of AT&T Corporation ("AT&T"), would complete a transaction involving
a $300 million cash investment, plus an interest factor, by Liberty in USAi
and/or the Company through the purchase of USAi Common Stock or Class C LLC
Shares. The transaction closed on June 30, 1998 with Liberty making a cash
payment of $308.5 million in exchange for 30,000,000 Class C LLC Shares.
 
    On January 20, 2000, the Board of Directors declared a two-for-one stock
split of USANi LLC's members' equity interests, payable in the form of a
dividend to shareholders of record as of the close of business on February 10,
2000. The stock dividend was paid on February 24, 2000. All share numbers give
effect to such stock split.
 
COMPANY BUSINESS
 
    The Company is a holding company, the subsidiaries of which are engaged in
diversified media and electronic commerce businesses.
 
    The three principal areas of business are:
 
    - NETWORKS AND TELEVISION PRODUCTION, which includes Networks and Studios
      USA. Networks operates the USA Network and Sci-Fi Channel cable networks
      and Studios USA produces and distributes television programming.
 
    - ELECTRONIC RETAILING, which consists primarily of the Home Shopping
      Network and America's Store which are engaged in the electronic retailing
      business.
 
    - INTERNET SERVICES, which represents Internet Shopping Network, the
      Company's on-line retailing networks business.
 
                                      117

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
BASIS OF PRESENTATION
 
    The contribution of assets by USAi and Home Shopping to the Company was
accounted for in the accompanying consolidated financial statements in a manner
similar to the pooling-of-interests for business combinations due to the common
ownership of Home Shopping and USANi LLC. Accordingly, the assets and
liabilities were transferred to the LLC at Home Shopping's historical cost.
 
    Given that equity interests in limited liability companies are not in the
form of common stock, earnings per share data is not presented.
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
CONSOLIDATION
 
    The 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 not in excess of 50%,
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.
 
REVENUES
 
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 commencement 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.
 
ELECTRONIC RETAILING AND INTERNET SERVICES
 
    Revenues from electronic retailing and internet services primarily consist
of merchandise sales and are reduced by incentive discounts and sales returns to
arrive at net sales. Revenues are recorded for credit card sales upon
transaction authorization, and for check sales upon receipt of customer payment,
which does not vary significantly from the time goods are shipped. Home
Shopping's sales policy allows merchandise to be returned at the customer's
discretion within 30 days of the date of delivery. Allowances for returned
merchandise and other adjustments are provided based upon past experience.
 
                                      118

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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.
 
MERCHANDISE INVENTORIES, NET
 
    Merchandise inventories are valued at the lower of cost or market, cost
being determined using the first-in, first-out method. Cost includes freight,
certain warehouse costs and other allocable overhead. Market is determined on
the basis of net realizable value, giving consideration to obsolescence and
other factors. Merchandise inventories are presented net of an inventory
carrying adjustment of $29.1 million and $23.4 million at December 31, 1999 and
1998, respectively.
 
CASH AND CASH EQUIVALENTS
 
    Cash and cash equivalents include cash and short-term investments.
Short-term investments consist primarily of U.S. Treasury Securities, U.S.
Government agencies and certificates of deposit with original maturities of less
than 91 days.
 
PROPERTY, PLANT AND EQUIPMENT
 
    Property, plant and equipment, including significant improvements, are
recorded at cost. Repairs and maintenance and any gains or losses on
dispositions are included in operations.
 
    Depreciation and amortization is provided for on a straight-line basis to
allocate the cost of depreciable assets to operations over their estimated
service lives.
 

<TABLE>
<CAPTION>
ASSET CATEGORY                                      DEPRECIATION/AMORTIZATION PERIOD
--------------                                      --------------------------------
<S>                                                 <C>
Computer and broadcast equipment..................  3 to 13 Years
Buildings.........................................  30 to 40 Years
Leasehold improvements............................  4 to 20 Years
Furniture and other equipment.....................  3 to 10 Years
</TABLE>

 
    Depreciation and amortization expense on property, plant and equipment was
$41.0 million and $35.0 million for the years ended December 31, 1999 and 1998.
 
LONG-LIVED ASSETS INCLUDING INTANGIBLES
 
    The Company's accounting policy regarding the assessment of the
recoverability of the carrying value of long-lived assets, including goodwill
and other intangibles and property, plant and equipment, is to review the
carrying value of the assets if the facts and circumstances suggest that they
may be impaired. If this review indicates that the carrying value will not be
recoverable, as determined based on the projected undiscounted future cash
flows, the carrying value is reduced to its estimated fair value.
 
                                      119

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
CABLE DISTRIBUTION FEES
 
    Cable distribution fees relate to upfront fees paid in connection with long
term cable contracts for carriage of Home Shopping's programming. These fees are
amortized to expense on a straight line basis over the terms of the respective
contracts, with original terms from 5 to 15 years.
 
ADVERTISING
 
    Advertising costs are primarily expensed in the period incurred. Advertising
expense for the years ended December 31, 1999, 1998 and 1997 were
$95.5 million, $88.8 million and $13.2 million, respectively.
 
STOCK-BASED COMPENSATION
 
    The Company is subject to Statement of Financial Accounting Standards
No. 123 "Accounting and Disclosure of Stock-Based Compensation" ("SFAS 123"). As
allowed by SFAS 123, the Company accounts for stock-based compensation in
accordance with APB 25, "Accounting for Stock Issued to Employees." In cases
where exercise prices are less than fair value as of the grant date,
compensation is recognized over the vesting period.
 
MINORITY INTEREST
 
    Minority interest represents the ownership interests of third parties in the
net assets and results of operations of certain consolidated subsidiaries.
 
ACCOUNTING ESTIMATES
 
    Management of the Company is required to make certain estimates and
assumptions during the preparation of consolidated financial statements in
accordance with generally accepted accounting principles. These estimates and
assumptions impact the reported amount of assets and liabilities and disclosures
of contingent assets and liabilities as of the date of the consolidated
financial statements. They also impact the reported amount of net earnings
during any period. Actual results could differ from those estimates.
 
    Significant estimates underlying the accompanying consolidated financial
statements include the inventory carrying adjustment, program rights and film
cost amortization, sales return and other revenue allowances, allowance for
doubtful accounts, recoverability of intangibles and other long-lived assets,
estimates of film revenue ultimates and various other operating allowances and
accruals.
 
RECLASSIFICATIONS
 
    Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform to the 1999 presentation.
 
NOTE 3--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 USAi through
shares of USAi common stock and USAi Class B Common Stock, and LLC Shares which
are exchangeable (subject to regulatory restrictions) into shares of USAi Common
Stock and USAi Class B Common Stock. At the closing of the Universal
Transaction, USAi contributed its Home Shopping business to USANi LLC, a
subsidiary of USAi.
 
                                      120

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    The Investment Agreement, as amended and restated as of December 18, 1997,
among USAi, 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 AT&T Corporation
("AT&T"), 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 30,000,000 LLC shares.
 
    The following unaudited pro forma consolidated financial information for the
year ended December 31, 1998 and 1997, is presented to reflect the results of
the Company as if the Universal Transaction occurred at the beginning of each of
the periods presented. The pro forma results include certain adjustments,
including increased amortization related to goodwill, changes in programming and
film costs amortization and an increase in interest expense, and are not
necessarily indicative of what the results would have been had the Universal
Transaction actually occurred on the aforementioned dates.
 

<TABLE>
<CAPTION>
                                                             YEAR ENDED
                                                            DECEMBER 31,
                                                       -----------------------
                                                          1998         1997
                                                       ----------   ----------
                                                           (IN THOUSANDS)
<S>                                                    <C>          <C>
Net revenues.........................................  $2,362,874   $2,144,664
Net earnings.........................................     143,187       65,648
</TABLE>

 
NOTE 4--INTANGIBLE ASSETS
 
    Intangible assets represents goodwill which is amortized using the
straight-line method over 40 years.
 
    Goodwill primarily relates to the acquisition by USAi of Home Shopping and
the Universal Transaction, and represents the excess of purchase price over the
fair value of assets acquired and is net of accumulated amortization of
$284.7 million and $150.7 million at December 31, 1999 and 1998, respectively.
 
NOTE 5--LONG-TERM OBLIGATIONS
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Unsecured Senior Credit Facility ("New Facility"); with a
  $40,000,000 sub-limit for letters of credit, entered into
  February 12, 1998, which matures on December 31, 2002. At
  the Company's option, the interest rate on borrowings is
  tied to the London Interbank Offered Rate ("LIBOR") or the
  Alternate Base Rate ("ABR"), plus an applicable margin.
  Interest rate at December 31, 1998 was 6.0%...............  $     --   $250,000
$500,000,000 6 3/4% Senior Notes (the "Senior Notes") due
  November 15, 2005; interest payable May 15 and November 15
  commencing May 15, 1999. Interest rate at December 31,
  1999 was 6.84%............................................   497,914    496,896
Other long-term obligations maturing through 2007...........    33,183     13,634
                                                              --------   --------
Total long-term obligations.................................   531,097    760,530
Less current maturities.....................................    (3,758)   (28,223)
                                                              --------   --------
Long-term obligations, net of current maturities............  $527,339   $732,307
                                                              ========   ========
</TABLE>

 
                                      121

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    On February 12, 1998, USAi and USANi LLC, as borrower, entered into a credit
agreement which provides for a $1.6 billion credit facility. The credit facility
was used to finance the Universal Transaction and to refinance USAi's
then-existing $275.0 million revolving credit facility. The credit facility
consists of (1) a $600.0 million revolving credit facility with a $40.0 million
sub-limit for letters of credit, (2) a $750.0 million Tranche A Term Loan and,
(3) a $250.0 million Tranche B Term Loan. The Tranche A Term Loan and the
Tranche B Term Loan have been permanently repaid as of December 31, 1999, as
described below. The revolving credit facility expires on December 31, 2002.
 
    On November 23, 1998, USAi and USANi LLC completed an offering of
$500.0 million 6 3/4% Senior Notes due 2005 (the "Notes"). Proceeds received
from the sale of the Notes together with available cash were used to repay and
permanently reduce $500.0 million of the Tranche A Term Loan. On August 5, 1998,
USANi LLC permanently repaid the Tranche B Term Loan in the amount of
$250.0 million from cash on hand. In 1999 the Company permanently repaid the
Tranche A Term Loan in the amount of $250.0 million from cash on hand.
 
    The existing credit facility is guaranteed by substantially all of USAi's
material subsidiaries. The interest rate on borrowings under the existing credit
facility is tied to an alternate base rate or the London InterBank Rate, in each
case, plus an applicable margin, and $598.7 million was available for borrowing
as of December 31, 1999 after taking into account outstanding letters of credit.
The credit facility includes covenants requiring, among other things,
maintenance of specific operating and financial ratios and places restrictions
on payments of dividends, incurrence of indebtedness and investments. The
Company pays a commitment fee of .1875% on the unused portion of the credit
facility.
 
    Aggregate contractual maturities of long-term obligations are as follows:
 

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,                                     (IN THOUSANDS)
-------------------------                                     --------------
<S>                                                           <C>
2000........................................................     $  3,758
2001........................................................        6,500
2002........................................................        6,315
2003........................................................        2,722
2004........................................................        2,031
Thereafter..................................................      509,771
                                                                 --------
                                                                 $531,097
                                                                 ========
</TABLE>

 
NOTE 6--INCOME TAXES
 
    The Company was formed as a limited liability company on February 12, 1998
and is treated as a partnership for income tax purposes. As such, the individual
LLC members are subject to federal and state taxes based on their allocated
portion of income and expenses and the Company is not subject to Federal and
state income taxation. However, for the period January 1, 1998 to February 11,
1998 and the year ended December 31, 1997, the Company and its predecessor were
subject to Federal and state taxation.
 
                                      122

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    A reconciliation of total income tax expense to the amounts computed by
applying the statutory federal income tax rate to earnings (loss) before income
taxes is shown as follows:
 

<TABLE>
<CAPTION>
                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                                   1997
                                                              --------------
                                                              (IN THOUSANDS)
<S>                                                           <C>
Income tax expense (benefit) at the federal statutory rate
  of 35%....................................................      $16,297
Amortization of goodwill and other intangibles..............       10,916
State income taxes, net of effect of federal tax benefit....        1,064
Non-deductible portion of executive compensation............           --
Other, net..................................................        2,031
                                                                  -------
Income tax expense..........................................      $30,308
                                                                  =======
</TABLE>

 
    The components of income tax expense are as follows:
 

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                              DECEMBER 31, 1997
                                                              -----------------
                                                               (IN THOUSANDS)
<S>                                                           <C>
Current income tax expense:
  Federal...................................................       $15,088
  State.....................................................         1,637
                                                                   -------
    Current income tax expense..............................        16,725
Deferred income tax expense:
  Federal...................................................        12,955
  State.....................................................           628
                                                                   -------
    Deferred income tax expense.............................        13,583
                                                                   -------
    Total income tax expense................................       $30,308
                                                                   =======
</TABLE>

 
    The Company has Federal income tax returns under examination by the Internal
Revenue Service. The Company has received proposed adjustments related to
certain examinations. Management believes that the resolution of the proposed
adjustments will not have a material adverse effect on the Company's
consolidated financial statements.
 
NOTE 7--COMMITMENTS AND CONTINGENCIES
 
    The Company leases satellite transponders, computers, warehouse and office
space, as well as broadcast and production facilities, equipment and services
used in connection with its operations under various operating leases and
contracts, many of which contain escalation clauses.
 
                                      123

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    Future minimum payments under non-cancellable agreements are as follows:
 

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,                                     (IN THOUSANDS)
-------------------------                                     --------------
<S>                                                           <C>
2000........................................................     $ 46,243
2001........................................................       43,948
2002........................................................       36,270
2003........................................................       18,346
2004........................................................       13,320
Thereafter..................................................       14,460
                                                                 --------
                                                                 $172,587
                                                                 ========
</TABLE>

 
    Expenses charged to operations under these agreements were $44.1 million,
$45.9 million and $20.0 million for the years ended December 31, 1999, 1998 and
1997, respectively.
 
    The Company is required to provide funding, from time to time, for the
operations of its investments in joint ventures accounted for under the equity
method.
 
NOTE 8--INVENTORIES
 

<TABLE>
<CAPTION>
                                                         DECEMBER 31,            DECEMBER 31,
                                                             1999                    1998
                                                     ---------------------   ---------------------
                                                     CURRENT    NONCURRENT   CURRENT    NONCURRENT
                                                     --------   ----------   --------   ----------
                                                                    (IN THOUSANDS)
<S>                                                  <C>        <C>          <C>        <C>
Film costs:
  Released, net of amortization....................  $ 76,183    $ 47,012    $ 98,082    $ 61,283
  In process and unreleased........................    38,366       2,378         138          --
Programming costs, net of amortization.............   149,959     105,107     151,192      89,010
Sales merchandise, net.............................   168,012          --     162,315          --
                                                     --------    --------    --------    --------
    Total..........................................  $432,520    $154,497    $411,727    $150,293
                                                     ========    ========    ========    ========
</TABLE>

 
    The Company estimates that approximately 90% of unamortized film costs at
December 31, 1999 will be amortized within the next three years.
 
NOTE 9--MEMBERS' EQUITY
 
    On January 20, 2000, the Board of Directors declared a two-for-one stock
split of USANi LLC's members' equity interests, payable in the form of a
dividend to shareholders of record as of the close of business on February 10,
2000. The 100% stock dividend was paid on February 24, 2000. All share numbers
give effect to such stock split.
 
    In connection with the Universal Transaction, the Company was formed through
the authorization and issuance of three classes of shares, Class A LLC Shares,
Class B LLC Shares and Class C LLC Shares. In return for LLC Shares (i) USAi
(and certain of its subsidiaries) contributed its assets and liabilities related
to its Electronic retailing and Internet services businesses and (ii) Universal
(and certain of its subsidiaries) contributed Networks and Studios USA. On
June 30, 1998, and in connection with the Universal Transaction, Liberty
purchased 30,000,000 Class C LLC Shares for $308.5 million. USAi, Home Shopping,
Universal and Liberty (and their respective subsidiaries) are collectively
referred to herein as the "Members".
 
                                      124

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    In connection with various equity transactions at USAi in 1998, Universal
completed its mandatory purchase obligation in exchange for total consideration
of $539.3 million in the form of $234.7 million in cash and $304.6 million
applied against the deferred purchase obligations (including accrued interest).
 
    In 1998, Liberty exercised certain of its preemptive rights and acquired
9,394,900 shares of USAi Common Stock in exchange for $93.9 million. USAi
contributed $93.9 million to the LLC in exchange for 9,394,900 Class A LLC
Shares. In addition, Liberty exercised certain of its preemptive rights and
acquired 15,774,708 Class C LLC Shares in exchange for $157.7 million in cash.
 
