UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

FORM 10-K

Commission file number: 333-80523

SUSQUEHANNA MEDIA CO.

Registrant’s telephone number, including area code: (717) 848-5500

Securities Registered Pursuant To Section 12(b) of The Act: None

Securities Registered Pursuant To Section 12(g) of The Act: None

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

Indicate by check mark 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 þ

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

As of June 30, 2004, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $0.

As of March 29, 2005, there were 1,100,000 shares of Common Stock outstanding, all of which was held by Susquehanna Pfaltzgraff Co., the Registrant’s parent.

DOCUMENTS INCORPORATED BY REFERENCE

None

INDEX

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Some of the statements in this Form 10-K, as well as statements made by us in filings with government regulatory bodies, including the Securities and Exchange Commission (“SEC”), and in periodic press releases and other public comments and communications, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “may,” “will,” “should,” “estimates,” “intends,” “plans,” “approximately,” or “anticipates” or the negative thereof or other variations thereof or comparable terminology, or by discussion of strategies, each of which involves risks and uncertainties. We have based these forward-looking statements on our current expectations and projections about future events and trends affecting the financial condition of our business that may prove to be incorrect. These forward-looking statements relate to future events, our future financial performance, and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You should specifically consider the various factors identified in this report and in any other documents filed by us with the SEC that could cause actual results to differ materially from our forward-looking statements.

     All statements other than of historical facts included herein or therein, including those regarding market trends, our financial position, business strategy, projected plans and objectives of management for future operations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or performance to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, but are not limited to:

	•	general economic and business conditions, both nationally and in our markets;
	•	interest rate movements;
	•	terrorists’ acts or adverse reactions to United States anti-terrorism activities;
	•	expectations and estimates concerning future financial performance;
	•	the amount and timing of payments required under the Radio Employee Stock Plan and the Cable Performance Share Plan;
	•	acquisition opportunities and our ability to successfully integrate acquired businesses, properties or other assets and realize anticipated benefits of such acquisitions;
	•	our ability to successfully enter new lines of business, from time to time, such as telephony;
	•	financing plans and access to adequate capital on favorable terms;
	•	our ability to service our outstanding indebtedness and the impact such indebtedness may have on the way we operate our businesses;
	•	the impact of competition from other radio stations, media forms, communication service providers and telephony service providers;
	•	changes in accounting principles generally accepted in the United States and SEC rules and regulations;
	•	the impact of existing and future regulations affecting our businesses, including radio licensing and ownership rules and cable television regulations;
	•	the possible non-renewal of cable franchises;
	•	increases in programming costs and availability of programming;

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	•	the accuracy of anticipated trends in our businesses, including those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein;
	•	advances in technology and our ability to adapt to and capitalize on such advances;
	•	decreases in our customers’ advertising and entertainment expenditures; and
	•	other factors over which we may have little or no control.

     All forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by this cautionary statement. Any forward-looking statement speaks only as of the date it was made, and except for our ongoing obligations to disclose material information as required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this Form 10-K might not transpire. You should also read carefully the factors described in the “Risk Factors” section of this report.

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RISK FACTORS

     Before you invest in our securities, you should be aware that there are various risks involved in your investment. You should read and carefully consider each of the following material risk factors, as well as other information in this report before making a decision to invest in our securities. Our business, financial condition, results of operations and our ability to make payments on our indebtedness could be materially adversely affected by any of the following risks. This report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks faced by us described below or elsewhere.

Risks Related to Us and Our Business

Our significant debt service obligations will limit our cash flow and affect how we operate our company.

     We have a significant level of debt and debt service obligations. As of December 31, 2004, we had approximately $577.2 million of indebtedness. We had the ability to incur approximately $175.8 million of additional debt under our senior credit facilities as of that date. If we add new debt to our current debt levels, the related risks that we now face could intensify.

     Our substantial indebtedness poses important consequences to you, including the risks that:

	•	we will use a substantial portion of our cash flow from operations to pay principal and interest on our debt, thereby reducing the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes;
	•	our indebtedness may limit our ability to obtain additional financing on satisfactory terms;
	•	insufficient cash flow from operations may force us to sell assets, restructure or refinance our debt, or seek additional equity capital, which we may be unable to do at all or on satisfactory terms;
	•	our level of indebtedness may make us more vulnerable to economic downturns and may limit our ability to withstand competitive pressures;
	•	indebtedness under the senior credit facility bears interest at variable rates which could create higher debt service requirements if market interest rates increase; and
	•	our failure to comply with the financial and other covenants applicable to our debt could result in an event of default, which, if not cured or waived, could have a material adverse effect on us.

     These risks may directly impact our ability to service our debt obligations.

We depend upon our subsidiaries for the cash flow necessary to service our debt and other cash obligations.

     Media is a holding company. We conduct our business through our operating subsidiaries and do not have any operations of our own. As a result, we are dependent upon the ability of our subsidiaries to provide us with cash, in the form of dividends, inter-company credits, loans or otherwise, to meet our debt service obligations. Our subsidiaries are separate and distinct legal entities and have no obligations to pay any amounts due on our indebtedness or to make any funds available therefore. Dividends, loans or other distributions to us from our subsidiaries may be subject to contractual or other restrictions and may also be subject to the results of operations of such subsidiaries and other business considerations.

     Not all of our subsidiaries are wholly-owned. To the extent that our subsidiaries that are not wholly-owned declare dividends or make other distributions to stockholders, minority stockholders will receive their shares of such payments, and such amounts will not be available to service our indebtedness. The indentures governing our outstanding senior subordinated notes do, however, limit the amount of dividends and other distributions that may be paid to these minority stockholders.

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Our indebtedness prohibits us from engaging in activities that may benefit us.

     Our senior credit facilities and the indenture governing 7.375% senior subordinated notes due 2013 each contain a number of significant covenants. These covenants limit or restrict our ability to:

	•	incur additional debt;
	•	pay dividends and make distributions;
	•	repurchase securities;
	•	make certain investments;
	•	incur liens;
	•	transfer or sell assets;
	•	enter into transactions with insiders or related parties;
	•	issue or sell stock of subsidiaries;
	•	change our business;
	•	pay management fees to Susquehanna Pfaltzgraff Co.; or
	•	merge or consolidate.

     These limitations and restrictions may adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our best interests.

Our senior credit facilities contain cross-default provisions that may enable senior lenders to proceed against collateral in the event of a default on our senior subordinated notes.

     The events that qualify as events of default under the indenture governing our 7.375% senior subordinated notes due 2013 may also be events of default under our senior credit facilities or other indebtedness. An event of default under the senior credit facilities would permit our lenders to accelerate payment of our indebtedness. If we cannot repay such borrowings when due, the lenders could proceed against the collateral securing the debt.

If we do not successfully integrate future acquisitions, we may not successfully increase our cash flow.

