Liberty Media Corporation Business Information, Profile, and History

Company Perspectives:

Liberty Media produces, acquires, and distributes entertainment and informational programming services, as well as electronic retailing services, through subsidiaries and affiliates. Such programming is delivered to viewers in the United States and overseas via cable television and other distribution technologies.

History of Liberty Media Corporation

Liberty Media Corporation is a holding company with a variety of subsidiaries and investments operating in the media, communications, and entertainment industries. Each of Liberty's businesses is separately managed. For the year ended December 31, 2001, Liberty had five operating segments: Starz Encore Group, Liberty Livewire, On Command, Telewest, and Other.

Liberty Media Is Born

John C. Malone, who would earn a reputation as the "king of cable programming," began his career in 1970 as president of Jerrold Communications, a subsidiary of New York-based General Instrument Corporation, and supplier of cable TV equipment. Robert Magness, a former Texas rancher, was a customer of Malone's who in the 1950's had started the company that became Denver-based cable operator Tele-Communications, Inc. (TCI). In an effort to provide sound leadership for a financially struggling TCI, Malone was named Chief Economic Officer (CEO) in 1973, at the age of 32. By restructuring TCI's debt in 1977, Malone paved the way for expansion into bigger cable markets after deregulation in 1984. He also began acquiring programming assets by buying stakes in Black Entertainment Television (BET) in (33 percent in 1979), the Discovery Channel (15 percent in 1986) and American Movie Classics (50 percent in 1986). In 1987, he purchased 12 percent of Turner Broadcasting's stock. Entering the European markets in 1991, TCI merged with United Artists Cable International (formerly United Cable), a broadband service provider in the U.K. Prior to the merger, TCI was United Artists' largest shareholder. The joint venture company was renamed Telewest Communications.

In 1991, TCI spun off much of its programming assets and 14 cable systems, due in part to antitrust pressure from government regulators. The result was Liberty Media Corporation, with Malone as chairman and principal shareholder. During the first two years in operation, Liberty Media launched Court TV, introduced the film channel, Encore, and acquired an interest in the Home Shopping Network. Another home-shopping network and competitor of the Home Shopping Network, QVC, partnered with Liberty Media and the Comcast Corporation, giving Liberty Media an 80-percent voting stake in QVC.

In 1994, Liberty Media was reacquired by TCI. The following, year it joined forces with Rupert Murdoch's News Corporation to create FOX/Liberty Networks, a national sports network. When Turner Broadcasting was acquired by Time Warner in 1996, control of TCI's stake in Turner Broadcasting was passed on to Liberty Media, giving them a 9 percent holding in Time Warner. The same year John Malone became chairman of TCI following the death of Robert Magness.

In 1997, Robert R. Bennett was named President and CEO of Liberty Media, with John Malone serving as Chairman of the Board. Bennett had been employed by Liberty Media since 1990, serving as principal financial officer and in other officer capacities. Prior to joining Liberty Media, Bennett was VicePresident and Director of Finance at TCI where he had been employed since 1987, after leaving The Bank of New York's Communications Entertainment and Publishing Division.

The attractiveness of the Spanish-speaking market in the United States. prompted Liberty Media, Sony, and other investors to purchase Telemundo in 1998 for $780 million. In 1998, BET was bought out jointly by Liberty Media and BET's chairman, Robert Johnson.

AT&T Buys TCI

In 1999 the American Telephone and Telegraph Company, an integrated telecommunications services and equipment company known as AT&T, purchased TCI for $55 billion, folding TCI Ventures into Liberty Media, as well as parts of Sprint PCS, United Video Satellite Group (Gemstar-TV Guide), General Instrument, and TCI International. This combination known as Liberty Media Group and headed by Chairman Malone added assets in technology, wireless telephone and international cable and programming businesses. Liberty Media's interest in FOX/Liberty Networks was traded for an 8 percent interest in News Corporation. Purchased the same year were Associated Group, a wireless communication services and radio broadcasting company, and a stake in Teligent, a wireless communications company. In 2000, Liberty Media invested in Cendant Corporation, a worldwide provider of travel, real estate, vehicle, and financial services; PRIMEDIA, a magazine publisher and specialty video producer and distributor; and Corus Entertainment, a Canadian media group; Todd-AO, an Atlanta-based company specializing in motion picture and television post-production, renamed Liberty Livewire; and Denver's Ascent Entertainment Group, a multimedia distribution and entertainment service provider specializing in satellite distribution support services. Other transactions in 2000 included folding Liberty Media's European and Latin American broadband assets into UnitedGlobalCom (UGC) and merging Japan-based Jupiter Telecommunications, of which Liberty Media owned 50 percent, with Microsoft's Titus Communications. An 11 percent equity stake in France's UGC had been purchased in the fall of 1999, with additional interests acquired in 2002. UGC was the largest operator of cable television systems outside the United States.

AT&T Spins Off Liberty Media

In November 2000, AT&T announced that Liberty Media Group would be one of four planned spin-offs as the company was restructured into separate cable, wireless, corporate and consumer businesses. In February of the following year, Liberty Media filed a $38.4 initial public offering (IPO), the largest in IPO in history. The spin-off, completed on August 10, 2001, enabled Liberty Media to begin trading as an independent publicly-traded company, to raise capital on its own, and to use its stock as currency in acquiring, merging, or partnering with other companies. Each outstanding share of AT&T Class A Liberty Media Group tracking stock was redeemed for one share of Liberty Series A common stock and each outstanding share of AT&T Class B Liberty Media Group tracking stock was redeemed for one share of Liberty Series B common stock. Common stock began trading on the New York Stock Exchange under the symbols LMC.A and LMC.B.