    On December 30, 1998, USAi acquired from Universal an entity which owned
3,411,308 Class B LLC shares in exchange for issuing to Universal 670,000 shares
of USAi Class B Common Stock and 2,741,308 shares of USAi Common Stock. The
transaction resulted in the Class B LLC Shares being converted into Class A LLC
Shares.
 
    In 1999, in connection with Liberty's exercise of certain of its preemptive
rights, USAi acquired 7,277,290 Class A LLC shares in exchange for
$120.3 million. In addition, USAi acquired 11,244,900 Class A LLC shares in
exchange for $48.0 million and sold 477,892 Class A LLC shares back to the LLC
in exchange for $8.9 million.
 
    In 1999, Universal exercised certain of its preemptive rights and acquired
14,781,752 Class B LLC shares in exchange for $242.3 million.
 
    Each of the classes of the LLC Shares are identical in all material
respects. The business and affairs of the Company are managed by Mr. Barry
Diller and USAi in accordance with the Governance Agreement among USAi,
Universal, Liberty and Mr. Diller.
 
    By various methods, Universal and Liberty hold the right, from time to time,
to exchange Class B LLC Shares and Class C LLC Shares of the Company for either
USAi Common Stock or USAi Class B Common Stock.
 
NOTE 10--LITIGATION
 
    In the ordinary course of business, the Company is engaged in various
lawsuits, including certain class action lawsuits initiated in connection with
the Home Shopping Merger and the Ticketmaster Transaction. In the opinion of
management, the ultimate outcome of the various lawsuits should not have a
material impact on the liquidity, results of operations or financial condition
of the Company.
 
NOTE 11--BENEFIT PLANS
 
    The Company offers various plans pursuant to Section 401(k) of the Internal
Revenue Code covering substantially all full-time employees who are not party to
collective bargaining agreements. The Company's share of the matching employer
contributions is set at the discretion of the Board of Directors or the
applicable committee thereof.
 
NOTE 12--STOCK OPTION PLANS
 
    The following describes the stock option plans. Share numbers, prices and
earnings per share reflect USAi's two-for-one stock split to holders of record
at the close of business on February 10, 2000.
 
    USAi has outstanding options to employees or consultants of the Company
under several plans (the "Plans") which provide for the grant of options to
purchase USAi's common stock at not less than fair market value on the date of
the grant. The options under the Plans vest ratably, generally over a range of
three to five years from the date of grant and generally expire not more than
10 years from the date of grant. Four of the Plans have options available for
future grants.
 
                                      125

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    USAi also has outstanding options to outside directors under one plan (the
"Directors Plan") which provides for the grant of options to purchase USAi's
common stock at not less than fair market value on the date of the grant. The
options under the Directors Plan vest ratably, generally over three years from
the date of grant and expire not more than 10 years from the date of grant. A
summary of changes in outstanding options under the stock option plans following
the Company's two-for-one stock split, is as follows:
 

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                  -------------------------------------------------------------------------------
                                                            1999                        1998                       1997
                                                  -------------------------   ------------------------   ------------------------
                                                                 PRICE                       PRICE                      PRICE
                                                   SHARES        RANGE         SHARES        RANGE        SHARES        RANGE
                                                  --------   --------------   --------   -------------   --------   -------------
                                                                               (SHARES IN THOUSANDS)
<S>                                               <C>        <C>              <C>        <C>             <C>        <C>
Outstanding at beginning of period..............   68,916    $         2-37    65,872    $        2-37    32,598    $        1-37
Granted or issued in connection with mergers....    8,093    $        16-28     7,338    $        9-15    23,160    $        5-10
Exercised.......................................   (7,881)   $         1-13    (3,074)   $         2-8    (1,936)   $         1-8
Cancelled.......................................     (798)   $         6-18    (1,220)   $        3-13    (1,096)   $        3-37
Options transferred to employees and outside
  directors of USAi.............................       --                          --                     13,146    $         1-8
                                                   ------                      ------                     ------
Outstanding at end of period....................   68,330    $         1-37    68,916    $        2-37    65,872    $        1-37
                                                   ------                      ------                     ------
Options exercisable.............................   44,697    $         1-37    34,422    $        2-37    21,680
                                                   ------                      ------                     ------
</TABLE>

 
    The weighted average exercise prices during the year ended December 31,
1999, were $23.77, $6.05 and $11.56 for options granted, options exercised and
options cancelled, respectively. The weighted average fair value of options
granted during the year was $9.52.
 
    The weighted average exercise prices during the year ended December 31,
1998, were $12.62, $5.04 and $12.34 for options granted, exercised and
cancelled, respectively. The weighted average fair value of options granted
during the year was $12.56.
 
    The weighted average exercise prices during the year ended December 31,
1997, were $9.39, $3.70 and $7.35 for options granted, exercised and cancelled,
respectively. The weighted average fair value of options granted during the year
was $5.91.
 

<TABLE>
<CAPTION>
                                                 OPTIONS OUTSTANDING                  OPTIONS EXERCISABLE
                                      ------------------------------------------   -------------------------
                                                           WEIGHTED
                                                            AVERAGE     WEIGHTED                    WEIGHTED
                                                           REMAINING    AVERAGE    EXERCISABLE AT   AVERAGE
                                       OUTSTANDING AT     CONTRACTUAL   EXERCISE    DECEMBER 31,    EXERCISE
RANGE OF EXERCISE PRICE               DECEMBER 31, 1999      LIFE        PRICE          1999         PRICE
-----------------------               -----------------   -----------   --------   --------------   --------
                                       (IN THOUSANDS)                              (IN THOUSANDS)
<S>                                   <C>                 <C>           <C>        <C>              <C>
$0.01 to $5.00......................       18,850             5.8        $ 4.71        19,509        $ 4.71
$5.01 to $10.00.....................       32,055             7.0          8.20        23,057          7.68
$10.01 to $15.00....................        8,362             8.6         12.51         1,994         12.50
$15.01 to $20.00....................        3,612             9.1         18.71            20         19.44
$20.01 to $25.00....................          662             8.4         21.42           117         21.44
$25.01 to $37.00....................        4,789             9.9         27.91            --            --
                                           ------                                      ------
                                           68,330             7.2          9.83        44,697          6.64
                                           ======                                      ======
</TABLE>

 
    Pro forma information regarding net income and earnings per share is
required SFAS 123. The information is determined as if the Company had accounted
for its employee stock options granted subsequent to December 31, 1994 under the
fair market value method. The fair value for these options was
 
                                      126

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for 1999, 1998 and 1997: risk-free
interest rates of 5.0%, 5.0% and 5.5%, respectively; a dividend yield of zero; a
volatility factor of .44, .56 and .71, respectively, based on the expected
market price of USAi Common Stock based on historical trends; and a
weighted-average expected life of the options of five years.
 
    The Black-Scholes option valuation model was developed for use in estimating
the fair market value of traded options which have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair market value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
 
    For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
 

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Pro forma net income (loss) (in thousands)..................  $357,900   $89,010    $(1,137)
</TABLE>

 
    These pro forma amounts may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense over the
vesting period and additional options may be granted in future years.
 
NOTE 13--STATEMENTS OF CASH FLOWS
 
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS FOR THE YEAR ENDED
DECEMBER 31, 1999:
 
    In 1999, the Company acquired post-production equipment through a capital
lease totaling $2.5 million.
 
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS FOR THE YEAR ENDED
DECEMBER 31, 1998:
 

<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)
                                                              --------------
<S>                                                           <C>
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 USAi Common Shares and USAi Class B Shares....       277,898
  Issuance of USANi LLC Shares..............................     2,236,650
                                                               -----------
                                                               $ 2,814,548
                                                               ===========
Exchange of Class B USANi LLC Shares for Deferred Purchase
  Price Liability...........................................   $   304,636
                                                               ===========
</TABLE>

 
    During the period ended December 31, 1998, the Company acquired computer
equipment through a capital lease totaling $15.5 million.
 
    On December 30, 1998, the Company acquired from Universal an entity which
owned 3,411,308 Class B LLC Shares in exchange for issuing to Universal 670,000
shares of USAi Class B Common Stock
 
                                      127

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
and 2,741,308 shares of USAi Common Stock. The transaction resulted in the
Class B LLC Shares being converted into Class A LLC Shares.
 
    Supplemental disclosure of cash flow information:
 

<TABLE>
<CAPTION>
                                                             YEARS ENDED
                                                             DECEMBER 31,
                                                    ------------------------------
                                                      1999       1998       1997
                                                    --------   --------   --------
                                                            (IN THOUSANDS)
<S>                                                 <C>        <C>        <C>
CASH PAID DURING THE PERIOD FOR:
  Interest........................................  $47,112    $68,751     $5,875
  Income tax payments.............................    3,935         --      6,339
  Income tax refund...............................       --         --      5,732
</TABLE>

 
NOTE 14--RELATED PARTY TRANSACTIONS
 
    As of December 31, 1999, the Company was involved in several agreements with
related parties as follows:
 
    The Company entered into a lease agreement with an entity owned by the
Chairman of the Board and Chief Executive Officer of the Company providing for
the use of an aircraft for corporate purposes. The lease has a five-year term
and is terminable by either party on thirty days' notice. In the years ended
December 31, 1999, 1998 and 1997, the Company paid a total of $2.1 million,
$2.0 million and $2.7 million, respectively, related to the use of the aircraft.
 
    Universal provides certain support services to the Company under a
Transition Services agreement entered into in connection with the Universal
Transaction. For these services, which include use of pre-production, production
and post-production facilities, information technology services, physical
distribution, contract administration, legal services and office space,
Universal charged the Company $12.5 million and $15.0 million for the years
ended December 31, 1999 and 1998, respectively, of which $8.0 million and
$8.5 million was capitalized to production costs, respectively.
 
    Universal and the Company entered into an International Television
Distribution Agreement under which the Company pays to Universal a distribution
fee of 10% on all programming owned or controlled by the Company distributed
outside of the United States. For the years ended December 31, 1999 and 1998,
the fee totaled $9.0 million and $1.3 million, respectively.
 
    In addition, the Company and Universal entered into a Domestic Television
Distribution Agreement under which the Company distributes in the United States
certain of Universal's television programming. For the years ended December 31,
1999 and 1998, Universal paid the Company $1.5 million in both years.
 
    In the normal course of business, Home Shopping Network and Networks enter
into agreements with the operators of cable television systems and operators of
broadcast television stations for the carriage of Home Shopping, USA Network and
Sci-Fi Channel programming. Home Shopping Network and Networks have entered into
agreements with a number of cable operators that are affiliates of AT&T. The
long-term contracts for Home Shopping Network provide for a minimum subscriber
guarantee and incentive payments based on the number of subscribers. Cash paid
by Home Shopping Network to AT&T and certain of its affiliates under these
contracts for cable commissions and advertising was $9.5 million, $9.5 million,
and $9.6 million for the years ended 1999, 1998, and 1997, respectively. The
long-term contracts for Networks provide for subscriber fee payments to
Networks. For the years ended December 31, 1999 and 1998, AT&T paid $70.4 and
$62.2 million respectively to Networks under these agreements.
 
                                      128

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    Home Shopping has affiliation agreements with USA Broadcasting ("USAB"), a
wholly owned subsidiary of USAi which provides for the USAB's broadcast of Home
Shopping's electronic retailing programming on a full-time basis. Expense
related to these affiliation agreements with USAB for the years ended
December 31, 1999, 1998 and 1997 was $38.1 million, $38.7 million and
$41.7 million, respectively.
 
    Under the USANi LLC Operating Agreement, USANi LLC is obligated to make a
distribution to each of the LLC members in an amount equal to each member's
share of USANi LLC's taxable income at a specified tax rate. The first such
payment was made on March 1, 1999 to USAi, Universal and Liberty covering the
year ended December 31, 1998 in the amount of $52.8 million, of which
$24.0 million was paid by USAi.
 
NOTE 15--TRANSACTIONS WITH USAI AND SUBSIDIARIES
 
    Advances to USAi and subsidiaries generally represent net amounts
transferred from the Company to USAi and its subsidiaries to fund operations and
other related items. Pursuant to the Investment Agreement, all excess cash held
at USAi and subsidiaries is transferred to the Company no less frequently than
monthly and the Company may transfer funds to USAi to satisfy obligations of
USAi and its subsidiaries. Under the Investment Agreement, transfers of cash are
evidenced by a demand note and accrue interest at the Company's borrowing rate
under the credit facility.
 
    During the year ended December 31, 1999, net transfers from USANi LLC to
USAi totaling approximately $429.1 million, including $372.2 million related to
the Hotel Reservations Network Transaction and the October Films/PFE Transaction
(including $200 million to make the Universal Advance), $50.9 million to fund
the operations of USAi's television broadcast operations, $98.6 million to repay
a portion of the outstanding borrowings assumed in the October Films/PFE
Transaction and $8.8 million to fund the operations of USA Films. Funds were
also transferred to USAi to purchase shares of treasury stock. These amounts
were offset by $79.4 million and $40.0 million of funds transferred to USANi LLC
from the Ticketing operations business and the Hotel reservations business,
respectively. During the year ended December 31, 1998 net cash transfers
totaling approximately $118.2 million were made to repay USAi's revolving credit
facility, repay Ticketmaster's bank credit facility, and fund the operations of
USAi's broadcast operation, offset by proceeds from the sale of the assets of SF
Broadcasting and USAi's Baltimore television station. The interest incurred on
the net transfers for the years ended December 31, 1999 and 1998 was
approximately $7.2 million and $9.5 million, respectively.
 
    The Company allocates certain overhead expenses to the USAi parent company
based upon the fair value of services performed. Expenses allocated for the
periods ended December 31, 1999 and 1998 were $8.6 million and $5.9 million,
respectively.
 
    In accordance with the Investment Agreement, certain transfers of funds
between the Company and USAi are not evidenced by a demand note and do not
accrue interest, primarily relating to the establishment of the operations of
the Company and to equity contributions.
 
                                      129

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 16--QUARTERLY RESULTS (UNAUDITED)
 

<TABLE>
<CAPTION>
                                                    QUARTER         QUARTER      QUARTER     QUARTER
                                                     ENDED           ENDED        ENDED       ENDED
                                                  DECEMBER 31,   SEPTEMBER 30,   JUNE 30,   MARCH 31,
                                                  ------------   -------------   --------   ---------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                               <C>            <C>             <C>        <C>
YEAR ENDED DECEMBER 31, 1999
Net revenues....................................    $718,037       $594,857      $611,114   $617,889
Operating profit................................     117,254         68,048        76,450     81,843
Net earnings (a)................................     112,337         96,487        58,865    127,299
YEAR ENDED DECEMBER 31, 1998 (B)
Net revenues....................................    $657,322       $548,418      $584,412   $415,358
Operating profit................................      83,858         50,261        66,755     30,856
Net earnings....................................      62,744         28,828        27,705      6,258
</TABLE>

 
(a) In the first quarter of 1999, the Company recorded a gain of $11.5 million
    related to the reversal of equity losses which were previously recorded in
    1998 as a result of the Universal Transaction. Furthermore, the Company
    recorded gains on the sale of securities of $47.3 million, $3.0 million, and
    $39.5 million in the first, second and third quarters of 1999, respectively.
 
(b) Includes the operations of Networks and Studios USA since their acquisition
    on February 12, 1998.
 
                                      130

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 17--INDUSTRY SEGMENTS
 
    For the years ended December 31, 1999 and 1998, the Company operated
principally in three industry segments: Networks and television production,
Electronic retailing and Internet services. The Networks and television
production segment consists of the cable networks USA Network and Sci-Fi Channel
and Studios USA, which produces and distributes television programming. The
Electronic retailing segment consists of Home Shopping Network and America's
Store, which are engaged in the sale of merchandise through electronic
retailing. The Internet services segment represents the Company's on-line
retailing networks business.
 