     As part of our business strategy, we may acquire suitable radio stations and cable systems. In the event that we acquire additional radio stations and cable systems, we may have difficulty integrating the operations, systems and management of such businesses, and unforeseen integration difficulties may require a disproportionate amount of management’s attention and our other resources. We may have difficulty in providing new services such as telephony to our cable subscribers. There can be no assurance that any future acquisitions will be as successful as recent acquisitions, and future acquisitions may not increase our cash flow or yield other anticipated benefits.

Events that are beyond our control have increased the level of public and regulatory scrutiny in general and in the capital markets and have resulted in increased regulation and new accounting standards. The reaction to these events may have negative impacts on our business, financial condition and access to capital.

     As a result of the bankruptcy filings by the Enron Corporation and WorldCom, Inc., accounting irregularities of public companies, alleged insider trading violations and investigations by governmental authorities of companies in different industries, businesses have been under a generally increased amount of public and regulatory scrutiny. Recently discovered accounting irregularities have caused regulators and legislators to review current accounting practices, financial disclosures and companies’ relationships with their independent auditors. The capital markets and rating agencies also have increased their level of scrutiny. We believe that we

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are complying with all applicable laws, and we have taken steps to avoid these events, but it is difficult or impossible to predict or control what effect these types of disruptions may have on our business, financial condition or our access to the capital markets.

     Additionally, it is unclear what laws or regulations may develop, and we cannot predict the ultimate impact of any future changes in accounting regulations or practices in general with respect to public companies or in our operations specifically. Any such new accounting standards could impact the way we are required to record revenues, assets and liabilities. These changes in accounting standards could lead to negative impacts on reported earnings or increases in liabilities that could, in turn, affect our reported results of operations.

Risks Relating to the Radio Broadcasting Industry

We are dependent upon advertising revenues to generate income and cash flow. A concentration of stations in any particular market intensifies our exposure to economic declines.

     We derive substantially all of our broadcast revenues from the sale of advertising on our radio stations. For each of the years ended December 31, 2004, 2003 and 2002, approximately 93% of our radio revenues were generated from the sale of broadcast advertising. Because advertisers generally reduce their spending during economic downturns, we could be adversely affected by a future national recession. In addition, because a substantial portion of our broadcast revenues is derived from local advertisers, our ability to generate advertising revenues in specific markets could be adversely affected by local or regional economic downturns.

     A concentration of stations in any particular market intensifies our exposure to economic declines. We are particularly dependent on advertising revenue from the San Francisco and Dallas markets, which generated approximately 26% and 24%, respectively of our total radio revenue for the year ended December 31, 2004. Advertising revenue from the San Francisco and Dallas markets each generated 26% of our total radio revenue for the year ended December 31, 2003. The decline in Dallas revenues can be attributed to competitive pressures. An economic decline in these markets could adversely impact our cash flow and results of operations.

The ongoing impact of acts of war and terrorism in the United States and globally, may reduce our advertising revenues and have other negative effects on our business.

     A general slowdown in the Unites States economy, as well as the impact of acts of war and terrorism against the United States, and the country’s response thereto, could cause our advertising revenues to decline due to advertising cancellations, delays or defaults in payment for advertising time, and other factors. In addition, these ongoing events could depress economic activity in the United States and globally, including the markets in which we operate, and may have other negative effects on our business, the nature and duration of which we cannot predict. If these acts of war or terrorism continue or economic conditions weaken, our financial condition and results of operations may be materially and adversely affected.

Competition from other radio stations and media forms could reduce our advertising revenues and cash flow.

     The radio broadcasting industry is very competitive. The success of each of our stations is dependent upon its audience ratings and share of the overall advertising revenues within its market. Our stations compete for audiences and advertising revenues directly with other radio stations (including satellite radio), and some of the owners of those competing stations have much greater financial resources than we do. Our stations also compete with other media such as cable television, newspapers, magazines, direct mail, compact discs, music videos, the Internet and outdoor advertising. We cannot be sure that any of our stations can maintain or increase its current audience ratings or market share. In addition, other stations may change their format or programming to compete directly with our stations for audience and advertisers or engage in aggressive promotional campaigns. If this happens, the ratings and advertising revenues of our stations could decrease, the promotion and other expenses of our stations could increase, and our stations would have lower broadcast cash flow.

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     New media technologies are also being introduced to compete with the radio broadcasting industry. Some of these new technologies are:

	•	digital audio broadcasting and satellite digital audio radio service, which provide for the delivery of multiple new, high quality audio programming formats to local and national audiences; and
	•	streaming audio delivered through the Internet.

     We cannot predict at this time the effect, if any, that any of these new technologies may have on the radio broadcasting industry in general or our stations in particular.

Licensing and ownership rules may limit the growth of our radio broadcasting operations.

     The radio broadcasting industry is subject to extensive regulation by the Federal Communications Commission under the Communications Act of 1934. FCC approval is required for the issuance, renewal or transfer of radio broadcast station operating licenses. We cannot operate our radio stations without FCC licenses. The failure to renew our licenses on their expiration dates or the inclusion of conditions or qualifications in our licenses could have a negative impact on our business. The Communications Act and FCC rules impose specific limits on the number of stations an entity can own in a single market. Ownership rules may affect our acquisition strategy because they may prevent us from acquiring additional stations in a particular market. We may also be prevented from engaging in a swap transaction if the swap would cause us to violate these rules.

     The FCC has indicated that it will no longer, on its own initiative, examine and may impose limits upon the advertising revenue share acquired by one entity in a single market. In addition, the Department of Justice, either directly through its administration of the Hart-Scott-Rodino pre-merger notification requirements, or generally, has taken an active role in reviewing acquisitions of stations in particular markets and, in some instances, has conditioned its clearance on the parties’ agreement to limit market share to a level approved by the Department.

     In 2001, the FCC began rulemaking proceedings on two of its broadcast ownership rules — the Broadcast-Newspaper Cross-Ownership Rule and the Local Radio Ownership Rule. In September of 2002, the FCC issued a Notice of Proposed Rulemaking, or NPRM, in which it sought comment on its four other broadcast ownership rules: the Television-Radio Cross-Ownership Rule; the Dual Television Network Rule; the Local Television Multiple Ownership Rule; and the National Television Ownership Rule. The September NPRM consolidated the three proceedings into a single biennial review for all broadcast ownership rules; such biennial reviews are required in accordance with the 1996 Telecom Act. In June, 2003, the FCC adopted a set of revised local and national ownership rules that further relaxed its broadcast ownership restrictions to permit some additional ownership consolidation. In August 2003, a number of parties appealed the FCC’s revised rules, and the Third Circuit in Philadelphia was selected to hear all of the appeals. The Third Circuit, in September 2003, granted a stay of the new rules shortly before they were to go into effect, with the exception of the National TV Ownership Rule which was modified in January 2004 by Congress, thereby mooting all reconsideration and appeals of that issue.