Prior to the spin off, BET Holdings was acquired by Viacom, Inc., in exchange for 15.2 million share of Viacom's common stock. In an effort to expand their European activities and control by ownership a large European cable television business on which to build other businesses, Liberty Media attempted to acquire six of the nine regional cable television companies in Germany. German anti-trust authorities turned down the proposed acquisition. The company did not appeal the decision.

In December 2001, Liberty Media exchanged their 21 percent interest in Gemstar-TV Guide International for News Corporation shares, making them a leading shareholder with an 18 percent interest in the company. Another agreement in 2001 allowed Liberty Media to exchange a portion of their interest in USA Networks Inc. and certain other assets for shares in Vivendi Universal as part of a larger transaction between USA and Vivendi. Liberty Media agreed to sell Telemundo to General Electric's NBC for $2.2 billion.

As of December 31, 2001, Liberty Media's most significant consolidated subsidiaries either wholly or majority owned and controlled were Starz Encore Group LLC (Starz Encore Group), Liberty Livewire Corporation, and On Command Corporation. Other operations were conducted through entities in which Liberty Media did not have a controlling financial interest, but did have significant influence over the operating and financial policies included USA Networks, Inc.; Discovery Communications, Inc.; QVC. Inc.; UnitedGlobalCom, Inc.; and Telewest Communications PLC. Ownership interests were held in companies in which Liberty Media had no significant influence, including AOL Time Warner, Inc., Sprint Corporation, the News Corporation Limited, and Motorola.

Effective January 2, 2002, the NYSE ticker symbol for the Series A common stock was changed to "L." Liberty Series B common stock continued to be traded under LMC.B. The year 2002 also witnessed Liberty Media principally engaged in two fundamental areas of business: video programming and interactive television services, consisting of interests in video programming services; and communications, consisting of interests in cable television systems, telephone and satellite systems. Interests were held in numerous globally branded entertainment networks such as the Discovery Channel, USA, QVC, Encore, and STARZ! Successful non-public affiliates included Japan's Jupiter Telecommunications and Court TV. Liberty's assets included interests in international video distribution business; international telephony and domestic wireless telephony; plant and equipment manufacturers; and other businesses related to broadband services.

Starz Encore Group provided programming through cable, direct-to-home satellite and other distribution media throughout the U.S. Liberty Livewire provided sound, video and post-production and distribution services to the motion picture television industries in the United States., Europe, Asia and Mexico. On Command provided in-room, on-demand video entertainment and information services to hotels, motels, and resorts. Other consolidated subsidiaries included Liberty Digi- tal, Inc., Pramer S.C.A. and Liberty Cablevision of Puerto Rico. Liberty Digital was engaged in programming, distributing and marketing digital and analog music services to homes and businesses. Pramer was a distributor of video programming services in Argentina. Liberty Cablevision of Puerto Rico provided cable television and other broadband services in Puerto Rico.

Liberty Media Faces the Future

Liberty Media began 2002 committed to their strategy of opportunism and value-creation. Although the company continued to look into new areas for acquisition, they nurtured their operating businesses, as the company viewed these assets as likely to provide the greatest long-term value to the company. Looking forward, Liberty Media remained committed to producing, acquiring, and distributing entertainment and informational programming, as well as electronic retailing services through its subsidiaries and affiliates. Such programming would continue to be delivered to viewers in the United States and overseas via cable television and other distribution technologies. Major activities for the coming years were identified by the company to be in video programming and interactive television services, cable and telephony, and satellite communications services.

Principal Subsidiaries: Starz Encore Group LLC (100%); Liberty Digital, Inc. (84%); Liberty Livewire Corporation (85%); On Command Corporation (63%); Pramer S.C.A. (Argentina) (100%); Discovery Communications, Inc. (50%); QVC Inc. (42%); Jupiter Programming Co., Ltd. (Japan) (50%); USA Networks, Inc. (20%); Telewest Communications PLC (Content Division) (UK) (25%); Torneos y Competencias, S.A. (Argentina) (40%); Liberty Cablevision of Puerto Rico, Inc. (100%); Liberty Satellite & Technology, Inc. (27%); TruePosition, Inc. (89%); Telewest Communications PLC (Cable Division) (UK) (25%); Jupiter Telecommunications Co., Ltd. (Japan) (35%); UnitedGlobal Com, Inc. (72%); Cablevision S.A. (Argentina) (50%); Metropólis-Intercom, S.A. (Chile) (50%); Chorus Communication Limited (Ireland) (50%).

Principal Competitors:Bertelsmann; CANAL+; Carlton Communications; Comcast; Cox Communications; Fox Entertainment; Hearst; KirchGruppe; NBC; News Corporation; Rainbow Media; Turner Broadcasting; Universal Studios; Univision; ValueVision; Viacom; Disney.

Chronology

• Key Dates:
• 1970: John C. Malone becomes president of Jerrold Communications.
• 1973: Malone is named CEO of TCI.
• 1991: Liberty Media is spun off from TCI.
• 1994: Liberty Media is reacquired by TCI.
• 1997: Robert R. Bennett becomes President and CEO of Liberty Media, with John C. Malone serving as Chairman of the Board.
• 1999: AT&T purchases TCI.
• 2001: Liberty Media is split off from AT&T and its tracking stock recapitalized as common stock trading on the New York Stock Exchange.
• 2002: Liberty Media's Series A common stock symbol is changed to "L."