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                           ------------------------------------
                                                              1999         1998         1997
                                                           ----------   ----------   ----------
                                                                      (IN THOUSANDS)
<S>                                                        <C>          <C>          <C>
Revenue
  Networks and television production.....................  $1,305,871   $1,085,685   $       --
  Electronic retailing...................................   1,204,524    1,084,139    1,008,162
  Internet services......................................      24,620       21,191       12,857
  Other..................................................       6,882       14,495       16,041
                                                           ----------   ----------   ----------
                                                           $2,541,897   $2,205,510   $1,037,060
                                                           ==========   ==========   ==========
Operating profit (loss)
  Networks and television production.....................  $  319,500   $  190,191   $       --
  Electronic retailing...................................      96,265       76,502       78,848
  Internet services......................................     (42,392)     (17,296)      (9,851)
  Corporate and other....................................     (29,778)     (17,667)      (7,855)
                                                           ----------   ----------   ----------
                                                           $  343,595   $  231,730   $   61,142
                                                           ==========   ==========   ==========
Assets
  Networks and television production.....................  $5,524,436   $5,190,669   $       --
  Electronic retailing...................................   1,810,401    1,777,524    1,641,048
  Internet services......................................      27,622       12,711        6,197
  Corporate and other....................................     110,467       21,781        6,630
                                                           ----------   ----------   ----------
                                                           $7,472,926   $7,002,685   $1,653,875
                                                           ==========   ==========   ==========
Depreciation and amortization
  Networks and television production.....................  $  113,034   $   99,225   $       --
  Electronic retailing...................................      83,808       72,312       62,811
  Internet services......................................       3,167        1,436        1,903
  Corporate and other....................................       2,210        1,653          438
                                                           ----------   ----------   ----------
                                                           $  202,219   $  174,626   $   65,152
                                                           ==========   ==========   ==========
Capital expenditures
  Networks and television production.....................  $    6,771   $    5,616   $       --
  Electronic retailing...................................      47,197       42,269       25,063
  Internet services......................................      13,618        2,968        2,125
  Corporate and other....................................       3,095        1,232          624
                                                           ----------   ----------   ----------
                                                           $   70,681   $   52,085   $   27,812
                                                           ==========   ==========   ==========
</TABLE>

 
                                      131

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 18--FINANCIAL INSTRUMENTS
 
    The additional disclosure below of the estimated fair value of financial
instruments was made in accordance with the requirements of Statements of
Financial Accounting Standards No. 107. The estimated fair value amounts have
been determined by the Company using available market information and
appropriate valuation methodologies when available. The carrying value of all
current assets and current liabilities approximates fair value due to their
short-term nature.
 

<TABLE>
<CAPTION>
                                                       DECEMBER 31, 1999     DECEMBER 31, 1998
                                                      -------------------   -------------------
                                                      CARRYING     FAIR     CARRYING     FAIR
                                                       AMOUNT     VALUE      AMOUNT     VALUE
                                                      --------   --------   --------   --------
                                                                   (IN THOUSANDS)
<S>                                                   <C>        <C>        <C>        <C>
Cash and cash equivalents...........................  $247,474   $247,474   $234,903   $234,903
Long-term investments...............................    93,742     93,742     71,601     71,601
Long-term obligations...............................   531,097    531,097    760,530    760,530
</TABLE>

 
NOTE 19--PROGRAM RIGHTS AND FILM COSTS
 
    As of December 31, 1999, the liability for program rights, representing
future payments to be made under program contract agreements amounted to
$468.4 million. Annual payments required are $219.5 million in 2000,
$118.9 million in 2001, $77.9 million in 2002, $30.5 million in 2003,
$15.1 million in 2004 and $6.5 million in 2005 and thereafter. Amounts
representing interest are $50.0 million and the present value of future payments
is $418.4 million.
 
    As of December 31, 1999, the liability for film costs amounted to
$103.1 million. Annual payments are $72.6 million in 2000 and $30.5 million in
2001.
 
    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 December 31, 1999, the unrecorded commitments amounted to $748.8 million.
Annual commitments are $138.6 million in 2000, $141.4 million in 2001,
$124.7 million in 2002, $121.6 million in 2003, $99.6 million in 2004 and
$122.9 million in 2005 and thereafter.
 
NOTE 20-- NOTES OFFERING AND GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
 
    On November 23, 1998, USAi and the Company completed an offering of
$500.0 million 6 3/4% Senior Notes due 2005 (the "Old Notes"). In May 1999, the
Old Notes were exchanged in full for $500.0 million of new 6 3/4% Senior Notes
due 2005 (the "Notes") that have terms that are substantially identical to the
Old Notes. Interest is payable on the Notes on May 15 and November 15 of each
year, commencing May 15, 1999. The Notes are jointly, severally, fully and
unconditionally guaranteed by certain subsidiaries of USAi, including Holdco, a
non-wholly owned, direct subsidiary of USAi, and all of the subsidiaries of the
Company (other than subsidiaries that are, individually and in the aggregate,
inconsequential to the Company on a consolidated basis) (collectively, the
"Subsidiary Guarantors"). All of the Subsidiary Guarantors (other than Holdco)
(the "Wholly Owned Subsidiary Guarantors") are wholly owned, directly or
indirectly, by USAi or the Company, as the case may be.
 
    Separate financial statements for each of the Wholly Owned Subsidiary
Guarantors are not presented and such Wholly Owned Subsidiary Guarantors are not
filing separate reports under the Securities Exchange Act of 1934 because USAi's
and the Company's management has determined that the information contained in
such documents would not be material to investors.
 
                                      132

<PAGE>
                           USANI LLC AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 21--SUBSEQUENT EVENTS (UNAUDITED)
 
    On January 12, 2000, USAi announced that it reached a definitive agreement
to acquire Precision Response Corp. ("PRC") in a stock-for-stock transaction,
whereby each share of PRC will be exchanged for 1.08 USAi shares. The
transaction is expected to close in April 2000. Upon closing of the transaction,
USAi will contribute the business of PRC to the LLC in exchange for Class A LLC
shares equaling the amount of USAi common stock issued to the shareholders of
PRC.
 
    On January 25, 2000, USAi and Styleclick.com Inc., a leading enabler of
e-commerce for manufacturers and retailers, announced an agreement to form a new
company by merging USA's Internet Shopping Network ("ISN") and Styleclick.com.
The new company, which will be named Styleclick, Inc., will own and operate the
combined properties of Styleclick.com Inc. and ISN. Under the terms of the
agreement, USAi will also invest $40 million in cash, contribute $10 million in
dedicated media, and will receive warrants to purchase additional shares of the
new company. Upon both the closing of the transaction and on a fully diluted
basis, USAi will own approximately 75% of the new company and Styleclick.com
stockholders will own approximately 25%. In the interim, USAi has agreed to
extend a $10 million bridge loan to Styleclick.com. The transaction is expected
to close in the second quarter of 2000.
 
                                      133





<PAGE>

                                                                   EXHIBIT 10.39

                                    THIRD AMENDMENT dated as of April 29, 1999
                           (this "AMENDMENT") to the Credit Agreement dated as
                           of February 12, 1998 (as amended, supplemented or
                           otherwise modified from time to time, the "CREDIT
                           AGREEMENT"), among USA NETWORKS, INC., a Delaware
                           corporation ("USANI"), USANi LLC, a Delaware limited
                           liability company (the "BORROWER"), the several banks
                           and other financial institutions and entities from
                           time to time parties thereto (the "LENDERS"), BANK OF
                           AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION and THE
                           BANK OF NEW YORK, as co-documentation agents (in such
                           capacity, the "CO-DOCUMENTATION AGENTS") and THE
                           CHASE MANHATTAN BANK, as administrative agent (in
                           such capacity, the "ADMINISTRATIVE AGENT") and as
                           collateral agent (in such capacity, the "COLLATERAL
                           AGENT").

                  WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make certain loans to the Borrower and the Issuing Bank has agreed to
issue certain Letters of Credit for the account of the Borrower; and

                  WHEREAS the Borrower has requested that certain provisions of
the Credit Agreement be modified in the manner provided for in this Amendment,
and the Lenders are willing to agree to such modifications as provided for in
this Amendment.

                  NOW, THEREFORE, the
 parties hereto hereby agree as follows:

                  1. DEFINED TERMS. Capitalized terms used and not defined
herein shall have the meanings given to them in the Credit Agreement.

                  2. AMENDMENTS TO THE CREDIT AGREEMENT. (a) Section 1.01 of the
Credit Agreement is hereby amended by inserting the following definitions in
their proper alphabetical order:

                  "`HOTEL RESERVATIONS NETWORK ACQUISITION' means the
                  acquisition by HRN, Inc., a subsidiary of USANi, of
                  substantially all the assets of TMF, Inc. and HRN Marketing
                  Corporation in exchange for the assumption of certain
                  liabilities, the issuance of a promissory note and certain
                  other payments (collectively the "HRN Obligations"); PROVIDED,
                  THAT such transaction is consummated substantially in
                  accordance with the terms of the Asset Purchase Agreement
                  dated as of April 13, 1999, among HRN, Inc., USANi and the
                  other parties thereto (the "HRN Agreement"), previously
                  delivered to the Lenders and that any changes to the HRN
                  Agreement are not materially adverse to the interests of the
                  Lenders.

                  `UNIVERSAL ADVANCE' means an interest bearing advance to
                  Universal Studios Holding I Corp. or one or more of its
                  affiliates in a principal amount of up to $200,000,000;
                  PROVIDED, THAT such advance is made in accordance with the
                  terms of the Letter Agreement dated April 6, 1999 between
                  Universal Studios Holding I Corp. and USA Networks, Inc.,
                  including the schedules and exhibits thereto (collectively,
                  the "Letter Agreement"), previously delivered to the Lenders
                  and



<PAGE>


                  that any changes to the terms of the advance as set forth in
                  the Letter Agreement are not materially adverse to the
                  interests of the Lenders.

         (b) Section 5.07 of the Credit Agreement is hereby amended by:

                  (i)      deleting "subsection (k)" in clause (i) thereof and
                           substituting "subsections (k), (o) and (p)" therefor;
                           and

                  (ii)     deleting the period at the end of clause (n) thereof
                           and substituting the following therefor: "; (o) the
                           HRN Obligations; and (p) the Guarantee of HRN
                           Obligations by USANi set forth in the HRN Agreement".

         (c) Section 5.17 of the Credit Agreement is hereby amended by:

                   (i)     deleting "and" at the end of clause (h) thereof;

                  (ii)     replacing the period at the end of clause (i) thereof
                           with "; and"; and

                  (iii)    inserting the following after clause (i):

                           "(j) the sale or other disposition of the rights of
                           USANi and/or one or more of its subsidiaries with
                           respect to the Universal Advance".

         (c) Section 5.19 of the Credit Agreement is hereby amended by:

                  (i)      deleting "and" at the end of clause (g) thereof;

                  (ii)     replacing the period at the end of clause (h) thereof
                           with "; and"; and

                  (iii)    inserting the following after clause (h): "(i) the
                           Universal Advance."

         (d) Section 5.20 of the Credit Agreement is hereby amended by:

                  (i)      deleting "and" at the end of clause (b) thereof;

                  (ii)     replacing the period at the end of clause (c) thereof
                           with "; and"; and

                  (iii)    inserting immediately after clause (c) thereof the
                           following:

                           "(d)  The Hotel Reservations Network Acquisition."

                  3. NO OTHER AMENDMENTS; CONFIRMATION. Except as expressly
amended, modified and supplemented hereby, the provisions of the Credit
Agreement are and shall remain in full force and effect.

                  4. REPRESENTATIONS AND WARRANTIES. Each of USANi and the
Borrower hereby represents and warrants to the Administrative Agent, the
Collateral Agent, the Issuing Bank and the Lenders as of the date hereof:

                  (a) No Default or Event of Default has occurred and is
         continuing.

                  (b) The execution, delivery and performance by each of USANi
         and the Borrower of this Amendment are within the scope of its
         corporate or company powers, and have been duly authorized by all
         necessary corporate, company and, if required, stockholder or member
         action on the part of each of them, and no authorizations, approvals or
         consents of, and no filings or registrations with, any governmental or
         regulatory authority or agency



<PAGE>


         are necessary for the execution or delivery of this Amendment by either
         of them or for the validity or enforceability of this Amendment. The
         Credit Agreement as amended by this Amendment constitutes the legal,
         valid and binding obligation of each of USANi and the Borrower,
         enforceable against each of them in accordance with its terms, except
         as such enforceability may be limited by (a) bankruptcy, insolvency,
         reorganization, moratorium or other similar laws of general
         applicability affecting the enforcement of creditors' rights and (b)
         the application of general principles of equity (regardless of whether
         such enforceability is considered in a proceeding in equity or at law).

                  (c) All representations and warranties of USANi and the
         Borrower contained in the Credit Agreement (other than representations
         or warranties expressly made only on and as of the Effective Date) are
         true and correct in all material respects on and as of the date hereof
         with the same force and effect as if made on and as of the date hereof.

                  5. EFFECTIVENESS. This Amendment shall become effective only
upon the satisfaction in full of the following conditions precedent:

                  (a) The Administrative Agent shall have received counterparts
         hereof, duly executed and delivered by USANi, the Borrower and the
         Required Lenders; and

                  (b) The Administrative Agent shall have received such opinions
         and certificates from USANi and the Borrower and their counsel as it
         may reasonably request in form reasonably satisfactory to its counsel.

                  6. EXPENSES. The Borrower agrees to reimburse the
Administrative Agent and the Collateral Agent for its out-of-pocket expenses in
connection with this Amendment, including the reasonable fees, charges and
disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent.

                  7. GOVERNING LAW; COUNTERPARTS. (a) This Amendment and the
rights and obligations of the parties hereto shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York.

         (b) This Amendment may be executed by one or more of the parties to
this Amendment on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. This Amendment may be delivered by facsimile transmission of the
relevant signature pages hereof.



<PAGE>


                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.

                                       USA NETWORKS, INC.,


                                          by /s/ Michael Durney
                                             -----------------------------------
                                             Name: Michael Durney
                                             Title: V.P. & Controller


                                       USANi LLC,

                                          by /s/ Michael Durney
                                             -----------------------------------
                                             Name: Michael Durney
                                             Title: V.P. & Controller


                                       THE CHASE MANHATTAN BANK, individually 
                                       and as Administrative Agent, Collateral 
                                       Agent and Issuing Bank,


                                          by /s/ Constance M. Coleman
                                             -----------------------------------
                                             Name: Constance M. Coleman
                                             Title: V.P.


                                       BANK OF AMERICA NT&SA,


                                          by /s/ Sean W. Cassidy
                                             -----------------------------------
                                             Name: Sean W. Cassidy
                                             Title: Vice President


                                       THE BANK OF NEW YORK COMPANY, INC., 
                                       individually and as Co-Documentation 
                                       Agent,


                                          by /s/ John C. Lambert
                                             -----------------------------------
                                             Name: John C. Lambert
                                             Title: Vice President



<PAGE>


                                       ABN AMRO BANK, N.V.,


                                          by /s/ Frances O.R. Lagan
                                             -----------------------------------
                                             Name: Frances O.R. Lagan
                                             Title: V.P.


                                          by /s/ Ann Schwalenberg
                                             -----------------------------------
                                             Name: Ann Schwalenberg
                                             Title: Vice President


                                       BANCA COMMERCIALE ITALIANA, NEW YORK,

                                          by /s/ Charles Dougherty
                                             -----------------------------------
                                             Name: Charles Dougherty
                                             Title: VP


                                          by /s/ T. Gallonetto
                                             -----------------------------------
                                              Name: T. Gallonetto
                                              Title: A.V.P.


                                       BANK OF HAWAII,

                                          by /s/ Bernardine M. Havertine
                                             -----------------------------------
                                             Name: Bernardine M. Havertine
                                             Title: Corporate Banking Officer


                                       BANK OF MONTREAL,


                                          by /s/ W.T. Calder
                                             -----------------------------------
                                             Name: W.T. Calder
                                             Title: Managing Director



<PAGE>


                                       THE BANK OF NOVA SCOTIA,


                                          by /s/ Ian A. Hodgart
                                             -----------------------------------
                                             Name: Ian A Hodgart
                                             Title: Authorized Signatory


                                       BANQUE NATIONALE DE PARIS,


                                          by /s/
                                             -----------------------------------
                                             Name:
                                             Title:


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:


                                               BANQUE WORMS CAPITAL CORPORATION,


                                          by /s/ F. Jamet
                                             -----------------------------------
                                             Name: F. Jamet
                                             Title: S.V.P.


                                             /s/ Constance DeClerk
                                             -----------------------------------
                                             Name: Constance DeClerk
                                             Title: V.P.


                                       CITY NATIONAL BANK,


                                          by /s/ Rod Bollins
                                             -----------------------------------
                                             Name: Rod Bollins
                                             Title: Vice President



<PAGE>


                                       COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
                                       EUROPEENNE,


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:


                                       CREDIT AGRICOLE INDOSUEZ,


                                          by /s/ Craig Welch
                                             -----------------------------------
                                             Name: Craig Welch
                                             Title: V.P.


                                          by /s/ Sarah McLinmore
                                             -----------------------------------
                                             Name: Sarah McLinmore
                                             Title: V.P.


                                       CREDITANSTALT CORPORATE FINANCE, INC.,


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:



<PAGE>


                                       CRESTAR BANK,


                                          by /s/ Lantanya B.Mason
                                             -----------------------------------
                                             Name: Latanya B. Mason
                                             Title: Assistant Vice President


                                       THE DAI-ICHI KANGYO BANK LTD., NEW YORK 
                                       BRANCH,


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:


                                       DE NATIONALE INVESTERINGSBANK, N.V.,


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:


                                       FIRST HAWAIIAN BANK,


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:


                                       FLEET NATIONAL BANK,


                                          by /s/ Russ Lopinto
                                             -----------------------------------
                                             Name: Russ Lopinto
                                             Title: Vice President



<PAGE>


                                       THE FUJI BANK LIMITED, LOS ANGELES 
                                       AGENCY,


                                          by /s/ Masahito Fukuda 
                                             -----------------------------------
                                             Name: Masahito Fukuda
                                             Title: Joint General Manager


                                       ISTITUTO BANCARIO SAN PAOLO DI TORINO
                                       - ISTITUTO MOBILIARE ITALIANO, SPA,


                                          by /s/ Robert Wurster
                                             -----------------------------------
                                             Name: Robert Wurster
                                             Title: V.P.