     In June 2004, the Third Circuit remanded to the FCC for further explanation or modification many of the radio multiple ownership rule changes adopted by the FCC in June 2003; the court did, however, indicate its approval of the FCC’s decisions to repeal the ban on newspaper-radio cross-ownership, to use Arbitron Metro markets to define local markets and to count non-commercial educational radio stations in determining the size of a market, to attribute radio stations whose advertising is brokered under a Joint Sales Agreement to a brokering station’s permissible ownership totals, and impose a transfer restriction. As to these approved changes, the Third Circuit in September 2004 granted an FCC motion and partially lifted its stay on the implementation of these rules. Thus, at the present time, the FCC is processing radio broadcast applications for new stations and for consent to assignments of license and transfers of control under their June 2003 rules. The FCC has elected to not seek review of the Third Circuit decision in the Supreme Court of the United States and it has filed an opposition to the efforts of private parties in the case to seek such review. Relaxation of the ownership rules may allow us, and competitors, to increase the number of stations owned in a particular market, and may permit us, and competitors, to own other media in a particular market. We cannot predict the impact of the ultimate outcome of these proceedings on our business.

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Risks Relating To The Cable Television Industry

Competition from other communication service providers could reduce our revenues and cash flow.

     Cable television systems operate in a very competitive business environment, and we may compete against competitors with fewer regulatory burdens, greater financial and personnel resources, greater brand name recognition and long-standing relationships with regulatory authorities. Moreover, mergers, joint ventures and alliances among franchise, wireless or private cable television operators, regional bell operating companies and others may result in providers capable of offering cable television and other telecommunications services in direct competition with us. In addition, providing telephony services to our subscribers will put us in competition with established companies.

     Our cable television systems face competition from alternative methods of receiving and distributing television signals, including:

	•	direct broadcast satellite, which is a satellite service of one or more program channels that can be received on a subscriber’s premises directly using an antenna;
	•	multichannel multipoint distribution systems, which use low power microwave frequencies with increased channel capacity to transmit video programming over the air to customers;
	•	satellite master antenna television systems, which use one central antenna to receive and deliver programming to a concentrated group of viewers, such as in apartments, hotels or hospitals; and
	•	broadcast digital television, which can deliver high definition television pictures, digital-quality programs and CD-quality audio programming;
	•	data transmission and Internet service providers;
	•	regional bell operating companies, other incumbent and competitive telephone companies, public utility companies and other entities that are in the process of entering the cable television business; and
	•	other sources of news, information and entertainment such as newspapers, movie theaters, live sporting events and home video products, including videotape cassette recorders and digital videodisc players.

If our cable franchises are not renewed or if our franchises encounter competition, we may experience a significant decline in our revenues and cash flow.

     Cable television companies operate under non-exclusive franchises granted by local authorities, which are subject to renewal and renegotiation from time to time. Our business is dependent upon the retention and renewal of our local franchises. The non-renewal or termination of franchises relating to a significant portion of our subscribers could have a material adverse effect on our revenues and cash flow. A franchise is generally granted for a fixed term ranging from 5 to 15 years, but in many cases the franchise may be terminated if the franchisee fails to comply with material provisions of the franchise agreement. Franchises typically impose conditions relating to the use and operation of the cable television system, including requirements relating to the payment of fees, system bandwidth capacity, customer service requirements, franchise renewal and termination. The Cable Communications Policy Act of 1984 provides for an orderly franchise renewal process in which franchise renewal will not be unreasonably withheld. If renewal is denied and the franchising authority acquires ownership of the system or affects a transfer of the system to another person, the operator generally is entitled to the “fair market value,” but with no value allocated to the franchise itself in a non-renewal situation, for the system covered by such franchise. No assurances can be given that we will be able to retain or renew our franchises or that the terms of any such renewals will be on terms as favorable to us as our existing franchises.

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Changes in cable television regulation could increase our costs and reduce our revenues.

     Federal, state and local regulation can increase the costs of operating our cable systems and limit the rates we can charge. The Cable Television Consumer Protection and Competition Act of 1992, the Telecommunications Act of 1996 and the FCC’s rules implementing these acts have increased the administrative and operational expenses of cable television systems. The FCC and local or state franchise authorities have also gained additional regulatory oversight powers under these acts. The FCC is currently considering whether franchise authorities should be allowed to collect a franchise fee on revenues derived from cable modem service. The FCC and Congress continue to be concerned that rates for programming services are rising at a rate exceeding inflation. It is therefore possible that Congress may enact legislation in the future to reimpose additional rate controls on cable systems.

     Cable television systems generally operate pursuant to non-exclusive franchises, permits or licenses granted by a municipality or other state or local governmental entity. The terms and conditions of franchises vary materially from jurisdiction to jurisdiction. A number of states subject cable systems to the jurisdiction of centralized state governmental agencies. New York has enacted state level regulation. We cannot predict whether any of the other states in which we currently operate will engage in such regulation in the future. If we become subject to this type of regulation, the costs of operating our cable systems may increase and the rates we can charge may be limited.

If our programming costs continue to increase and we cannot pass them along to our customers, our cash flow will decrease.

     Our cable programming costs are increasing. Programming has been and is expected to continue to be our largest single expense item and accounted for approximately $45.7 million of our total cable operating costs for the year ended December 31, 2004 and $35.1 million of our total cable operating costs for the year ended December 31, 2003. In recent years, the cable industry has experienced a rapid escalation in the cost of programming, particularly sports programming. Moreover, television stations have become increasingly aggressive in demanding cash or other consideration in return for granting retransmission consent for our ability to carry such stations. This escalation may continue, and we may not be able to pass programming cost increases on to our subscribers. In addition, as we add programming to our limited and “expanded basic” tiers, we may face additional market constraints on our ability to pass these costs on to our subscribers. Some programming is acquired through another cable operator. The availability and cost of this programming could negatively impact our operating results and cash flow. Our financial condition, results of operations and cash flows could be negatively affected by further increases in programming costs.

Providing telephony services makes us subject to new regulation and may reduce cash flows.

     Telephony providers are subject to federal and state regulation. We provided telephony services to approximately 9,800 subscribers in the Carmel, New York cable service area as of December 31, 2004. Providing telephony services makes us subject to additional costs and taxes. Our financial condition, results of operations and cash flow could be negatively affected by providing telephony services.

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PART I

Item 1. Business

  Overview of Susquehanna Media

     Susquehanna Media was incorporated in 1993 as a cable and radio broadcasting holding company subsidiary of Susquehanna Pfaltzgraff Co. Susquehanna Pfaltzgraff Co. was founded in 1941 by Louis J. Appell, Sr. to own and operate WSBA-AM, our flagship radio station in York, Pennsylvania. In 1954, The Pfaltzgraff Co., a leading manufacturer of ceramic dinnerware, was merged into Susquehanna Pfaltzgraff. The Pfaltzgraff Co. had been owned by the family of Mrs. Louis J. Appell, Sr. We entered the cable television business in 1965 when we were awarded a franchise to operate in York, Pennsylvania.

     We are a diversified communications company with operations in radio broadcasting and cable television. We are the largest privately-owned radio broadcaster and the 12th largest radio broadcaster overall in the United States based on 2003 revenues. As of December 31, 2004, we owned and operated 20 FM and 7 AM stations. We also own 6 stations operated by third parties under local marketing agreements (“LMAs”). Our owned and operated stations serve three of the nation’s ten largest radio markets (San Francisco, Dallas and Houston), as well as five other markets (Atlanta, Cincinnati, Indianapolis, Kansas City, and York, Pennsylvania). We are also the 17th largest cable multiple system operator in the United States, based on subscribers, with nine cable systems serving approximately 233,100 subscribers as of December 31, 2004. As of December 31, 2004, our cable systems were 95% rebuilt to two-way plant in order to facilitate digital cable and broadband data services.

     In 1996, we formed Susquehanna Data Services (SDS) to provide Internet access and other related services. SDS launched dial-up access in October 1996 and one-way cable modem access in July 1997 under the trade name BlazeNet. The BlazeNet operation, which was merged into our cable operations in 2004 and was re-branded SusCom Business Solutions, focuses on selling enhanced voice and data services to commercial establishments within our cable footprint.

     In 2000, SDS acquired Judd’s Online, a designer of web sites and online applications. This company has been renamed Susquehanna Technologies, (SusQtech). It is focused on providing content management, eCommerce and eProcurement solutions to clients in the Mid-Atlantic region.

     On March 9, 2004, we purchased assets serving approximately 29,000 cable, high-speed data and telephony subscribers in the Carmel, New York area from RCN Telecommunications Inc. (“RCN”) for approximately $120.6 million cash. This acquisition marked our entry into providing telephony services to cable subscribers using cable infrastructure.

  Radio Broadcasting

     Our radio broadcasting business focuses on acquiring, operating and developing radio stations in the 40 largest markets in the United States. We have over 60 years of experience operating radio properties and currently own stations serving four of the nation’s largest radio markets: San Francisco, Dallas, Houston and Atlanta; two markets ranked between 25 and 40, Cincinnati and Kansas City; Indianapolis (rank 41); and York, Pennsylvania (rank 103). Our radio stations offer a broad range of programming formats, such as country, top 40, adult contemporary, oldies, rock, and sports and talk radio, each targeted to a specific demographic audience within a market. We believe that our large market radio presence and variety of programming formats make us attractive to a diverse base of local and national advertisers and enables us to capitalize on our ratings to generate higher market revenue share.

     Our business strategy for radio includes the following key elements intended to establish leadership positions in the markets we serve and to enhance our operating and financial performance:

•

Focus on large markets. For the year ended December 31, 2004, we generated approximately 71% of our radio revenues from our four largest markets and approximately 87% from Arbitron top 40 markets. We intend to continue focusing on large markets.

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	•	Employ targeted programming and market research. We seek to maximize station operating performance through extensive market research, innovative programming, and distinctive marketing campaigns.
	•	Decentralize management. We decentralize much of our operations to regional and local levels. Each of our regional and local station groups is managed by a team of experienced broadcasters who understand the musical tastes, demographics, and competitive opportunities of their particular market.
	•	Selectively pursue strategic acquisitions. In addition to seeking continued internal growth, we may pursue acquisition opportunities that allow us to continue to compete more effectively for advertising revenues and to increase our growth rate of revenues and cash flow.

   The Radio Broadcasting Industry

The radio broadcasting industry is characterized by the following key factors:

     Significant growth. The sale of advertising time to local and national spot advertisers and to national network advertisers is the primary source of revenues for radio stations. Local and national spot advertising is generally used to target the market where a station is located or to cover regions larger than the markets where a station is located. National network advertising is included in nationally syndicated programming aired on radio stations. The growth in total radio advertising revenue tends to be fairly stable, growing over the last 25 years at an approximately 7.6% compound annual rate, compared to a gross domestic product growth rate of approximately 6.3% over the same period.

     Broad market coverage. According to the Radio Advertising Bureau’s Radio Marketing Guide and Fact Book for Advertisers 2004-2005, each week radio reaches approximately 94% of all Americans over 12 years of age. More than one-half of all radio listening occurs outside the home, and 81% of adults are reached by car radio each week. The average listener spends approximately three hours per day listening to radio. The highest portion of radio listening occurs during the morning, particularly between the time a listener wakes up and the time he reaches work. This “morning drive time” period reaches more than 82% of people over 12 years of age, and as a result, radio advertising sold during this period commands premium advertising rates.

     Low-cost advertising. The cost to reach a thousand listeners, or impressions, is the benchmark for comparing different media with different reach and frequency aspects. Radio is recognized by the advertising community for its ability to generate a high frequency of commercial impressions cost efficiently. This is caused by its low cost per minute, or low cost per rating point. Stations are generally classified by their on-air format, such as country, adult contemporary, oldies and news/talk. A station’s format and style of presentation enables it to efficiently target certain demographics. By capturing a specific share of a market’s radio listening audience, with particular concentration in a targeted demographic, a station is able to market its broadcasting time to enable advertisers to maximize their reach for each dollar of advertising expenditures.

   Radio Properties

     Our radio subsidiary, Susquehanna Radio Corp., operates radio stations in San Francisco, Dallas and Houston, all of which are top ten markets, as well as radio stations in Atlanta, Cincinnati, Indianapolis, Kansas City, and York, Pennsylvania. The following table sets forth certain information regarding our radio stations and their respective markets as of December 31, 2004. The table excludes KIKT-FM and KGVL-AM in Greenville, Texas, WAVG-AM in Jeffersonville, Indiana, KQKC-FM and WZZB-AM in Seymour, Indiana, and KYNG-AM in Dallas/Ft. Worth, Texas, which are owned by us, but operated by third parties under time brokerage agreements. Market rank by revenue is based upon market revenue size of the primary radio market served by the station among all radio markets in the United States, as reported in 2004 BIA Financial Network’s Media Access Pro. Station rank and audience share are based upon a station’s share of its primary demographic target for the period Monday through Sunday, 6 a.m. to 12 midnight by market, as reported by Arbitron in Fall 2004. Combined market revenue share represents our share of the total radio advertising revenue from the market, as reported in BIA Financial Network’s Media Access Pro and by Miller, Kaplan, Arase & Co. Combined market revenue rank represents our rank in the market as measured by the amount of its radio advertising revenue from the market, as reported in BIA Financial Network’s Media Access Pro and by Miller, Kaplan, Arase & Co.

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   Market Overviews

We own and operate radio stations in the following markets:

     San Francisco. We have operated in the San Francisco market since 1983, and currently own three FM and two AM stations in the area. We own KNBR-AM, one of the original 50,000 watt, clear channel AM licenses, which provides clear reception throughout northern California and as far inland as eastern Nevada. The station is currently programmed with a sports talk format and has the broadcast rights to the San Francisco Giants and the Golden State Warriors. All of our San Francisco stations are ranked among the top 5 stations in their respective target demographics.

     Dallas/Ft. Worth. We have been operating in the Dallas/Ft. Worth market since 1974, and currently own four FM and five AM stations in the area. Three of our stations, KTCK-AM, KTBK-AM, and KTDK-FM, which are programmed with a sports talk format and are simulcast, are ranked third in the market among males 25 to 54. KPLX, which is programmed with a “Texas” country format, is rated sixth in the market among persons 25 to 54. KIKT-FM and KGVL-AM in Greenville, Texas are owned by us, but operated by a third party under a time brokerage agreement.