                                          by /s/ Glen Binder
                                             -----------------------------------
                                             Name: Glen Binder
                                             Title: Vice President


                                       KBC BANK N.V.,


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:


                                       THE LONG-TERM CREDIT BANK OF JAPAN, 
                                       LIMITED,


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:



<PAGE>


                                       MELLON BANK, N.A.,


                                          by /s/ Paul F. Noel
                                             -----------------------------------
                                             Name: Paul F. Noel
                                             Title: Vice President


                                       PARIBAS,


                                          by /s/ William B. Schink
                                             -----------------------------------
                                             Name: William B. Schink
                                             Title: Director


                                       PNC BANK, NATIONAL ASSOCIATION,


                                          by /s/ Kristen E. Talaber
                                             -----------------------------------
                                             Name: Kristen E. Talaber
                                             Title: Vice President


                                       ROYAL BANK OF CANADA,


                                          by /s/ Wayne P. Gray
                                             -----------------------------------
                                             Name: Wayne P. Gray
                                             Title: Manager


                                       SOCIETE GENERALE,


                                          by /s/ Mark Vigil
                                             -----------------------------------
                                             Name: Mark Vigil
                                             Title: Director


                                       THE SUMITOMO TRUST & BANKING, CO.,
                                       LTD., NEW YORK BRANCH,


                                          by /s/ Stephen E. Stratico
                                             -----------------------------------
                                             Name: Stephen E. Stratico
                                             Title: Vice President



<PAGE>


                                       SUNTRUST BANK, CENTRAL FLORIDA N.A.,


                                          by /s/ Harold Binder
                                             -----------------------------------
                                             Name: Harold Binder
                                             Title: Authorized Signatory


                                       UNION BANK OF CALIFORNIA, N.A.,


                                          by /s/ Stender E. Sweeney
                                             -----------------------------------
                                             Name: Stender E. Sweeney
                                             Title: Assistant Vice President


                                       WELLS FARGO BANK,

                                          by /s/ Anthony Turner
                                             -----------------------------------
                                             Name: Anthony Turner
                                             Title: V.P.


                                       WESTDEUTSCHE LANDESBANK, NEW YORK BRANCH


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:


                                          by
                                             -----------------------------------
                                             Name:
                                             Title:



<PAGE>


                                                                  Exhibit 10.40


                                        FOURTH AMENDMENT dated as of January 31,
                              2000 (this "AMENDMENT") to the Credit Agreement
                              dated as of February 12, 1998 (as amended,
                              supplemented or otherwise modified from time to
                              time, the "CREDIT AGREEMENT"), among USA NETWORKS,
                              INC., a Delaware corporation ("USANI"), USANi LLC,
                              a Delaware limited liability company (the
                              "BORROWER"), the several banks and other financial
                              institutions and entities from time to time
                              parties thereto (the "LENDERS"), BANK OF AMERICA
                              NATIONAL TRUST & SAVINGS ASSOCIATION and THE BANK
                              OF NEW YORK, as co-documentation agents (in such
                              capacity, the "CO-DOCUMENTATION AGENTS") and THE
                              CHASE MANHATTAN BANK, as administrative agent (in
                              such capacity, the "ADMINISTRATIVE AGENT") and as
                              collateral agent (in such capacity, the
                              "COLLATERAL AGENT").

                    WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make certain loans to the Borrower and the Issuing Bank has agreed to
issue certain Letters of Credit for the account of the Borrower; and

                    WHEREAS the Borrower has requested that certain provisions
of the Credit Agreement be modified in the manner provided for in this
Amendment, and the Lenders are willing to agree to such modifications as
provided for in this Amendment.

                    NOW, THEREFORE,
 the parties hereto hereby agree as follows:

                    1.   DEFINED TERMS. Capitalized terms used and not defined
herein shall have the meanings given to them in the Credit Agreement.

                    2.   AMENDMENTS TO THE CREDIT AGREEMENT. (a) Section 1.01 of
the Credit Agreement is hereby amended by:

                            (i) inserting the following definitions in their
                     proper alphabetical order:

                                 "`SAVOY DEBENTURES' means the 7% Convertible
                                 Subordinated Debentures of Savoy due July 1, 
                                 2003 in an aggregate principal amount of 
                                 $37,782,000.

                                 `SENIOR NOTES' means the 6.75% Senior Notes due
                                 November 15, 2005 of the Borrower and USANi in 
                                 an aggregate principal amount of $500,000,000.

                            (ii) deleting the following from the definition of
                     Fixed Charges: "(excluding Capital Expenditures by SKTV,
                     the Home Shopping Persons and their respective
                     subsidiaries)".

                 (b) Section 5.14 of the Credit Agreement is hereby deleted in
                     its entirety and the following substituted therefor:

                           "SECTION 5.14 [Reserved]".



<PAGE>


                 (c) Subsection 5.16(a) of the Credit Agreement is hereby
                     amended by:

                           (i) inserting "(i)" between the words "except
                           that" and "a Guarantor"; and

                          (ii) inserting the following immediately prior to ";":

                           "and (ii) Internet Shopping Network, L.L.C. may merge
                           on an arm's-length basis into a publicly traded
                           company for at least fair consideration paid solely
                           in publicly traded stock of such company".

                 (d) Section 5.18 of the Credit Agreement is hereby amended by

                           (i) inserting the following immediately prior to 
                           clause (x) in subsection (a)(iii) thereof:

                          "(v) the repurchase of up to $20,000,000 of Savoy
                            Debentures, (w) the repurchase of up to $50,000,000
                            of Senior Notes"; and

                          (ii) replacing "$1,000,000" in clause (z) of 
                          subsection (a)(iii) thereof with "$10,000,000".
                            

                 (e) Section 5.19 of the Credit Agreement is hereby amended by:

                            (i) deleting clause (a) thereof in its entirety
                            and substituting the following therefor: "(a)
                            Investments in any Wholly Owned Subsidiary
                            that is a Guarantor;"

                           (ii) replacing "$125,000,000" in clauses (e) and (g)
                            thereof with "$300,000,000"; and

                           (iii)  replacing "$20,000,000" in clause (h) thereof 
                           with "$200,000,000".

                  (f) Section 5.20 of the Credit Agreement is hereby amended by
deleting "or the Borrower" in Section (b) thereof and substituting ", the
Borrower or any Subsidiary that is not a Guarantor" therefor.

                  3. NO OTHER AMENDMENTS; CONFIRMATION. Except as expressly
amended, modified and supplemented hereby, the provisions of the Credit
Agreement are and shall remain in full force and effect.

                  4. REPRESENTATIONS AND WARRANTIES. Each of USANi and the
Borrower hereby represents and warrants to the Administrative Agent, the
Collateral Agent, the Issuing Bank and the Lenders as of the date hereof as
follows:

                  (a) No Default or Event of Default has occurred and is
           continuing.

                  (b) The execution, delivery and performance by each of USANi
           and the Borrower of this Amendment are within the scope of its
           corporate or company powers, and have been duly authorized by all
           necessary corporate, company and, if required, stockholder or member
           action on the part of each of them, and no authorizations, approvals 
           or consents of, and no filings or registrations with, any 
           governmental or regulatory authority or agency are necessary for the 
           execution or delivery of this Amendment by either of them or for the 
           validity or enforceability of this Amendment. The Credit Agreement as
           amended by this 



<PAGE>

           Amendment constitutes the legal, valid and binding  obligation of 
           each of USANi and the Borrower, enforceable against each of them in 
           accordance with its terms, except as such enforceability may be 
           limited by (a) bankruptcy, insolvency, reorganization, moratorium or
           other similar laws of general applicability affecting the enforcement
           of creditors' rights and (b) the application of general principles of
           equity (regardless of whether such enforceability is considered in a
           proceeding in equity or at law).

                  (c) All representations and warranties of USANi and the
           Borrower contained in the Credit Agreement (other than
           representations or warranties expressly made only on and as of the
           Effective Date) are true and correct in all material respects on
           and as of the date hereof with the same force and effect as if
           made on and as of the date hereof.

                  5. EFFECTIVENESS. This Amendment shall become effective only
upon the satisfaction in full of the following conditions precedent:

                  (a) The Administrative Agent shall have received counterparts
         hereof, duly executed and delivered by USANi, the Borrower and the
         Required Lenders; and

                  (b) The Administrative Agent shall have received such opinions
         and certificates from USANi and the Borrower and their counsel as it
         may reasonably request in form reasonably satisfactory to its counsel.

                  6. EXPENSES. The Borrower agrees to reimburse the
Administrative Agent and the Collateral Agent for its out-of-pocket expenses in
connection with this Amendment, including the reasonable fees, charges and
disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent.

                  7. GOVERNING LAW; COUNTERPARTS. (a) This Amendment and the
rights and obligations of the parties hereto shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York.

         (b) This Amendment may be executed by one or more of the parties to
this Amendment on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. This Amendment may be delivered by facsimile transmission of the
relevant signature pages hereof.



<PAGE>


             IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.

                                          USA NETWORKS, INC.,

                                            by     /s/ Michael Durney   
                                               -------------------------
                                               Name: Michael Durney
                                               Title: VP & Controller

                                          USANi LLC,

                                            by     /s/ Michael Durney    
                                               --------------------------
                                               Name: Michael Durney
                                               Title: VP & Controller

                                          THE CHASE MANHATTAN BANK, individually
                                          and as Administrative Agent, 
                                          Collateral Agent and Issuing Bank,

                                            by    /s/ Joan M. Fitzgibbon   
                                               ----------------------------
                                               Name: Joan M. Fitzgibbon
                                               Title: Managing Director

                                          BANK OF AMERICA, N.A.,

                                            by      /s/ Sean W. Cassidy     
                                               -----------------------------
                                               Name: Sean W. Cassidy
                                               Title: Vice President

                                          THE BANK OF NEW YORK COMPANY, INC., 
                                          individually and as Co-Documentation 
                                          Agent,

                                            by       /s/ John C. Lambert      
                                               -------------------------------
                                               Name: John C. Lambert
                                               Title: Vice President



<PAGE>


                                          ABN AMRO BANK, N.V.,

                                            by
                                               ------------------------------
                                               Name:
                                               Title:

                                            by
                                               ------------------------------
                                               Name:
                                               Title:

                                          BANCA COMMERCIALE ITALIANA, NEW 
                                          YORK BRANCH,

                                            by      /s/ Charles Dougherty    
                                               ------------------------------
                                               Name: Charles Dougherty
                                               Title: Vice President

                                            by         /s/ E. Bermant        
                                               ------------------------------
                                               Name: E. Bermant
                                               Title: First Vice President/
                                                      Deputy Manager

                                          BANK OF HAWAII,

                                            by          /s/ Luke Yeh         
                                               ------------------------------
                                               Name: Luke Yeh
                                               Title: Assistant Vice President

                                          BANK OF MONTREAL,

                                            by         /s/ W.T. Calder       
                                               ------------------------------
                                               Name: W.T. Calder
                                               Title: Managing Director



<PAGE>


                                          THE BANK OF NOVA SCOTIA,

                                            by
                                                /s/ Vincent J. Fitzgerald, Jr.
                                              ----------------------------------
                                              Name: Vincent J. Fitzgerald, Jr.
                                              Title: Authorized Signatory

                                          BANQUE NATIONALE DE PARIS,

                                            by
                                                      /s/ Serge Desrayaud       
                                              ----------------------------------
                                              Name: Serge Desrayaud
                                              Title: Vice President/Team Leader

                                            by
                                                     /s/ Gregg W. Bonardi       
                                              ----------------------------------
                                              Name: Gregg W. Bonardi
                                              Title: Vice President

                                          BANQUE WORMS CAPITAL CORPORATION,

                                            by
                                              ----------------------------------
                                              Name:
                                              Title:

                                          CITY NATIONAL BANK,

                                            by
                                                      /s/ David C. Burdge       
                                              ----------------------------------
                                              Name: David C. Burdge
                                              Title: Senior Vice President



<PAGE>


                                          CREDIT INDUSTRIEL ET COMMERCIAL,

                                            by
                                                        /s/ Albert Calo         
                                              ----------------------------------
                                              Name: Albert Calo
                                              Title: Vice President

                                            by
                                                 /s/ Marie-Rose Sensenbrenner
                                              ----------------------------------
                                              Name: Marie-Rose Sensenbrenner
                                              Title: Vice President

                                          CREDIT AGRICOLE INDOSUEZ,

                                            by
                                                        /s/ Craig Welch         
                                              ----------------------------------
                                              Name: Craig Welch
                                              Title: First Vice President

                                            by
                                                      /s/ John McCloskey        
                                              ----------------------------------
                                              Name: John McCloskey
                                              Title: Vice President, SRM

                                          CREDITANSTALT CORPORATE FINANCE, INC.,

                                            by
                                              ----------------------------------
                                              Name:
                                              Title:

                                            by
                                              ----------------------------------
                                              Name:
                                              Title:



<PAGE>


                                          THE DAI-ICHI KANGYO BANK LTD., NEW 
                                          YORK BRANCH,

                                            by
                                                      /s/ Marvin M. Lazar      
                                              ----------------------------------
                                              Name: Marvin M. Lazar
                                              Title: Assistant Vice President

                                          DE NATIONALE INVESTERINGSBANK, N.V.,

                                            by
                                              ----------------------------------
                                              Name:
                                              Title:

                                            by
                                              ----------------------------------
                                              Name:
                                              Title:

                                          FIRST HAWAIIAN BANK,

                                            by
                                                      /s/ Travis Ruetenik      
                                              ----------------------------------
                                              Name: Travis Ruetenik
                                              Title: Assistant Vice President

                                         FLEET NATIONAL BANK,

                                            by
                                                      /s/ Manuel Burgueno   
                                              ----------------------------------
                                              Name: Manuel Burgueno
                                              Title: Vice President

                                         THE FUJI BANK LIMITED, LOS ANGELES 
                                         AGENCY,

                                           by
                                                      /s/ Masahito Fukuda      
                                              ----------------------------------
                                             Name: Masahito Fukuda
                                             Title: Senior Vice President

                                         GENERAL ELECTRIC CAPITAL CORPORATION,



<PAGE>


                                           by
                                                       /s/ Karl Kieffer       
                                              ----------------------------------
                                             Name: Karl Kieffer
                                             Title: Duly Authorized Signatory

                                         ISTITUTO BANCARIO SAN PAOLO DI TORINO 
                                         - ISTITUTO MOBILIARE ITALIANO, SPA,

                                           by
                                              ----------------------------------
                                              Name:
                                              Title:

                                           by
                                              ----------------------------------
                                              Name:
                                              Title:

                                         KBC BANK  N.V.,

                                           by
                                              ----------------------------------
                                              Name:
                                              Title:

                                           by
                                              ----------------------------------
                                              Name:
                                              Title:

                                         MELLON BANK, N.A.,

                                           by
                                                     /s/ Raghunatha Reddy       
                                              ----------------------------------
                                              Name: Raghunatha Reddy
                                              Title: Lending Officer



<PAGE>


                                         PARIBAS,

                                           by
                                              ----------------------------------
                                              Name:
                                              Title:

                                           by
                                              ----------------------------------
                                              Name:
                                              Title:

                                         PNC BANK, NATIONAL ASSOCIATION,

                                           by
                                                      /s/ Karen L. Kooman       
                                              ----------------------------------
                                              Name: Karen L. Kooman
                                              Title: Assistant Vice President

                                         ROYAL BANK OF CANADA,

                                           by
                                                     /s/ Stephanie Babich       
                                              ----------------------------------
                                              Name: Stephanie Babich
                                              Title: Vice President

                                         SOCIETE GENERALE,

                                           by
                                                      /s/ Robert G. Robin       
                                              ----------------------------------
                                              Name: Robert G. Robin
                                              Title: Vice President

                                         THE SUMITOMO TRUST & BANKING, CO.,
                                         LTD., NEW YORK BRANCH,

                                           by
                                                     /s/ Stephen Stratico       
                                              ----------------------------------
                                              Name: Stephen Stratico
                                              Title: Vice-President



<PAGE>


                                         SUNTRUST BANK, CENTRAL FLORIDA N.A.,

                                            by
                                                      /s/ W. David Wisdom       
                                              ----------------------------------
                                              Name: W. David Wisdom
                                              Title: Vice President

                                         UNION BANK OF CALIFORNIA, N.A.,

                                           by

                                                    /s/ Stender E. Sweeney      
                                              ----------------------------------
                                              Name: Stender E. Sweeney
                                              Title: Assistant Vice President

                                         WELLS FARGO BANK,

                                           by
                                              ----------------------------------
                                              Name:
                                              Title:

                                         WESTDEUTSCHE LANDESBANK, NEW YORK 
                                         BRANCH,

                                           by
                                                    /s/ Cynthia M. Niesen       
                                              ----------------------------------
                                              Name: Cynthia M. Niesen
                                              Title: Managing Director

                                           by
                                                      /s/ Pascal Kabemba        
                                              ----------------------------------
                                              Name: Pascal Kabemba
                                              Title: Associate





<PAGE>

                                                                  EXHIBIT 10.47

                              EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into by and between
Mike Sileck ("Employee") and USA Networks, Inc., a Delaware corporation (the
"Company"), and is effective October 12, 1999 (the "Effective Date").