     Houston. We entered the Houston market in 1986 when we acquired KRBE-FM, which serves the Houston market with a Top 40 radio format. KRBE-FM has been a dominant radio station in Houston since the 1970s and is ranked second among women 18 to 34. This station attracts over 700,000 listeners each week.

     Atlanta. Atlanta represents one of the most desirable radio broadcast markets in the country, with only 20 FM and 30 total radio stations serving the market. We currently own two FM stations in the market. We entered the Atlanta market in 1974 with the acquisition of WNNX-FM, which is programmed with new rock and ranked fifth among men 18 to 34. In November 2000, the FCC granted our petition to move WHMA-FM, a country station in Anniston, Alabama, to the Atlanta market. Station call letters were changed to WWWQ-FM when it debuted in the Atlanta market on January 22, 2001 with a Top 40 format. WWWQ-FM is currently ranked seventh among women 18 to 34.

     Cincinnati. We have operated in Cincinnati since 1972, and currently own three FM stations in the market. WRRM-FM, which is programmed with adult contemporary, is the sole adult contemporary station in the market and is ranked second among women 25 to 54. WMOJ-FM, which is programmed as a rhythmic oldies station, is a strong contender, placing third among women 25 to 54. WYGY-FM is a country station, which we purchased in the fall of 2002.

     Indianapolis. We have operated in Indianapolis since 1972, and currently own three FM stations in the market. WFMS-FM, which is programmed with contemporary country, is the second ranked station among adults 25 to 54 and has ranked either 1st or 2nd in the market since 1992. On July 9, 2004 WISG-FM (formerly WGRL-FM) changed its format from Eighties’ Hits to Contemporary Christian.

     Kansas City. In July 2000, we acquired three radio stations serving the Kansas City market. Oldies KCMO-FM is tied for eighth in its target adult 35-54 demographic. KCFX-FM is the flagship station for the Kansas City Chiefs. KCMO-AM is one of the oldest continuously operated radio stations in the United States, on the air since 1936. Prior to April 1, 2004, the Company owned only 40% of KCJK-FM (formerly KFME-FM). On April 1, 2004, the company purchased the remaining 60% ownership in KCJK-FM.

     York. We have operated in York since 1942, and currently own three stations in the market. WARM-FM, which is programmed with an adult contemporary format, ranks first among women 25-54. WSBA-AM, which is programmed talk and news, is the AM ratings leader in York. The Company purchased Oldies WSOX-FM on August 1, 2003, which is now ranked fourth among adults 35 to 64.

   Advertising

     Most of our radio revenues are generated from the sale of local, regional and national advertising for broadcast on our radio stations. In 2004, approximately 80% of our radio revenues were generated from the sale of local and regional advertising, compared to 79% in 2003 and 80% in 2002. We generate additional radio

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revenues by marketing our proprietary database of listeners, selling print advertising and sponsoring local events. These important and growing sources of revenue supplement our traditional advertising revenues without increasing on-air commercial time.

     Each radio station’s local sales staff solicits advertising either directly from local advertisers or indirectly through advertising agencies. We employ personnel in each of our markets to produce commercials for advertisers. National advertising sales are made by a firm specializing in such sales in exchange for a commission from us based on our gross revenue, net of agency commission from the advertising sold. Regional advertising sales, which we define as sales in regions surrounding our markets to companies that advertise in our markets, are generally made by our local sales staff.

     We estimate the optimum number of advertisements available for sale by a station for a particular time period. The number of advertisements that can be broadcast without jeopardizing listening levels (and resulting ratings) is limited in part by the programming format of a particular station. We seek to maximize revenue by managing on-air inventory of advertising time and adjusting prices to local market conditions and to our ability, through our marketing efforts, to provide advertisers with an effective means of reaching a targeted demographic group. Each of our stations has a general target level of on-air inventory that it makes available for advertising. This target level may vary at different times of the day but tends to remain stable over time. Much of our selling activity is based on demand for our on-air inventory, and in general, we respond to this demand by varying prices rather than varying our target inventory level for a particular station. As a result, most changes in revenue are explained by demand-driven pricing changes rather than changes in available inventory.

     We believe that radio is one of the most efficient and cost-effective means for advertisers to reach specific demographic groups. Advertising rates charged by radio stations are based primarily on:

	•	a station’s share of audiences in the demographic groups targeted by advertisers;
	•	the number of stations in the market competing for the same demographic groups;
	•	the supply of and demand for radio advertising time; and
	•	certain qualitative factors.

     Rates are generally highest during morning and afternoon commuting hours. A station’s listenership is reflected in ratings surveys that estimate the number of listeners tuned to the station and the time they spend listening. Each station’s ratings are used by its advertisers and advertising representatives in connection with advertising sales and are used by us to chart audience growth, set advertising rates and adjust programming. The radio broadcast industry’s and our principal rating agency is Arbitron, which publishes periodic ratings surveys for significant domestic radio markets.

   Competition

     The radio broadcasting industry is very competitive. The success of each of our stations depends largely upon its audience ratings and its share of the overall advertising revenues within its market. Our audience ratings and advertising revenue are subject to change, and any adverse change in a particular market affecting advertising expenditures or an adverse change in the relative market positions of the stations located in a particular market could have a material adverse effect on the revenues of our radio stations located in that market. There can be no assurance that any one or all of our radio stations will be able to maintain or increase current audience ratings or advertising revenue market share.

     Our stations compete directly for listeners and advertising revenues with other radio stations within their respective markets. Radio stations compete for listeners primarily on the basis of program content that appeals to a particular demographic group. By building a strong listener base comprised of specific demographic groups in each of its markets, we are able to attract advertisers seeking to reach those listeners. Radio stations periodically change their formats to compete directly with other stations for listeners and advertisers. Another station’s decision to convert to a format similar to that of one of our radio stations in the same geographic area or launch an aggressive promotional campaign may result in lower ratings and advertising revenue, increased promotion and other expenses and, accordingly, lower our broadcast cash flow.

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     Factors that are material to a radio station’s competitive position include management experience, the station’s local audience rank in its market, transmitter power, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other radio stations in the market area. We attempt to improve our competitive position in each of our markets by extensively researching our stations’ programming, by implementing advertising campaigns aimed at the demographic groups for which our stations program and by managing our sales efforts to attract a larger share of advertising dollars for each individual station. In selling advertising, however, we compete with many organizations that have substantially greater financial and other resources.

     The Communications Act and the FCC’s rules and policies permit increased ownership and operation of multiple local radio stations. As a result, organizations are acquiring and operating larger blocks of radio stations. We compete with these organizations, as well as other radio station groups, to purchase additional stations. Some of these groups are owned or operated by companies that have substantially greater financial and other resources.

     Although the radio broadcasting industry is highly competitive, and competition is enhanced to some extent by changes in existing radio station formats and upgrades of power, certain regulatory limitations on market entry continue to exist. The operation of a radio broadcast station requires a license from the FCC, and the number of radio stations that an entity can operate in a given market is limited by the availability of FM and AM radio frequencies allotted or assigned by the FCC to communities in that market, as well as by the FCC’s multiple ownership rules regulating the number of stations that may be owned and controlled by a single entity. See “Federal Regulation of Radio Broadcasting.”

     In addition to other radio stations, we compete for advertising revenues with other media, including newspapers, broadcast television, cable television, magazines, direct mail, coupons and outdoor advertising. The radio broadcasting industry also competes with new media technologies, such as the delivery of audio programming by cable television systems, over the Internet, and by satellite digital audio radio services. Digital audio radio services may deliver by satellite to nationwide and regional audiences, multi-channel, multi-format, digital radio services with sound quality equivalent to compact discs. The delivery of information through the presently unregulated Internet also could create a new form of competition. Despite the introduction of new technologies for the delivery of entertainment and information, including television broadcasting, cable television, audiotapes and compact discs, the radio broadcasting industry historically has grown. A growing population and greater availability of radios, particularly car and portable radios, have contributed to this growth. There can be no assurance, however, that the introduction of new media technology will not have an adverse effect on the radio broadcasting industry.

   Cable Television

     We entered the cable television industry in 1965, when we were awarded the franchise to operate in York, Pennsylvania. Our cable areas serve approximately 233,100 total subscribers as of December 31, 2004 through 12 signal receiving and transmitting facilities (headends) in Pennsylvania, New York, Mississippi, Maine, Illinois and Indiana. We own, develop and operate geographically clustered cable television areas in small and medium-sized communities. We believe that these areas are less susceptible to competition and subscriber turnover than urban areas and result in more predictable revenue and cash flow.

     Our business strategy for cable television includes the following key elements intended to enhance our operating and financial performance:

	•	Build strategic clusters. To maximize operating efficiencies, we have pursued the development and acquisition of cable television areas in communities that are within close proximity to our existing areas.
	•	Focus on customer satisfaction. To maximize customer satisfaction, we strive to provide reliable, high-quality service offerings, superior customer service and attractive programming choices at reasonable rates. In 2005, we expect to complete the construction and implementation of a 24/7 consolidated customer service center in York, Pennsylvania in order to provide a higher level of customer service.

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	•	Continue upgrade of technical facilities. We seek to provide reliable, high-quality cable television services to our customers. To achieve this goal, we are continually expanding and upgrading our cable areas to increase channel capacity, enhance signal quality, improve technical reliability and reduce the number of headends in existing areas. The Company’s areas are currently 95% rebuilt. Management expects to complete the entire rebuild during 2005.
	•	Develop new sources of revenues. The investment we have made in our cable service areas has enabled us to generate additional revenue by providing expanded tiers of basic programming, digital cable services, premium services, and additional pay-per-view services. In addition, we are expanding new services, such as Internet access, high-speed data and telephony. We will be deploying video-on-demand, telephony, digital video recording (DVR) technology and other interactive services in 2005.

   The Cable Television Industry

     Total customers of a cable service area include customers who subscribe to either the basic video service or Internet Access using a cable modem. A cable customer generally pays an initial installation charge and fixed monthly fees for cable television services and for other services (such as the rental of converters and remote control devices). Such monthly service fees constitute the primary source of revenue for cable television operators. In addition to these services, cable television operators generate revenue from additional fees paid by customers for pay-per-view programming of movies and special events and from the sale of available advertising spots on advertiser-supported programming. Additionally, cable television operators frequently offer their customers home shopping services, from which the systems receive a share of revenue from sales of products in the systems’ service areas. Cable television operators are also generating increasing revenues from the sale of enhanced data services. Cable television revenues have grown over the last 15 years at a 9.2% compound annual rate, compared to a gross domestic product growth rate of 5.2%. Cable television did not experience a single down year in revenue during this period of time. Cable television operators offer customers various levels (or “tiers”) of cable television services consisting of:

	•	a limited basic service, comprised of off-air broadcast television signals, local origination programming produced by the cable system and/or public access groups, and a limited number of satellite services such as home shopping channels and C-Span; and
	•	an expanded basic service, comprised of satellite delivered, non-broadcast channels such as: Cable News Network (CNN), Entertainment and Sports Programming Network (ESPN) and Lifetime Network (LIFE).

     For an extra monthly charge, our cable television operation also offers premium television services. These services (such as Home Box Office, Cinemax and Showtime) are satellite delivered channels offering feature films, live sporting events, concerts and other special entertainment features presented without commercial interruption.

     Digital cable, offers enhanced television viewing with interactive guides, compact disc quality music channels, theater sound quality, and multiple services of premium and pay-per-view channels. These additional product offerings are made possible by use of bandwidth-saving digital compression.

     On an a la carte basis or for an additional monthly charge, our basic subscribers can obtain Internet access via a cable modem, which offers broadband access to the Internet at speeds exceeding standard dial-up access. Services offered include residential and commercial Internet access, e-mail and commercial point-to-point circuits. Cable modem revenues from Cable subscribers are included in the Cable segment. In 2004, telephony subscribers were included in the Cable segment.

     A cable television service area receives television, radio and data signals that are transmitted to the area’s headend by means of off-air antennae, microwave relay systems and satellite earth stations. These signals are then modulated, amplified and distributed, primarily through coaxial cable, and in some instances fiber optic cable, to customers who pay a fee for this service. Cable television areas may also originate their own television programming and other information services for distribution locally. Cable television operations generally are constructed and operated pursuant to non-exclusive franchises or similar licenses granted by local governmental authorities for a specified term of years, generally for extended periods of up to 20 years.

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   Cable Properties

     The following table sets forth certain selected technical, operating and financial data for each of our cable service areas as of and for the year ended December 31, 2004. “Density” represents homes passed divided by miles of plant. “Plant Bandwidth” represents percentage of plant mileage served by the indicated plant bandwidth. “Increased bandwidth” offers greater capacity for signals and resultant additional revenues. Homes passed represents the maximum number of homes that could become subscribers. “Total customers” represents the total of video and cable modem only customers. “Total customer penetration” represents total customers as a percentage of homes passed. “Basic penetration” represents basic subscribers as a percentage of homes passed. “Digital customers” represents the number of active customers which have subscribed to digital services. “Digital penetration” represents digital customers as a percentage of basic subscribers. “Premium units” represents the aggregate number of individual premium services (e.g., HBO, Cinemax, Showtime) for which customers have subscribed. “Premium penetration” represents premium units as a percentage of basic subscribers. “Cable modem penetration” represents cable modem subscribers as a percentage of homes passed. “Average monthly revenue per basic subscriber” represents revenues divided by 12 divided by the weighted average number of subscribers for the year.