          WHEREAS, Employee and USA Networks, a New York general partnership and
an affiliate of the Company ("Networks"), are parties to an Employment
Agreement, dated July __, 1999 and effective September 13, 1999 (the "Existing
Employment Agreement").

          WHEREAS, Employee and Networks desire to terminate the Existing
Employment Agreement, and the Company desires to establish its right to the
services of Employee, in the capacity described below, on the terms and
conditions hereinafter set forth, and Employee is willing to accept such
employment on such terms and conditions.

          NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, Employee and the Company have agreed and do hereby agree as follows:

1.   EMPLOYMENT. The Company agrees to employ Employee as Senior Vice President
and Chief Financial Officer of the Company, and Employee accepts and agrees to
such employment, effective as of the date on which the Board of Directors of the
Company or a Committee thereof
 approves such appointment. As Senior Vice
President and Chief Financial Officer of the Company, the Employee shall have
responsibility for the financial and administrative operations of the Company.
Notwithstanding the foregoing, during Employee's employment with the Company,
Employee shall do and perform all services and acts necessary or advisable to
fulfill the duties and responsibilities as are commensurate and consistent with
Employee's position and shall render such services on the terms set forth
herein. During Employee's employment with the Company, Employee shall report
directly to the Vice Chairman of the Company or such person(s) as from time to
time may be designated by the Company (hereinafter referred to as the "Reporting
Officer"). Employee shall have such powers and duties with respect to the
Company as may reasonably be assigned to Employee by the Reporting Officer, to
the extent consistent with Employee's position and status. Employee agrees to
devote all of Employee's working time, attention and efforts to the Company and
to perform the duties of Employee's position in accordance with the Company's
policies as in effect from time to time. Employee's principal place of
employment shall be the Company's offices located in New York, New York.

2.   TERM OF AGREEMENT. The term ("Term") of this Agreement shall commence on
the Effective Date and shall continue for a period of two (2) years, unless
sooner terminated in accordance with the provisions of Section 1 of the Terms
and Conditions attached hereto.


<PAGE>

3.   COMPENSATION.

     (a)  BASE SALARY. During the Term, the Company shall pay Employee an annual
base salary of $400,000 (the "Base Salary"), payable in equal biweekly
installments or in accordance with the Company's payroll practice as in effect
from time to time. For all purposes under this Agreement, the term "Base Salary"
shall refer to Base Salary as in effect from time to time.

     (b)  DISCRETIONARY BONUS. During the Term, Employee shall be eligible to
receive discretionary annual bonuses.

     (c)  STOCK OPTION. In consideration of Employee's entering into this
Agreement and as an inducement to join the Company, Employee shall be granted
under USA Networks, Inc.'s 1997 Stock and Annual Incentive Plan (the "Plan") a
non-qualified stock option (the "Option") to purchase an additional 37,500
shares of the Company's common stock, par value $.0l per share (the "Common
Stock"), subject to the approval of the Compensation Committee of the Board of
Directors of the Company. The date of grant of the Option shall be the later of
(x) the Effective Date and (y) the date on which the grant is approved by such
Compensation Committee. The exercise price of the Option shall equal the last
reported sales price of the Common Stock in the over-the-counter market (or such
other market on which the Common Stock is then traded) on the date preceding the
date of grant. Such Option shall vest and become exercisable in four equal
installments on each of the first, second, third and fourth anniversaries of the
Effective Date, provided that the Option shall become 100% vested and
exercisable upon a Change in Control (as such term is defined in the Plan). The
Option shall expire upon the earlier to occur of (i) ten years from the date of
grant (the "Option Term") or (ii) except as otherwise provided in the Option
award agreement, 90 days following the termination of Employee's employment with
the Company for any reason. Other than acceleration of the Option following a
Change in Control, the Option shall not otherwise become vested and exercisable
as a result of the termination or non-renewal of this Agreement (or the
termination of Employee's employment with the Company) for any reason.

     (d)  BENEFITS. During the Term, Employee shall be entitled to participate
in any welfare, health and life insurance and pension benefit and incentive
programs as may be adopted from time to time by the Company on the same basis as
that provided to similarly situated employees of the Company. Without limiting
the generality of the foregoing, Employee shall be entitled to the following
benefits:

          (i)  REIMBURSEMENT FOR BUSINESS EXPENSES. During the Term, the Company
shall reimburse Employee for all reasonable and necessary expenses incurred by
Employee in performing Employee's duties for the Company, on the same basis as
similarly situated employees and in accordance with the Company's policies as in
effect from time to time.

          (ii) RELOCATION EXPENSES. (A) Networks shall reimburse Employee for
all reasonable and necessary commission expenses incurred by Employee in
connection with the sale of his house in order to relocate to commence
employment with Networks, but in no event shall the amount reimbursed exceed 6%
of the sales price of such house.


                                       2

<PAGE>

               (B)  Networks shall reimburse Employee for all reasonable and
necessary moving expenses incurred by Employee in connection with his relocation
in accordance with Networks' policies as in effect from time to time.

          (iii) VACATION. During the Term, Employee shall be entitled to such
number of weeks of paid vacation per year as are provided to similarly situated
employees of the Company in accordance with the plans, policies, programs and
practices of the Company.

          (iv) MEDICAL EXPENSES. Networks shall reimburse Employee for any
amounts paid by Employee to obtain medical benefits under COBRA during the
period between termination of Employee's employment immediately prior to
commencing employment with Networks and the date on which Employee commences
coverage under the medical benefits plan of Networks or the Company, whichever
occurs first.

4.   NOTICES. All notices and other communications under this Agreement shall be
in writing and shall be given by first-class mail, certified or registered with
return receipt requested or hand delivery acknowledged in writing by the
recipient personally, and shall be deemed to have been duly given three days
after mailing or immediately upon duly acknowledged hand delivery to the
respective persons named below:

         If to the Company:             USA Networks, Inc.
                                        152 West 57th Street
                                        New York, New York  10019
                                        Attention:  General Counsel

         If to the Employee:            Mike Sileck
                                        5 Charles Court
                                        Chappaqua, New York 10514


Either party may change such party's address for notices by notice duly given
pursuant hereto.

5.   GOVERNING LAW; JURISDICTION. This Agreement and the legal relations thus
created between the parties hereto shall be governed by and construed under and
in accordance with the internal laws of the State of New York without reference
to the principles of conflicts of laws. Any and all disputes between the parties
which may arise pursuant to this Agreement will be heard and determined before
an appropriate federal court in New York, or, if not maintainable therein, then
in an appropriate New York state court. The parties acknowledge that such courts
have jurisdiction to interpret and enforce the provisions of this Agreement, and
the parties consent to, and waive any and all objections that they may have as
to, personal jurisdiction and/or venue in such courts.

6.   COUNTERPARTS. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument. Employee expressly understands and
acknowledges that the Terms and Conditions attached hereto are incorporated
herein by reference, deemed a part of this Agreement


                                       3

<PAGE>

and are binding and enforceable provisions of this Agreement. References to
"this Agreement" or the use of the term "hereof" shall refer to this Agreement
and the Terms and Conditions attached hereto, taken as a whole.

               IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and delivered by its duly authorized officer and Employee has executed
and delivered this Agreement on November 2, 1999.

                                      USA NETWORKS, INC.

                                      By:
                                         ---------------------------------
                                             Name:
                                             Title:
                                                   -----------------------
                                                       MIKE SILECK


                                       4

<PAGE>

                              TERMS AND CONDITIONS

1.   TERMINATION OF EMPLOYEE'S EMPLOYMENT.

     (a)  DEATH. In the event Employee's employment hereunder is terminated by
reason of Employee's death, the Company shall pay Employee's designated
beneficiary or beneficiaries, within 30 days of Employee's death in a lump sum
in cash, Employee's Base Salary through the end of the month in which death
occurs and any Accrued Obligations (as defined in paragraph 1(f) below).

     (b)  DISABILITY. If, as a result of Employee's incapacity due to physical
or mental illness ("Disability"), Employee shall have been absent from the
full-time performance of Employee's duties with the Company for a period of four
consecutive months and, within 30 days after written notice is provided to
Employee by the Company (in accordance with Section 6 hereof), Employee shall
not have returned to the full-time performance of Employee's duties, Employee's
employment under this Agreement may be terminated by the Company for Disability.
During any period prior to such termination during which Employee is absent from
the full-time performance of Employee's duties with the Company due to
Disability, the Company shall continue to pay Employee's Base Salary at the rate
in effect at the commencement of such period of Disability, offset by any
amounts payable to Employee under any disability insurance plan or policy
provided by the Company. Upon termination of Employee's employment due to
Disability, the Company shall pay Employee within 30 days of such termination
(i) Employee's Base Salary through the end of the month in which termination
occurs in a lump sum in cash, offset by any amounts payable to Employee under
any disability insurance plan or policy provided by the Company; and (ii) any
Accrued Obligations (as defined in paragraph 1(f) below).

     (c)  TERMINATION FOR CAUSE. The Company may terminate Employee's employment
under this Agreement for Cause at any time prior to the expiration of the Term.
As used herein, "Cause" shall mean: (i) the plea of guilty or nolo contendere
to, or conviction for, the commission of a felony offense by Employee; PROVIDED,
HOWEVER, that after indictment, the Company may suspend Employee from the
rendition of services, but without limiting or modifying in any other way the
Company's obligations under this Agreement; (ii) a material breach by Employee
of a fiduciary duty owed to the Company; (iii) a material breach by Employee of
any of the covenants made by Employee in Section 2 hereof; or (iv) the willful
or gross neglect by Employee of the material duties required by this Agreement.
In the event of Employee's termination for Cause, this Agreement shall terminate
without further obligation by the Company, except for the payment of any Accrued
Obligations (as defined in paragraph 1(f) below).

     (d)  TERMINATION BY THE COMPANY OTHER THAN FOR DEATH, DISABILITY OR CAUSE.
If Employee's employment is terminated by the Company for any reason other than
Employee's death or Disability or for Cause, then (i) the Company shall pay
Employee the Base Salary through the end of the Term over the course of the then
remaining


<PAGE>

Term; and (ii) the Company shall pay Employee within 30 days of the date of such
termination in a lump sum in cash any Accrued Obligations (as defined in
paragraph 1(f) below).

     (e)  MITIGATION; OFFSET. In the event of termination of Employee's
employment prior to the end of the Term, Employee shall use reasonable best
efforts to seek other employment and to take other reasonable actions to
mitigate the amounts payable under Section 1 hereof. If Employee obtains other
employment during the Term, the amount of any payment or benefit provided for
under Section 1 hereof which has been paid to Employee shall be refunded to the
Company by Employee in an amount equal to any compensation earned by Employee as
a result of employment with or services provided to another employer after the
date of Employee's termination of employment and prior to the otherwise
applicable expiration of the Term, and all future amounts payable by the Company
to Employee during the remainder of the Term shall be offset by the amount
earned by Employee from another employer. For purposes of this Section 1(e),
Employee shall have an obligation to inform the Company regarding Employee's
employment status following termination and during the period encompassing the
Term.

     (f)  ACCRUED OBLIGATIONS. As used in this Agreement, "Accrued Obligations"
shall mean the sum of (i) any portion of Employee's Base Salary through the date
of death or termination of employment for any reason, as the case may be, which
has not yet been paid; and (ii) any compensation previously earned but deferred
by Employee (together with any interest or earnings thereon) that has not yet
been paid.

     2.   CONFIDENTIAL INFORMATION; NON-SOLICITATION; AND PROPRIETARY RIGHTS.

     (a)  CONFIDENTIALITY. Employee acknowledges that while employed by the
Company Employee will occupy a position of trust and confidence. Employee shall
not, except as may be required to perform Employee's duties hereunder or as
required by applicable law, without limitation in time or until such information
shall have become public other than by Employee's unauthorized disclosure,
disclose to others or use, whether directly or indirectly, any Confidential
Information regarding the Company or any of its subsidiaries or affiliates.
"Confidential Information" shall mean information about the Company or any of
its subsidiaries or affiliates, and their clients and customers that is not
disclosed by the Company or any of its subsidiaries or affiliates for financial
reporting purposes and that was learned by Employee in the course of employment
by the Company or any of its subsidiaries or affiliates, including (without
limitation) any proprietary knowledge, trade secrets, data, formulae,
information and client and customer lists and all papers, resumes, and records
(including computer records) of the documents containing such Confidential
Information. Employee acknowledges that such Confidential Information is
specialized, unique in nature and of great value to the Company and its
subsidiaries or affiliates, and that such information gives the Company and its
subsidiaries or affiliates a competitive advantage. Employee agrees to deliver
or return to the Company, at the Company's request at any time or upon
termination or expiration of Employee's employment or as soon thereafter as
possible, all documents, computer tapes and disks, records, lists, data,
drawings, prints, notes and written information (and all copies thereof)
furnished by the Company and its subsidiaries or affiliates or prepared by
Employee in the course of Employee's employment by the Company and its
subsidiaries or affiliates. As used in this Agreement,


                                       2

<PAGE>

"subsidiaries" and "affiliates" shall mean any company controlled by,
controlling or under common control with the Company.

     (b)  NON-SOLICITATION OF EMPLOYEES. Employee recognizes that he will
possess confidential information about other employees of the Company and its
subsidiaries or affiliates relating to their education, experience, skills,
abilities, compensation and benefits, and inter-personal relationships with
suppliers to and customers of the Company and its subsidiaries or affiliates.
Employee recognizes that the information he will possess about these other
employees is not generally known, is of substantial value to the Company and its
subsidiaries or affiliates in developing their respective businesses and in
securing and retaining customers, and will be acquired by Employee because of
Employee's business position with the Company. Employee agrees that, during the
Term (and for a period of 12 months beyond the expiration of the Term), Employee
will not, directly or indirectly, solicit or recruit any employee of the Company
or any of its subsidiaries or affiliates for the purpose of being employed by
Employee or by any business, individual, partnership, firm, corporation or other
entity on whose behalf Employee is acting as an agent, representative or
employee and that Employee will not convey any such confidential information or
trade secrets about other employees of the Company or any of its subsidiaries or
affiliates to any other person except within the scope of Employee's duties
hereunder.

     (c)  PROPRIETARY RIGHTS; ASSIGNMENT. All Employee Developments shall be
made for hire by the Employee for the Company or any of its subsidiaries or
affiliates. "Employee Developments" means any idea, discovery, invention,
design, method, technique, improvement, enhancement, development, computer
program, machine, algorithm or other work or authorship that (i) relates to the
business or operations of the Company or any of its subsidiaries or affiliates,
or (ii) results from or is suggested by any undertaking assigned to the Employee
or work performed by the Employee for or on behalf of the Company or any of its
subsidiaries or affiliates, whether created alone or with others, during or
after working hours. All Confidential Information and all Employee Developments
shall remain the sole property of the Company or any of its subsidiaries or
affiliates. The Employee shall acquire no proprietary interest in any
Confidential Information or Employee Developments developed or acquired during
the Term. To the extent the Employee may, by operation of law or otherwise,
acquire any right, title or interest in or to any Confidential Information or
Employee Development, the Employee hereby assigns to the Company all such
proprietary rights. The Employee shall, both during and after the Term, upon the
Company's request, promptly execute and deliver to the Company all such
assignments, certificates and instruments, and shall promptly perform such other
acts, as the Company may from time to time in its discretion deem necessary or
desirable to evidence, establish, maintain, perfect, enforce or defend the
Company's rights in Confidential Information and Employee Developments.

     (d)  COMPLIANCE WITH POLICIES AND PROCEDURES. During the Term, Employee
shall adhere to the policies and standards of professionalism set forth in the
Company's Policies and Procedures as they may exist from time to time.