     York. The York, Pennsylvania cable area is Susquehanna’s largest, serving subscribers in 51 municipalities and accounting for 39% of total customers and 41% of 2004 Cable revenues. The entire cable plant has a capacity of 750 MHz and is two-way capable, which allows cable modem service and other interactive services. Cable modem service has been provided to customers since 1997, with approximately 19% penetration to homes passed as of December 31, 2004. Digital services were launched in October 1999, with penetration equaling 26% of basic customers as of December 31, 2004. The consolidated customer care center with 24/7 customer care has been deployed to two cable system, with the remaining systems to be brought into the customer care facility by third quarter 2005.

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     Williamsport. The Williamsport, Pennsylvania area accounts for 17% of total customers and 16% of its 2004 Cable revenues. The service area has been completely rebuilt to 750 MHz and is two-way capable. Cable modem services are presently offered to residential and commercial customers with penetration of 16% of homes passed as of December 31, 2004. Digital services were launched in June 2000 with penetration of 20% of basic customers as of December 31, 2004.

     Carmel, New York. On March 9, 2004 we purchased assets serving approximately 29,000 basic cable subscribers in the Carmel, New York area from RCN for $120.6 million cash. The cable plant was entirely rebuilt or upgraded to 750 MHz two-way capability before acquisition and offers digital video, high-speed Internet access and residential telephony. There were 8,900 telephony subscribers at acquisition. The Carmel system accounts for 13% of total customers and 16% of 2004 Cable revenues. As of December 31, 2004 there were approximately 9,800 circuit-switched telephony customers served by the Carmel cable plant.

     Rankin. The Rankin County, Mississippi cable service area accounts for 10% of total customers and 9% of its 2004 Cable revenues. A rebuild of the cable plant to 860 MHz is underway and is expected to be complete in second quarter 2005. Rankin launched digital technology in February 2000, and digital penetration is approximately 30% of basic customers as of December 31, 2004. Cable modem high speed Internet access service was launched during 2004 to homes that have been rebuilt. Penetration to total homes passed is approximately 2% at December 31, 2004.

     Brunswick. The Brunswick cable service area serves 11 communities in Maine, including Brunswick, Freeport, Bath, Harpswell and Woolwich. Brunswick accounts for 9% of total customers and 10% of 2004 Cable revenues. This area is entirely two-way capable and has been providing cable modem service since 1996 to commercial customers and since 1998 to residential customers. Cable modem penetration is approximately 32% of homes passed as of December 31, 2004. Digital services were launched in August 2000, and total 24% penetration to basic customers as of December 31, 2004.

     Midwest. The Midwest cable service area serves Shelbyville and Lawrenceburg, Indiana and Olney and DuQuoin, Illinois. The area accounts for 13% of total customers and approximately 10% of 2004 Cable revenues. The area currently has bandwidth ranging from 550 MHz to 750 MHz. Rebuilds have been completed and all plant is two-way, capable of offering cable modem services. Cable modem penetration to homes passed is approximately 12% as of December 31, 2004. Digital services were launched in 2000, with penetration of nearly 19% of basic customers as of December 31, 2004.

  Programming

     We have various contracts to obtain basic, satellite and premium programming for our cable systems from the National Cable Television Cooperative, Comcast Corporation and in some cases directly from program suppliers, including, in limited circumstances, some broadcast stations, with compensation generally based on a fixed fee per customer or a percentage of the gross receipts for the particular service. Some program suppliers provide volume discount pricing structures and some offer marketing support. Some cable programming is purchased in conjunction with another operator.

     Programming costs are expected to increase in the ordinary course of business as a result of any increases in the number of basic subscribers, any increased costs to purchase cable programming, any expansion of the number of channels provided to customers and contractual rate increases from programming suppliers. See Part III, Item 13 of this annual report for additional details regarding our relationship with Comcast.

  Marketing, Customer Service And Community Relations

     Our product marketing strategy is designed to grow total revenues and revenues per customer by:

	•	Aggressively promoting products and services to current customers and potential customers;
	•	Diligently developing new product lines and enhancing existing products; and
	•	Consistently supporting all of our products with exceptional customer care and convenience.

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     We believe this forward-thinking, customer-centric approach will continue to drive the growth of our traditional and advanced product lines and to retain customers’ business. Cable has established an industry leadership position in several areas by following this strategy, including digital interactive television (“ITV”), HDTV, and premium broadband content tiers over cable modems, among others.

     We understand that our key long-term competitive advantage is not only the ability to deliver compelling technology products, but also the ability to deliver exceptional customer care and support of those products. Our personalized in-home service distinguishes us from our competitors. Cable has established an innovative performance-based compensation environment for field and office employees and invests in training and development programs designed to empower our employees and to maximize their potential. During 2004 we began building a state-of-the-art Unified Customer Care Center (“UC3”) in York, Pennsylvania, that utilizes the most advanced customer care provisioning technologies. The UC3 is handling calls for approximately 43% of our customers and Cable expects to have customer care provided by the UC3 by third quarter 2005. By effectively combining customer care technologies with our dedication to personalized service, we believe we can strengthen our care relationship with our customers, leading to increased retention and new revenues.

     Recognizing that we have an important role in the communities we serve, we are committed to creating and maintaining positive local relationships with franchise and community leaders. Local management communicates regularly with municipal officials to keep them informed of our activities and industry trends and to gain valuable feedback on the needs of the local market. We also maintain a high level of visibility locally through active involvement with various community and non-profit organizations.

  Technology

     As part of our commitment to customer service, we seek to provide reliable, high-quality cable television service. As such, our primary objective with respect to Susquehanna Cable’s capital expenditures is to maintain, expand and upgrade its cable plant to improve and expand its cable television services. Through a capital investment program, we have expanded channel capacity, enhancing signal quality, improving technical reliability and providing a platform to deliver high-speed data services, including Internet access and telephony. We believe that such technical improvements and upgrades create additional revenue opportunities, enhance operating efficiencies, improve franchising relations and increase customer satisfaction. We expect capital spending in 2005 for rebuild activities to total approximately $7.0 million, which we expect to be funded by operations and existing credit facilities.

     The following table summarizes, as of December 31, 2004, our existing bandwidth profile and our bandwidth profile upon completion of work-in-progress projects (which are generally expected to be completed by the end of 2005).

     Our use of fiber optic technology as an enhancement to coaxial is enabling us to consolidate headends and reduce amplifier cascades, thereby improving picture quality and system reliability and reducing headend and maintenance expenditures. Fiber optic strands are capable of carrying hundreds of video, data and voice channels over extended distances without the extensive signal amplification typically required for coaxial cable. In our larger systems, fiber optic technology is deployed in a “ring” design providing a redundant path for video and data signals being delivered to large subscriber groups. This approach provides an extra degree of reliability in the event that fiber optic cable is damaged on the primary path.

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     Digital compression is a technology that enables cable operators to increase channel capacity of cable television systems by permitting a significantly increased number of digitalized video signals to fit within a cable television system’s existing bandwidth. At December 31, 2004, digitally compressed services were available to 99% of our customer base.