     (e)  REMEDIES FOR BREACH. Employee expressly agrees and understands that
the remedy at law for any breach by Employee of this Section 2 will be
inadequate and that damages


                                       3

<PAGE>

flowing from such breach are not usually susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that upon Employee's violation
of any provision of this Section 2 the Company shall be entitled to obtain from
any court of competent jurisdiction immediate injunctive relief and obtain a
temporary order restraining any threatened or further breach as well as an
equitable accounting of all profits or benefits arising out of such violation.
Nothing in this Section 2 shall be deemed to limit the Company's remedies at law
or in equity for any breach by Employee of any of the provisions of this Section
2, which may be pursued by or available to the Company.

     (f)  SURVIVAL OF PROVISIONS. The obligations contained in this Section 2
shall, to the extent provided in this Section 2, survive the termination or
expiration of Employee's employment with the Company and, as applicable, shall
be fully enforceable thereafter in accordance with the terms of this Agreement.
If it is determined by a court of competent jurisdiction in any state that any
restriction in this Section 2 is excessive in duration or scope or is
unreasonable or unenforceable under the laws of that state, it is the intention
of the parties that such restriction may be modified or amended by the court to
render it enforceable to the maximum extent permitted by the law of that state.

3.   TERMINATION OF PRIOR AGREEMENTS. This Agreement constitutes the entire
agreement between the parties and terminates and supersedes any and all prior
agreements and understandings (whether written or oral) between the parties with
respect to the subject matter of this Agreement, including, without limitation,
the Existing Employment Agreement. Employee acknowledges and agrees that neither
the Company nor anyone acting on its behalf has made, and is not making, and in
executing this Agreement, the Employee has not relied upon, any representations,
promises or inducements except to the extent the same is expressly set forth in
this Agreement. Employee hereby represents and warrants that by entering into
this Agreement, Employee will not rescind or otherwise breach an employment
agreement with Employee's current employer prior to the natural expiration date
of such agreement

4.   ASSIGNMENT; SUCCESSORS. This Agreement is personal in its nature and none
of the parties hereto shall, without the consent of the others, assign or
transfer this Agreement or any rights or obligations hereunder, provided that,
in the event of the merger, consolidation, transfer, or sale of all or
substantially all of the assets of the Company with or to any other individual
or entity, this Agreement shall, subject to the provisions hereof, be binding
upon and inure to the benefit of such successor and such successor shall
discharge and perform all the promises, covenants, duties, and obligations of
the Company hereunder, and all references herein to the "Company" shall refer to
such successor.

5.   WITHHOLDING. The Company shall make such deductions and withhold such
amounts from each payment and benefit made or provided to Employee hereunder, as
may be required from time to time by applicable law, governmental regulation or
order.

6.   HEADING REFERENCES. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose. References to "this Agreement" or the use of
the term "hereof" shall refer to these Terms and Conditions and the Employment
Agreement attached hereto, taken as a whole.


                                       4

<PAGE>

7.   WAIVER; MODIFICATION. Failure to insist upon strict compliance with any of
the terms, covenants, or conditions hereof shall not be deemed a waiver of such
term, covenant, or condition, nor shall any waiver or relinquishment of, or
failure to insist upon strict compliance with, any right or power hereunder at
any one or more times be deemed a waiver or relinquishment of such right or
power at any other time or times. This Agreement shall not be modified in any
respect except by a writing executed by each party hereto. Notwithstanding
anything to the contrary herein, neither the assignment of Employee to a
different Reporting Officer due to a reorganization or an internal restructuring
of the Company or its affiliated companies nor a change in the title of the
Reporting Officer shall constitute a modification or a breach of this Agreement.

8.   SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any law or
public policy, only the portions of this Agreement that violate such law or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.

9.   INDEMNIFICATION. The Company shall indemnify and hold Employee harmless for
acts and omissions in Employee's capacity as an officer, director or employee of
the Company to the maximum extent permitted under applicable law; PROVIDED,
HOWEVER, that neither the Company, nor any of its subsidiaries or affiliates
shall indemnify Employee for any losses incurred by Employee as a result of acts
described in Section 1(c) of this Agreement.

ACKNOWLEDGED AND AGREED:

Date: November 2, 1999

                             USA NETWORKS, INC.

                             By:    /s/ Thomas J. Kuhn                    
                                    -----------------------               
                                    Senior Vice President, General Counsel
                                    and Secretary

                             /s/ Mike Sileck                              
                             ------------------------------               
                                               MIKE SILECK

                                       5




<PAGE>

                                                                  EXHIBIT 10.48

                              EMPLOYMENT AGREEMENT

                  THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into by and
between Barry Baker ("Executive") and USA Networks, Inc., a Delaware corporation
(the "Company"), and is effective February 19, 1999 (the "Effective Date").

                  WHEREAS, the Company desires to establish its right to the
services of Executive, in the capacity described below, on the terms and
conditions hereinafter set forth, and Executive is willing to accept such
employment on such terms and conditions.

                  NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, Executive and the Company have agreed and do hereby agree
as follows:

                  1.   EMPLOYMENT.

                  (a)  DUTIES AND AUTHORITY. During the Term (as defined in
Section 2 below), the Company agrees to employ Executive as President and Chief
Operating Officer of the Company, and Executive accepts and agrees to such
employment. During the Executive's employment, Executive shall be a member of
the Board of Directors of the Company, Ticketmaster Online-City Search Inc.
("TMCS"), and any other subsidiary of the Company whose shares are publicly
traded. Executive shall resign from each of such board memberships upon his
termination of employment. During the Executive's employment,
 Executive shall
also serve as a member of the Executive Committee of the Board of Directors of
the Company. Except as may be provided herein, Executive agrees to devote all of
his working time, attention and duties to the business of the Company. Under the
direction of the Chairman and Chief Executive Officer of the Company, Executive
shall be responsible for the business, affairs, properties and operations of all
operating units of the Company other than publicly-traded subsidiaries,
including operating units acquired after the Effective Date that are consistent
in size and scope with the Company's existing operating units for which
Executive will be responsible, except with respect to such operating units where
by prior contractual obligations such units need not report to Baker, and such
other business and affairs as the parties may mutually agree. The Company's
Chairman and Chief Executive Officer shall reasonably attempt in good faith to
eliminate such prior contractual obligations by modifying such contracts.
Executive shall have general executive charge, management and control over such
operating units which will report to Executive, with all such powers and
authority with respect to such business, affairs, properties and operations as
may be reasonably incident to such duties and responsibilities; PROVIDED, that
Executive shall not be responsible for any corporate functions for any such unit
other than public relations and administration. During Executive's employment
with the Company, Executive shall report directly to the Chairman and Chief
Executive Officer of the Company. Executive shall have such powers and duties
with respect to the Company as may reasonably be assigned to him by the Board or
the Chairman and Chief Executive Officer, to the extent consistent with his
position and status as set forth above. Executive's principal place of
employment shall be the Company's offices in New York City.


                                      -1-

<PAGE>

                  (b)  OTHER ACTIVITIES. It shall not be a violation of this
Agreement for Executive to (a) serve on corporate, civic or charitable boards or
committees, (b) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (c) manage personal investments, so long as in the
case of (a), (b) and (c) above such activities do not significantly interfere
with the performance of Executive's responsibilities as an employee of the
Company in accordance with this Agreement. In addition, it shall not be a
violation of this Agreement for Executive to maintain an investment, with
minimal time and involvement, in the management of certain radio and television
broadcasting properties which may be acquired by Executive pursuant to certain
agreements with Sinclair Broadcast Group, Inc. and its affiliates, so long as
such investments do not interfere with his obligations hereunder. If the
ownership of such broadcasting properties prevents the Company from owning
broadcast stations or properties in such broadcast markets, Executive agrees to
take such action as is reasonably necessary (including transferral of his
ownership of such properties) to remove such impediment to the ownership of
broadcast stations or properties by the Company. During the Term, Executive will
comply with the Company's Code of Conduct, except as specifically contemplated
by this Agreement.

                  2.   TERM OF AGREEMENT. The term ("Term") of this Agreement
shall commence on the Effective Date and shall continue for a period of five
years, unless sooner terminated in accordance with the provisions of Section 4
hereof. The Company acknowledges that although Executive is a part-time employee
as of the Effective Date (and has been a part-time employee of the Company since
February 8, 1999), he shall not be obligated to begin work full-time for the
Company until a date selected by Executive, but in no event later than March 29,
1999. The Company and Executive agree to negotiate in good faith an extension of
the Term commencing one year prior to the expiration of the Term; PROVIDED, that
nothing herein shall require either party to continue the employment
relationship following the end of the Term. If the Company and Executive are
unable to reach agreement upon an extension of the Term by six months prior to
the expiration of the Term, Executive shall be permitted to spend a reasonable
portion of his working time pursuing other employment opportunities, provided
that such employment shall not commence until after expiration of the Term.

                  3.   COMPENSATION.

                  (a)  BASE SALARY. The Company shall pay Executive an annual
base salary at the rate of $750,000 per year (the "Base Salary"), payable in
equal biweekly installments or at such other time or times as Executive and the
Company shall agree. The Company may, at any time, in the discretion of the
Board, increase, but not decrease, Executive's Base Salary. For all purposes
under this Agreement, the term "Base Salary" shall refer to Base Salary,
including increases made from time to time.

                  (b)  BONUS. During the Term, Executive shall be eligible for 
an annual bonus opportunity based on the achievement of reasonable performance
goals established in accordance with the Company's existing practices for peer
executives. Executive may participate in any Company plan applicable to peer
corporate executives that permits deferred payment of all or a


                                      -2-

<PAGE>

portion of such annual bonus, including any arrangement to purchase shares of
the common stock, par value $.01 per share, of the Company (the "Common Stock")
at a discount. Executive shall be eligible to participate in all other annual
incentive bonus plans or programs (including, without limitation, any profit
sharing or similar bonus programs or arrangements of the Company in effect from
time to time) maintained by the Company and applicable to peer corporate
executives of the Company, on a basis no less favorable than that provided to
peer corporate executives of the Company.

                  (c)  STOCK OPTIONS. Upon Executive becoming a part-time
employee of the Company on February 8, 1999 (the "Grant Date"), the Company
granted to Executive, pursuant to the terms of the HSN, Inc. 1997 Stock and
Annual Incentive Plan (the "Incentive Plan") non-qualified stock options (the
"Options") to purchase 1,200,000 shares of Common Stock. The exercise price of
the Options shall equal to $37.5625 per share. Such Options shall vest and
become exercisable in four equal installments on the anniversary of the Grant
Date in each of 2000, 2001, 2002 and 2003, provided that the Options shall
become 100% vested and exercisable upon a Change in Control (as such term is
defined below in Section 4(d)); and the Options shall expire ten years from the
Grant Date (the "Option Term"). The Options shall be transferrable by Executive
only to Executive's immediate family members, or certain entities that are owned
by Executive and/or Executive's immediate family members, as provided in the
option agreement, which shall be in substantially the form attached hereto as
Exhibit A. In addition, Executive shall be eligible for additional grants of
stock options on an annual basis consistent with the Company's practices and
commensurate with Executive's position and responsibilities.

                  (d)  RESTRICTED STOCK. Upon the date this Agreement is
executed, Executive shall be granted, pursuant to the terms of the Incentive
Plan, 125,000 restricted shares of Common Stock (the "Restricted Stock"). The
Restricted Stock shall vest and the restrictions shall lapse with respect to 60%
of the shares on the anniversary of the Effective Date in 2002, and an
additional 20% of the shares on the anniversary of the Effective Date in each of
2003 and 2004, provided that the Restricted Stock shall become 100% vested and
all restrictions shall lapse upon a Change in Control. Prior to vesting, the
Restricted Stock shall be transferrable by Executive only to Executive's
immediate family members, or entities that are owned by Executive's immediate
family members, as provided in the option agreement. The Restricted Stock shall
be evidenced by a restricted stock award agreement, which shall be in
substantially the form attached hereto as Exhibit B.

                  (e)  FRINGE BENEFITS. During the Term, Executive shall be
entitled to participate in any fringe, welfare, health and life insurance and
pension benefit and incentive programs (including excise tax reimbursement
payments) as may be adopted from time to time by the Company on the same basis
as that provided generally to peer corporate executives of the Company. Without
limiting the generality of the foregoing, Executive shall be entitled to the
following benefits:

                  (i) Car Allowance. During the first year of the Term, the
         Company shall provide Executive with a car allowance to cover the cost
         of purchasing or leasing a suitable vehicle


                                      -3-

<PAGE>

          and the cost of insuring and maintaining such vehicle in the aggregate
          amount of $500 per month. During the entire Term, the Company shall
          pay for reasonable costs for parking Executive's vehicle in a garage
          in New York City in close proximity to the Company's offices.

                   (ii) Computer, etc. The Company will provide Executive with a
          home facsimile machine, a lap-top computer and a cellular phone for
          home and travel use during the Term.

                  (iii) Reimbursement for Business Expenses. During the Term,
          the Company shall reimburse Executive for all reasonable and necessary
          expenses incurred by Executive in performing his duties for the
          Company, including, without limitation, first class hotel and travel
          accommodations on all commercial carriers for travel related to the
          business of the Company and entertainment expenses consistent with
          Executive's position in the Company. In the event that, in the good
          faith determination of Executive, the Company does not provide
          Executive with reasonable access to Company-leased airplanes in
          connection with travel for multi-destination business trips or any
          other destination for which non-stop service is not available from
          Executive's point of immediate departure, Executive shall thereafter
          be entitled to lease or designate a company (including a company
          affiliated with Executive) to lease to the Company an aircraft;
          PROVIDED, that the charter rates shall be consistent with the rates
          generally applicable for the aircraft leased by Executive, and the
          Company and Executive shall reasonably and mutually agree to the size
          and type of aircraft to be leased for a particular itinerary.

                  (iv) Vacation and Sick Leave. During the Term, Executive shall
          be entitled to four weeks of paid vacation per year, or such longer
          period as may be provided by the Company, in accordance with the
          plans, policies, programs and practices of the Company applicable to
          peer corporate executives of the Company generally. Executive shall be
          eligible for sick leave in accordance with the Company's most
          favorable practices generally applicable for executives.

                  (v) Office and Support Staff. During the Term, Executive shall
          be entitled to an office in New York City and such appropriate
          secretarial and administrative assistants consistent with the
          Company's practices for peer corporate executives.

                  (vi) Relocation Expenses. In connection with Executive's
          relocation to New York, the Company shall engage an executive
          relocation service, through which the Company shall purchase
          Executive's home for its appraised value. The Company shall also pay
          the broker's commission on the sale of Executive's home, temporary
          living expenses up to 180 days, the packing, shipping, and unpacking
          of Executive's household goods, including up to two cars, from current
          home to new home, and four house-hunting trips. The Company will also
          pay all normal and customary closing costs for Executive's new and old
          homes. Normal and customary closing costs include but are not limited
          to: legal fees, stamp taxes, transfer taxes, inspections, loan
          application fees, engineering survey, title company fees, brokerage
          commissions and moving expenses. The Company shall also reimburse
          Executive


                                      -4-

<PAGE>

          for any taxes imposed upon Executive with respect to the reimbursed
          expenses.

                  (vii) Disability and Life Insurance. Executive shall be
          entitled to (A) coverage under a disability insurance arrangement
          providing for payments of 60% of Executive's Base Salary in the event
          of his disability and continuing until the earlier of his recovery
          from such disability or attainment of age 65 and (B) life insurance
          coverage equal to $11,000,000, in each case without any cost to
          Executive; PROVIDED, HOWEVER, that Executive shall be entitled to
          designate the beneficiary or beneficiaries of such life insurance only
          with respect to 50% of the proceeds of such life insurance, and the
          Company shall be entitled to the balance of such proceeds.

                  4.   TERMINATION OF EXECUTIVE'S EMPLOYMENT.

                  (a)  DEATH. In the event Executive's employment hereunder is
terminated by reason of Executive's death, the Company shall pay Executive's
designated beneficiary or beneficiaries all amounts otherwise payable to
Executive pursuant to Section 4(d).

                  (b)  DISABILITY. If, as a result of Executive's incapacity 
due to physical or mental illness ("Disability"), Executive shall have been
absent from the full-time performance of his duties with the Company for a
period of six consecutive months and, within 30 days after written notice is
provided to him by the Company, he shall not have returned to the full-time
performance of his duties, Executive's employment under this Agreement may be
terminated by the Company or Executive for Disability. During any period prior
to such termination during which Executive is absent from the full-time
performance of his duties with the Company due to Disability, the Company shall
continue to pay Executive his Base Salary at the rate in effect at the
commencement of such period of Disability, offset by any amounts payable to
Executive under any disability insurance plan or policy provided by the Company.
Upon termination of Executive's employment for Disability, the Company shall pay
Executive the amounts provided in Section 4(d).

                  (c)  TERMINATION FOR CAUSE. The Company may terminate
Executive's employment under this Agreement for Cause on 60 days written notice
prior to expiration of the Term. As used herein, "Cause" shall mean: (i) during
the Term, Executive's conviction or plea of guilty in a court of law of a
felony; (ii) during the Term, Executive's willful gross misconduct or gross
neglect of duties, but in no event shall an action constitute Cause pursuant to
this clause (ii) if Executive believed in good faith that such action or failure
to act was in the best interest of the Company or (iii) a material breach of a
fiduciary duty owed to the Company which is materially injurious to the Company;
provided however, that Executive's employment may not be terminated for Cause
under clause (ii) or (iii) unless Executive shall have first received written
notice from the Board advising him of the specific acts or omissions alleged to
constitute a breach of duty of a failure or refusal to perform his duties, and
such failure or refusal to perform his duties continues after Executive shall
have had a reasonable opportunity to correct the acts or omissions cited in such
notice. In no event shall the alleged mediocre or poor performance of Executive
in his duties hereunder be deemed grounds for termination of his employment for
Cause. Upon a termination for Cause, all of Executive's obligations under this
Agreement (other than under Section 5) shall 


                                      -5-

<PAGE>

terminate. In the event of termination for Cause, this Agreement shall terminate
without further obligation by the Company, except for (a) its Accrued
Obligations, as defined below, (b) its obligations under Section 5, (c) its
obligations with respect to vested Stock Options, which vested Stock Options
shall remain exercisable for not less than one year, and (d) its obligations
under Section 14.


                                      -6-

<PAGE>

                  (d)  TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY
EXECUTIVE FOR GOOD REASON. If Executive's employment is terminated by the
Company for any reason other than for Cause, including Executive's death or
Disability, or Executive terminates his employment for Good Reason (as defined
below), then (i) the Company shall pay Executive, within 30 days of the date of
such termination, a lump sum cash payment equal to the sum of (A) his Base
Salary, unreduced, through the day on which the Term would have ended (as
extended, if theretofore extended) if not terminated pursuant to this Section 4
(the "Cutoff Date"), and (B) the average of the last two years' bonuses paid to
Executive (unless termination occurs prior to any bonuses being paid to
Executive in which event such average shall be deemed to be 150% of Base
Salary), multiplied by the number of whole and partial years (rounded to the
nearest 100th (.01)) remaining until the Cutoff Date; PROVIDED, HOWEVER, that if
Executive's employment terminates due to death or Disability, the lump sum cash
payment pursuant to this clause (i) shall be equal to the Base Salary Executive
would have earned through the end of the fiscal year in which the death or
Disability occurs; (ii) the Options shall immediately vest and any then
outstanding Options held by Executive shall remain exercisable until the later
of the Cutoff Date or two years from the date of termination; (iii) the
Restricted Stock shall immediately vest and all restrictions shall lapse; (iv)
the Company shall maintain until the Cutoff Date, at its expense (provided that
Executive continues to make all required employee contributions), all insurance
coverages and medical and health benefits in respect of Executive and his family
that shall have been in effect with respect to Executive and his immediate
family immediately prior to the termination of Executive's employment; PROVIDED,
that this clause (iv) shall not apply if Executive's employment terminates due
to death or Disability; and (v) the Company shall pay Executive within 30 days
of the date of such termination in a lump sum cash payment any Accrued
Obligations (as defined in subparagraph 4(f) below). The amounts payable under
clause (i) above shall be discounted from the dates they would otherwise have
been paid had Executive's employment not terminated at a discount rate of 5% per
annum. Furthermore, the Company's obligations (i) under Section 5, (ii) with
respect to vested Stock Options, which vested Stock Options shall remain
exercisable until the later of the Cutoff Date or two years from the date of
termination, and (iii) under Section 14 shall remain in full force and effect.
As used herein, "Good Reason" shall mean the occurrence of any of the following
without the written consent of Executive: (i) Executive is not elected (and
continued) as a director of the Company, TMCS, or any other publicly-traded
subsidiary, or as President and Chief Operating Officer of the Company, or
Executive shall be removed from such Board or office, (ii) the Company's
material breach of any of the provisions of this Agreement; (iii) any material
adverse alteration in Executive's title, position, status, duties, level of
reporting or responsibilities with the Company; (iv) any relocation of
Executive's office outside of the New York metropolitan area; or (v) the
occurrence of a Change in Control, as defined in the Incentive Plan. For an
event to constitute Good Reason hereunder, Executive must provide notice of
termination to the Company within 180 days of his knowledge of such event. No
termination for Good Reason shall be effective unless Executive gives at least
10 days prior written notice of the particular act or failure to act that
constitutes the grounds for such termination and the Company fails, within such
period, to cure such act or failure to act.

                  (e)  NO MITIGATION. In no event shall Executive be required 
to seek other employment or take any other action by way of mitigation of the
amounts payable under Section 4


                                      -7-

<PAGE>

hereof; PROVIDED, that if Executive obtains other employment during the Term,
the amount of any payment provided to Executive pursuant to Section 4 hereof in
the form of Common Stock or Options (or the vesting of Restricted Stock or
Options) shall be refunded to the Company by Executive to the extent of any
compensation paid in the form of stock, stock options or other equity-based
compensation (including any profit-sharing payments), earned by Executive as a
result of employment with or services provided to another employer after the
date of Executive's termination of employment and prior to the Cutoff Date. In
no event will Executive be obligated to refund any cash compensation paid
pursuant to this Section 4 as a result of this Section 4(e). The Company may
also offset any amounts owed to Executive under Section 4 by any claim or right
the Company may have against Executive.

                  (f)  ACCRUED OBLIGATIONS. As used in this Agreement, "Accrued
Obligations" shall mean the sum of (i) any portion of Executive's Base Salary
through the date of death, Disability or termination, as the case may be, which
has not yet been paid; (ii) any compensation previously deferred by Executive
(together with any interest or earnings thereon) that has not yet been paid; and
(iii) any earned but unpaid bonuses or other earned but unpaid incentive
compensation as of the date of death, Disability or termination, as the case may
be.

                  5.   CONFIDENTIAL INFORMATION.

                  (a)  CONFIDENTIALITY. Executive acknowledges that in his
employment hereunder he will occupy a position of trust and confidence.
Executive shall not, except as may be required to perform his duties hereunder
or as required by applicable law, without limitation in time or until such
information shall have become public other than by Executive's unauthorized
disclosure, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company or any of its respective
subsidiaries. "Confidential Information" shall mean information about the
Company or any of its respective subsidiaries, and their respective clients and
customers that is not disclosed by the Company or any of its respective
subsidiaries for financial reporting purposes and that was learned by Executive
in the course of his employment by the Company or any of its respective
subsidiaries, including (without limitation) any proprietary knowledge, trade
secrets, data, formulae, information and client and customer lists and all
papers, resumes, and records (including computer records) of the documents
containing such Confidential Information. Executive acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company and its respective subsidiaries, and that such information gives the
Company and its respective subsidiaries a competitive advantage. Executive
agrees to deliver or return to the Company, at the Company's request at any time
or upon termination or expiration of his employment or as soon thereafter as
possible, all documents, computer tapes and disks, records, lists, data,
drawings, prints, notes and written information (and all copies thereof)
furnished by the Company and its respective subsidiaries or prepared by
Executive in the course of his employment by the Company and its respective
subsidiaries.

                  (b)  NON-SOLICITATION OF EMPLOYEES. Executive recognizes that
he will possess confidential information about other employees of the Company
and its respective subsidiaries relating to their education, experience, skills,
abilities, compensation and benefits, and


                                      -8-

<PAGE>

inter-personal relationships with suppliers to and customers of the Company and
its respective subsidiaries. Executive recognizes that the information he will
possess about these other employees is not generally known, is of substantial
value to the Company and its respective subsidiaries in developing their
respective businesses and in securing and retaining customers, and will be
acquired by him because of his business position with the Company. Executive
agrees that, during the Term (and for a period of 12 months beyond the
expiration of the Term), he will not, directly or indirectly, solicit or recruit
any employee of the Company or any of its respective subsidiaries for the
purpose of being employed by him or by any business, individual, partnership,
firm, corporation or other entity on whose behalf he is acting as an agent,
representative or employee and that he will not convey any such confidential
information or trade secrets about other employees of the Company or any of its
respective subsidiaries to any other person except within the scope of
Executive's duties hereunder.

                  (c)  SURVIVAL OF PROVISIONS. The obligations contained in 
this Section 5 shall, to the extent provided in this Section 5, survive the
termination or expiration of Executive's employment with the Company and, as
applicable, shall be fully enforceable thereafter in accordance with the terms
of this Agreement. If it is determined by a court of competent jurisdiction in
any state that any restriction in this Section 5 is excessive in duration or
scope or is unreasonable or unenforceable under the laws of that state, it is
the intention of the parties that such restriction may be modified or amended by
the court to render it enforceable to the maximum extent permitted by the law of
that state.

                  6.   NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by first-class mail, certified
or registered with return receipt requested or hand delivery acknowledged in
writing by the recipient personally, and shall be deemed to have been duly given
three days after mailing or immediately upon duly acknowledged hand delivery to
the respective persons named below:

        If to the Company:                 USA Networks, Inc.
                                           152 West 57th Street
                                           New York, New York 10019
                                           Attention: Office of the Chairman

        If to Executive:                   Barry Baker
                                           -----------
                                           -----------

                                           With a copy to:

                                           Andrew M. Baker, Esq.
                                           Baker & Botts, L.L.P.
                                           2001 Ross Avenue
                                           Dallas, Texas 75201


                                      -9-

<PAGE>

Either party may change such party's address for notices by notice duly given
pursuant hereto.

                  7.   TERMINATION OF PRIOR AGREEMENTS. This Agreement 
constitutes the entire agreement between the parties and terminates and
supersedes any and all prior agreements and understandings among the parties
with respect to Executive's employment and compensation by the Company. The
Company acknowledges and agrees that neither Executive nor anyone acting on his
behalf has made, and is not making, and in executing this Agreement, the Company
has not relied upon, any representations, promises or inducements except to the
extent the same is expressly set forth in this Agreement.

                  8.   ASSIGNMENT; SUCCESSORS. This Agreement is personal in its
nature and none of the parties hereto shall, without the consent of the others,
assign or transfer this Agreement or any rights or obligations hereunder,
provided that, in the event of the merger, consolidation, transfer, or sale of
all or substantially all of the assets of the Company with or to any other
individual or entity, this Agreement shall, subject to the provisions hereof, be
binding upon and inure to the benefit of such successor and such successor shall
discharge and perform all the promises, covenants, duties, and obligations of
the Company hereunder, and all references herein to the "Company" shall refer to
such successor.

                  9.   GOVERNING LAW. This Agreement and the legal relations  
thus created between the parties hereto shall be governed by and construed under
and in accordance with the laws of the State of New York.

                  10.  WITHHOLDING.  The Company shall make such deductions 
and withhold such amounts from each payment made to Executive hereunder as may
be required from time to time by law, governmental regulation or order.

                  11.  HEADINGS.  Section headings in this Agreement are 
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

                  12.  WAIVER; MODIFICATION. Failure to insist upon strict
compliance with any of the terms, covenants, or conditions hereof shall not be
deemed a waiver of such term, covenant, or condition, nor shall any waiver or
relinquishment of, or failure to insist upon strict compliance with, any right
or power hereunder at any one or more times be deemed a waiver or relinquishment
of such right or power at any other time or times. This Agreement shall not be
modified in any respect except by a writing executed by each party hereto.

                  13.  SEVERABILITY. In the event that a court of competent
jurisdiction determines that any portion of this Agreement is in violation of
any law or public policy, only the portions of this Agreement that violate such
law or public policy shall be stricken. All portions of this Agreement that do
not violate any statute or public policy shall continue in full force and
effect. Further, any court order striking any portion of this Agreement shall
modify the stricken terms as narrowly as possible to give as much effect as
possible to the intentions of the parties under this Agreement.


                                      -10-

<PAGE>

                  14.  INDEMNIFICATION. The Company shall indemnify and hold
Executive harmless from any liability, damage, cost or expense (including
reasonable attorneys fees) resulting from acts and omissions in his capacity as
an officer, director or employee of the Company, or as a result of his being or
having been an officer, director or employee of the Company or any subsidiary or
affiliate of the Company, or as a result of his serving or having served at the
request of the Company as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust, business organization,
enterprise or other entity, including service with respect to employee benefit
plans, to the maximum extent permitted under Delaware law; PROVIDED, HOWEVER,
that neither the Company, nor any of its respective subsidiaries shall indemnify
Executive for any losses incurred by Executive as a result of acts described in
Section 4(c) of this Agreement.

                  15.  COUNTERPARTS.  This Agreement may be executed in 
several counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.

                                  [END OF PAGE]


                                      -11-

<PAGE>

                  IN WITNESS  WHEREOF,  the Company has caused this Agreement to
be executed and delivered by its duly authorized officer and Executive has
executed and delivered this Agreement on February 19, 1999.

                                             USA NETWORKS, INC.

                                                      /s/ MICHAEL DURNEY     
                                                      --------------------------

                                             By:      Michael Durney
                                                      VP and Controller

                                             BARRY BAKER

                                                      /s/ BARRY BAKER         
                                                      --------------------------

                                      -12-




<PAGE>
                                                                    EXHIBIT 21.1
 
                   LIST OF SUBSIDIARIES OF USA NETWORKS, INC.
                             A DELAWARE CORPORATION
                             AS OF JANUARY 31, 2000
 

<TABLE>
<CAPTION>
                                                                  PLACE OF
SUBSIDIARY                                                     INCORPORATION
----------                                                     -------------
<S>                                                           <C>
Exception Management Services LP............................  Delaware
Home Shopping Network, Inc..................................  Delaware
  d/b/a Home Shopping Network
      The Home Shopping Network
Home Shopping Network en Espanol............................  Delaware
Home Shopping Club, LP......................................  Delaware
  d/b/a Home Shopping Club
      Telemation
      Spree
      Home Shopping Spree
      HSN
      HSN Spree
      HSC Spree
      Home Shopping Network
      Home Shopping Direct
Home Shopping Network GmbH..................................  Germany
HSN Capital LLC.............................................  Delaware
HSN Direct LLC..............................................  Delaware
HSN General Partner LLC.....................................  Delaware
HSN Holdings, Inc...........................................  Delaware
HSN of Nevada LLC...........................................  Delaware
HSN Fulfillment LLC.........................................  Delaware
  d/b/a Home Shopping Network Outlet
      Home Shopping Network Outlet of Tampa
      HSN Wholesale Liquidation
      Designer Direct
      Home Shopping Values
      Private Showing--Jewelry Values By Mail
      HSN Media Merchandise
      Home Shopping By Mail
HSN-SBS Italia S.p.A........................................  Italy
HSN Travel LLC..............................................  Delaware
HSN Realty LLC..............................................  Delaware
Short Shopping LLC..........................................  Delaware
Home Shopping Network E-Commerce LLC........................  Delaware
HSN En Espanol LLC..........................................  Delaware
Internet Shopping Network LLC...............................  Delaware
MarkeTech Services, Inc.....................................  Delaware
National Call Center LP.....................................  Delaware
USANi
 Sub LLC...............................................  Delaware
Less than 50% ownership:
  Jupiter Shop Channel Co. Ltd (Japan)
Hotel Reservations Network, Inc.............................  Delaware
USANi Holding XI............................................  Delaware
USANi LLC Holding XIII, Inc.................................  Delaware
USANi LLC...................................................  Delaware
</TABLE>

 

<PAGE>
 

<TABLE>
<CAPTION>
                                                                  PLACE OF
SUBSIDIARY                                                     INCORPORATION
----------                                                     -------------
<S>                                                           <C>
USAi Sub Inc................................................  Delaware
USA Networks Holdings, Inc..................................  Delaware
USA Networks Partner LLC....................................  Delaware
USA Network (NY General Partnership)........................  New York
New-U Studios Holdings, Inc.................................  Delaware
New-U Studios, Inc..........................................  Delaware
New-U Pictures Facilities LLC...............................  Delaware
Studios USA Development LLC.................................  Delaware
Studios USA First-Run Television LLC........................  Delaware
Studios USA LLC.............................................  Delaware
Studios USA Pictures Development LLC........................  Delaware
Studios USA Pictures LLC....................................  Delaware
Studios USA Reality Television LLC..........................  Delaware
Studios USA Talk Television LLC.............................  Delaware
Studios USA Talk Video LLC..................................  Delaware
Studios USA Television Distribution LLC.....................  Delaware
Studios USA Television LLC..................................  Delaware
Studios USA Talk Productions LLC............................  Delaware
Studios USA Music Publishing LLC............................  California
Studios USA Canada Productions, Inc.........................  Delaware
Talk Video Productions LLC..................................  Delaware
Fareholm Productions Ltd....................................  Ontario
Studios USA Music Publishing LLC............................  Delaware
Coldwater Cable Development LLC.............................  Delaware
Laurel Productions LLC......................................  Delaware
Underworld Productions LLC..................................  Delaware
Writers Development LLC.....................................  Delaware
Happy Hours Development LLC.................................  Delaware
Lexi Production LLC.........................................  Delaware
Storm Front LLC.............................................  Delaware
Music of Sci Fi Network LLC.................................  Delaware
Nicholas Productions LLC....................................  Delaware
Sci Fi Network Music Publishing LLC.........................  Delaware
NCL LLC.....................................................  Delaware
Music of Studios USA LCC....................................  California
Miami USA Broadcasting, Inc.................................  Florida
Miami USA Broadcasting Productions, Inc.....................  Florida
Miami USA Broadcasting Station Productions, Inc.............  Florida
City Desk, Inc..............................................  Florida
Dance Show, Inc.............................................  Florida
Generation n, Inc...........................................  Florida
Hotties, Inc................................................  Florida
Kenneth's Freakquency.......................................  Florida
Lincoln Lounge, Inc.........................................  Florida
Lips, USA, Inc..............................................  Florida
Neil at Night, Inc..........................................  Florida
Ocean Drive, Inc............................................  Florida
Out Loud, Inc...............................................  Florida
Personal Box, Inc...........................................  Florida
Radio Daze, Inc.............................................  Florida
</TABLE>

 
                                       2

<PAGE>
 

<TABLE>
<CAPTION>
                                                                  PLACE OF
SUBSIDIARY                                                     INCORPORATION
----------                                                     -------------
<S>                                                           <C>
Traffic Jams, USA, Inc......................................  Florida
North Central LPTV, Inc.....................................  Delaware
Northeast LPTV, Inc.........................................  Delaware
Silver King Capital Corporation, Inc........................  Delaware
Silver King Investment Holdings, Inc........................  Delaware
South Central LPTV, Inc.....................................  Delaware
Southeast LPTV, Inc.........................................  Delaware
SK Holdings, Inc............................................  Delaware
SKC Investments, Inc........................................  Delaware
Telemation, Inc.............................................  Delaware
USA Broadcasting, Inc.......................................  Delaware
USA Broadcasting Productions, Inc...........................  Delaware
USA Station Group, Inc......................................  Delaware
USA Station Group of Dallas, Inc............................  Delaware
USA Station Group Partnership of Dallas.....................
  (General Partnership)                                       Delaware
USA Station Group of Hollywood, Florida, Inc................  Delaware
USA Station Group Partnership of Hollywood, Florida.........
  (General Partnership)                                       Delaware
USA Station Group of Houston, Inc...........................  Delaware
USA Station Group Partnership of Houston....................
  (General Partnership)                                       Delaware
USA Station Group of Illinois, Inc..........................  Delaware
USA Station Group Partnership of Illinois...................
  (General Partnership)                                       Delaware
USA Station Group of Atlanta, Inc...........................  Delaware
USA Station Group Partnership of Atlanta....................
  (General Partnership)                                       Delaware
USA Station Group of Massachusetts, Inc.....................  Delaware
USA Station Group Partnership of Massachusetts..............
  (General Partnership)                                       Delaware
USA Station Group of New Jersey, Inc........................  Delaware
USA Station Group Partnership of New Jersey.................
  (General Partnership)                                       Delaware
USA Station Group of Northern California, Inc...............  Delaware
USA Station Group of Ohio, Inc..............................  Delaware
USA Station Group Partnership of Ohio.......................
  (General Partnership)                                       Delaware
USA Station Group of Southern California, Inc...............  Delaware
USA Station Group Partnership of Southern California........
  (General Partnership)                                       Delaware
USA Station Group of Tampa, Inc.............................  Delaware
USA Station Group Partnership of Tampa......................
  (General Partnership)                                       Delaware
USA Station Group of Vineland, Inc..........................  Delaware
USA Station Group Partnership of Vineland...................
  (General Partnership)                                       Delaware
USA Station Group of Virginia, Inc..........................  Delaware
USA Station Group--LPTV, Inc................................  Delaware
West LPTV, Inc..............................................  Delaware
</TABLE>

 
                                       3

<PAGE>
 

<TABLE>
<CAPTION>
                                                                  PLACE OF
SUBSIDIARY                                                     INCORPORATION
----------                                                     -------------
<S>                                                           <C>
USA Station Group Communications, LLC.......................  Delaware
USA Station Group Communications, Inc.......................  Delaware
USA Station Group of Florida, Inc...........................  Delaware
USA Station Group of Melbourne, Inc.........................  Delaware
USA Station Group of South Dakota, Inc......................  Delaware
KEVN, Inc...................................................  Iowa
USA Station Group of Nebraska, LLC..........................  Delaware
USA Station Group of Salem, LLC.............................  Delaware
USA Station Group of Michigan, Inc..........................  Delaware
USA Station Group of Ann Arbor, Inc.........................  Delaware
USA Station Group of Oregon, Inc............................  Delaware
Savoy Pictures Entertainment, Inc...........................  Delaware
Savoy Pictures, Inc.........................................  Delaware
Savoy Pictures, Inc.........................................  Massachusetts
Savoy Pictures Print Services, Inc..........................  Delaware
Bayou Productions, Inc......................................  Delaware
Bison Pictures, Inc.........................................  Delaware
Buffalo Development Corporation.............................  Delaware
Getting Away Productions, Inc...............................  Ontario
Getting Away With Murder Productions, Inc...................  California
Getting Away With Murder Productions, Inc...................  Delaware
J&H Productions, Inc........................................  Quebec
Jekyll Productions, Inc.....................................  Delaware
Laramie Productions, Inc....................................  Delaware
Mariette Productions, Inc...................................  Delaware
Mariette Productions Canada, Inc............................  Ontario
Simple Plan Productions, Inc................................  Delaware
The Stupids Family Productions, Inc.........................  Delaware
The Stupids Productions (Canada), Inc.......................  British Columbia
Thin Line Productions, Inc..................................  Delaware
Without Remorse Productions, Inc............................  Delaware
Zeus Productions, Inc.......................................  Delaware
Savoy Television Holdings, Inc..............................  Delaware
Savoy Pictures Television, Inc..............................  Delaware
Savoy Pictures Television Productions, Inc..................  Delaware
Savoy Pictures Television Development, Inc..................  Delaware
Inflammable Productions, Inc................................  Delaware
Savoy Pictures Television Programming, Inc..................  Delaware
Savoy Stations, Inc.........................................  Delaware
SF Honolulu License Subsidiary, Inc.........................  Delaware
SF Multistations, Inc.......................................  Delaware
SF Broadcasting of New Orleans, Inc.........................  Delaware
SF New Orleans License Subsidiary, Inc......................  Delaware
SF Broadcasting of Mobile, Inc..............................  Delaware
SF Mobile License Subsidiary, Inc...........................  Delaware
SF Broadcasting of Honolulu, Inc............................  Delaware
SF Broadcasting of Wisconsin, Inc...........................  Delaware
SF Broadcasting of Green Bay, Inc...........................  Delaware
SF Green Bay License Subsidiary, Inc........................  Delaware
Ticketmaster--Indiana, Inc..................................  Indiana
</TABLE>

 
                                       4

<PAGE>
 

<TABLE>
<CAPTION>
                                                                  PLACE OF
SUBSIDIARY                                                     INCORPORATION
----------                                                     -------------
<S>                                                           <C>
Ticketmaster Indiana Holdings Corp..........................  Indiana
Ticketmaster Indiana........................................  Indiana
TM Number One Limited.......................................  United Kingdom
Ticketmaster UK Limited.....................................  United Kingdom
FC1031 Limited..............................................  United Kingdom
Synchro Systems Limited.....................................  United Kingdom
Ticketmaster New Venture Holdings, Inc......................  Delaware
Ticketmaster New Ventures, Ltd..............................  Cayman Islands
Venta de Boletas Por Compudoras.............................  Mexico
Ticketmaster New Ventures Argentina, Ltd....................  Cayman Islands
Ticketmaster Argentina, SA..................................  Argentina
Ticketmaster New Ventures Chile, Ltd........................  Cayman Islands
Ticketmaster Chile, SA......................................  Chile
Ticketmaster South America Holding, Ltd.....................  Cayman Islands
Ticketmaster Administration Inc.............................  Delaware
Ticketmaster Australasia Holdings Pty. Ltd..................  Australia
Ticketmaster Bass Pty. Ltd..................................  Australia
Ticketmaster Australasia Investments Pty. Ltd...............  Australia
Ticketmaster 7 Pty. Ltd.....................................  Australia
Ticketmaster At LLC.........................................  Colorado
Ticketmaster Bass Australasia Pty. Ltd......................  Australia
Ticketmaster Administration Australasia Inc.................  Delaware
Ticketmaster Pacific Acquisitions, Inc......................  Delaware
Ticketmaster Canada Ltd.....................................  Canada
Worldwide Ticket Systems, Inc...............................  Washington
The Ticketshop Limited......................................  Ireland
Ticketline Limited..........................................  Ireland
Ticketshop (NI) Limited.....................................  Northern Ireland
TMC Realty Co...............................................  California
Ticketmaster Corporation....................................  Illinois
Cinema Acquisition Corporation..............................  Delaware
Ticketmaster Cinema Group, Ltd..............................  Delaware
Pacer/CATS/CCS..............................................  Delaware
CCS Cinema Computer Systems Co..............................  Delaware
CCS-Cinema Computer Systems Co. & Co. oHG...................  Germany
CCS/CATS Pte. Ltd...........................................  Singapore
CCS Computel ComputerSystem GmbH............................  Germany
CCS Cinema Computer-Systems Verwaltungs GmbH................  Germany
T.E.D. Computer Systeme GmbH................................  Germany
CCS Cinema Concept GmbH.....................................  Germany
CCS Cinema Computer Systems GmbH & Co. oHG..................  Germany
CCS-Cinema Computer Systems S.A.R.L.........................  France
MC France SA................................................  France
Ticketmaster France Holdings Co. EURL.......................  France
Ticketmaster Group, Inc.....................................  Illinois
Ticketmaster New Ventures-International, LTD................  Cayman Islands
Ticketmaster LLC............................................  Delaware
Ticketmaster AT, Inc........................................  Colorado
Ticketmaster Online-CitySearch, Inc.........................  Delaware
Ticketmaster Multimedia Holdings, Inc.......................  Delaware
</TABLE>

 
                                       5

<PAGE>
 

<TABLE>
<CAPTION>
                                                                  PLACE OF
SUBSIDIARY                                                     INCORPORATION
----------                                                     -------------
<S>                                                           <C>
MetroBeat, Inc..............................................  New York
CitySearch Canada Inc.......................................  Canada
Ticketmaster Online-CitySearch Canada Ltd...................  Canada
Ticketmaster Online-CitySearch UK Limited...................  United Kingdom
USA Electronic Commerce and Services LLC....................  Delaware
USA Network Interactive LLC.................................  Delaware
Sci Fi Lab..................................................  Delaware
Sci Fi Lab Development......................................  Delaware
USA Cable Entertainment.....................................  Delaware
USA Cable Entertainment Development.........................  Delaware
True Blue Productions.......................................  Delaware
Flagship Development........................................  Delaware
AST SUB INC.................................................  Delaware
AST LLC.....................................................  Delaware
Music of USA Networks LLC...................................  Delaware
Ingenious Designs Inc.......................................  Delaware
USA Films, LLC..............................................  Delaware
OFI Holdings Inc............................................  Delaware
October Films Inc...........................................  Delaware
Gramercy Films..............................................  Delaware
Island Pictures.............................................  Delaware
Polygram Filmed Entertainment...............................  Delaware
PFE Development.............................................  Delaware
Black Crow Productions......................................  Delaware
Lava Films..................................................  Delaware
Glacier Films...............................................  Delaware
Volcanic Films..............................................  Delaware
Polygram Filmed Entertainment Distribution..................  Delaware
Polygram Films..............................................  Delaware
Gramercy Pictures...........................................  Delaware
Interscope Communications...................................  Delaware
Interscope Films, Ltd.......................................  Delaware
ATL Productions.............................................  Delaware
VAT Films...................................................  Delaware
VAT Productions.............................................  Delaware
Out There Productions Limited...............................  Delaware
DDF Films Inc...............................................  Delaware
Polygram Television.........................................  Delaware
Propaganda Films Inc .......................................  Delaware
Polygram Video LLC..........................................  Delaware
</TABLE>

 
                                       6



<PAGE>
                                                                    EXHIBIT 23.1
 
                          CONSENT OF ERNST & YOUNG LLP
 
    We consent to the incorporation by reference in the Registration Statement
on Form S-8 of USA Networks, Inc. pertaining to the Ticketmaster Stock Plan (as
amended and restated), the Amended and Restated Savoy Pictures
Entertainment, Inc. Stock Option Plan, the Savoy Pictures Entertainment, Inc.
1995 Stock Option Plan, the Home Shopping Network, Inc. 1996 Stock Option Plan
for Employees, the Home Shopping Network, Inc. 1996 Stock Option Plan for
Outside Directors, the Home Shopping Network, Inc. 1986 Stock Option Plan for
Employees, the Home Shopping Network, Inc. 1986 Stock Option Plan for Outside
Directors, HSN, Inc. 1997 Stock and Annual Incentive Plan, the HSN, Inc.
Retirement Savings Plan, the Ticketmaster Stock Plan, and the Ticketmaster
Group, Inc. Stock Option Agreement of our report dated February 3, 2000, with
respect to the consolidated financial statements and financial statement
schedule of USA Networks, Inc. and our reports dated February 3, 2000, with
respect to the consolidated financial statements of Home Shopping Network, Inc.
and Subsidiaries and USANi LLC and Subsidiaries included in the Annual Report
(Form 10-K) for the year ended December 31, 1999, filed
 with the Securities and
Exchange Commission.
 
                                                           /s/ Ernst & Young LLP
 
New York, New York
March 1, 2000



<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1999
<PERIOD-START>                             JAN-01-1999
<PERIOD-END>                               DEC-31-1999
<CASH>                                         424,239
<SECURITIES>                                         0
<RECEIVABLES>                                  454,341
<ALLOWANCES>                                    41,993
<INVENTORY>                                    470,844
<CURRENT-ASSETS>                             1,388,455
<PP&E>                                         356,631
<DEPRECIATION>                                 221,203
<TOTAL-ASSETS>                               9,253,152
<CURRENT-LIABILITIES>                        1,031,753
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         3,370
<OTHER-SE>                                   2,766,359
<TOTAL-LIABILITY-AND-EQUITY>                 9,253,152
<SALES>                                      3,235,761
<TOTAL-REVENUES>                             3,235,761
<CGS>                                        1,867,486
<TOTAL-COSTS>                                3,022,741
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              79,726
<INCOME-PRETAX>                                260,572
<INCOME-TAX>                                    90,906
<INCOME-CONTINUING>                           (27,631)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                  (27,631)
<EPS-BASIC>                                      (.08)
<EPS-DILUTED>                                    (.08)
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                         445,356
<SECURITIES>                                         0
<RECEIVABLES>                                  372,111
<ALLOWANCES>                                    20,610
<INVENTORY>                                    421,570
<CURRENT-ASSETS>                             1,295,275
<PP&E>                                         255,430
<DEPRECIATION>                                 168,727
<TOTAL-ASSETS>                               8,316,190
<CURRENT-LIABILITIES>                          851,867
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         3,175
<OTHER-SE>                                   2,568,230
<TOTAL-LIABILITY-AND-EQUITY>                 8,316,190
<SALES>                                      2,634,136
<TOTAL-REVENUES>                             2,634,136
<CGS>                                        1,522,300
<TOTAL-COSTS>                                2,415,920
<OTHER-EXPENSES>                                22,478
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                             121,266
<INCOME-PRETAX>                                283,814
<INCOME-TAX>                                   127,645
<INCOME-CONTINUING>                             76,874
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    76,874
<EPS-BASIC>                                        .27
<EPS-DILUTED>                                      .21
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-START>                             JAN-01-1997
<PERIOD-END>                               DEC-31-1997
<CASH>                                               0
<SECURITIES>                                         0
<RECEIVABLES>                                        0
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                                     0
<PP&E>                                               0
<DEPRECIATION>                                       0
<TOTAL-ASSETS>                                       0
<CURRENT-LIABILITIES>                                0
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                             0
<OTHER-SE>                                           0
<TOTAL-LIABILITY-AND-EQUITY>                         0
<SALES>                                      1,261,749
<TOTAL-REVENUES>                             1,261,749
<CGS>                                          645,299
<TOTAL-COSTS>                                1,167,230
<OTHER-EXPENSES>                                11,752
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              31,579
<INCOME-PRETAX>                                 56,501
<INCOME-TAX>                                    41,051
<INCOME-CONTINUING>                             13,061
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    13,061
<EPS-BASIC>                                        .06
<EPS-DILUTED>                                      .06
        

</TABLE>