     The provision of high-speed cable modems to residential and business customers has become a significant source of additional revenue to the cable industry. Cable modem revenues represented approximately 15% and 11% of 2004 and 2003 Cable revenues, respectively. Cable modems provide Internet access at higher speeds and lower costs than the technologies offered by other communication providers. For example, a 10 megabit-capable cable modem provides Internet access at download speeds approximately 10 times faster than typical 56.0-kilobit dial-up telephone modem connections. Cable modem service is available in every area except those portions of Rankin County that are undergoing plant rebuild.

     During 2004, we partnered with MCI in providing telephone services in our Carmel, New York cable system. Carmel telephone subscribers were migrated from the previous owner’s telephone platform to Susquehanna/MCI platform in February 2005.

  Other Services

     For the years ended December 31, 2004, 2003 and 2002, our Other segment accounted for 3% or less of our total revenues.

     Susquehanna Data Services. Susquehanna Data Services, Inc., a subsidiary, was formed in 1996 to provide Internet and data networking services to residential and business customers. The BlazeNet ISP operation was merged into the York, Pennsylvania Cable operation during 2004. During 2004, Susquehanna Technologies became a direct subsidiary of Susquehanna Media. Susquehanna Technologies will continue as part of the Other segment.

     Susquehanna Technologies. The web design company acquired in October 2000 has been remarketed as Susquehanna Technologies. Susquehanna Technologies’ focus is on custom designed web integration solutions and services provided to the media, entertainment, government, retail and associations sectors. Due to the collapse of the Internet sector in 2001, and continued industry softness through 2004, revenues for Susquehanna Technologies were depressed. A $5.0 million goodwill impairment loss related to this operation was recognized for the year ended December 31, 2002. Based on an independent appraisal performed as of December 31, 2004 for the annual ESOP valuation, no additional impairment was indicated.

     Adelphia Partnership. In 1997, Susquehanna Media, through its wholly-owned subsidiary Susquehanna Fiber Systems, Inc., entered into a 50/50 partnership with Hyperion Telecommunications of Pennsylvania, Inc., now TelCove, Inc., a subsidiary of Adelphia Communications Corp., to enter the competitive local exchange carrier business in the York, Pennsylvania market. The partnership provides long distance access circuits to businesses bypassing the local telephone company, point-to-point data circuits and switched business access services. Susquehanna’s York cable operation constructed and maintains a 248 mile fiber optic SONET ring network leased by the partnership under a long-term contract. As of December 31, 2004, the partnership provided service to 94 buildings in the York area and had over 7,400 access and long distance lines installed. In December 2003, we signed an agreement to dissolve the partnership, wherein we would receive certain assets and the majority of the partnership’s customers. During 2004, Media decided to not proceed with the dissolution of the Partnership. Agreement has been reached with TelCove for Media to sell 100% of its interest in the Partnership. Closing on the sale of Media’s partnership interest is expected upon regulatory approval in 2005.

  Franchises

     Cable television systems are constructed and operated under fixed-term non-exclusive franchises or other types of operating permits that are granted by local governmental authorities. All franchises that expired in 2004 were renewed or extended. These franchises contain many conditions, such as:

•

time limitations on commencement and completion of construction;

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	•	conditions of service, including mix of programming required to meet the needs and interests of the community;
	•	the provision of free service to schools and certain other public institutions;
	•	the maintenance of insurance and indemnity bonds; and
	•	the payment of fees to communities.

     Certain of these franchises may require the imposition of penalties if the franchise agreements are violated. Certain provisions of these local franchises are subject to limits imposed by federal law.

     As of December 31, 2004, we held a total of 166 franchises. Franchise agreements with many of these franchises require the payment of fees to the issuing authorities ranging from 1% to 5% of gross revenues (with the majority in the 3% to 5% range) from the related cable system. The Cable Communications Policy Act of 1984 (1984 Cable Act) prohibits franchising authorities from imposing annual franchise fees in excess of 5% of gross annual revenues and permits the cable television system operator to seek renegotiation and modification of franchise requirements if warranted by changed circumstances that render performance commercially impracticable.

     Our cable franchises expire at various times through 2024. The following table sets forth certain information relating to our franchises:

     Included in the 2005 franchise expiration total are 9 franchise areas in the Carmel, New York cable system that are under Letters of Authority issued by the New York Public Service Commission. The Letter of Authority allows a cable operator to continue to provide service while negotiating franchise renewals. All of these Letters of Authority were in place at acquisition from RCN. Negotiations are underway with these franchise areas. Media expects to renew all of the Carmel area franchise agreements.

     The 1984 Cable Act and the Cable Television Consumer Protection and Competition Act of 1992 (1992 Cable Act) provide, among other things, for an orderly franchise renewal process, which limits a franchising authority’s ability to deny a franchise renewal if the incumbent operator follows prescribed renewal procedures. In addition, the 1984 and 1992 Cable Acts establish comprehensive renewal procedures, which require, when properly elected by an operator, that an incumbent franchisee’s renewal application be assessed on its own merits and not as part of a comparative process with competing applications. Upon a franchise renewal request, however, a franchise authority may seek to add new and more onerous requirements upon the cable operator, such as significant upgrades in facilities and services or increased franchise fees, as a condition or renewal. We believe that our relationship with local franchise authorities is good. Although we cannot provide guarantees, we anticipate our franchises will be renewed upon expiration.

  Competition

     Cable television systems face competition from alternative methods of distributing video programming, high-speed Internet access and from other sources of news, information and entertainment. These sources include direct broadcast satellite, local exchange carriers, off-air television broadcast programming, newspapers, movie theaters, live sporting events, interactive online computer services, webcasts and home video products, including DVDs and videotape cassette tapes. The extent to which a cable television system is competitive depends, in part, upon that system’s ability to provide, at a reasonable price to customers, a greater variety of programming and other communications services than those available off-air or through alternative delivery sources and upon superior technical performance and customer service.

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     Competing Video Service Providers. Cable television systems generally operate pursuant to franchises granted on a non-exclusive basis. Franchising authorities may not unreasonably deny requests for competing franchises and may operate cable television systems themselves. Well-financed businesses from outside the cable television industry (such as the public utilities that own the poles to which cable is attached), local telephone companies or neighboring cable operators may become competitors for franchises or providers of competing services. Certain telephone companies have begun to deploy fiber more extensively in their networks and some have announced plans to deploy broadband services, including video programming services, in a manner that may avoid the same regulatory burdens imposed on our business.

     The 1996 amendments to the Cable Act allow registered utility holding companies and subsidiaries to provide telecommunications services, including cable television, notwithstanding the Public Utilities Holding Company Act of 1935, as amended. In 2004, the FCC adopted rules that affirmed the ability of electric service providers to provide broadband Internet access services over their distribution systems and to avoid interference with existing services. Electric power providers could be strong competitors to our cable services.

     One of our service areas has a small overbuild by a neighboring cable operator consisting of approximately 3,000 homes passed (1% of total homes passed). Competing cable television operators may construct future overbuilds in other franchise areas.

     Direct Broadcast Satellites. The fastest growing method of satellite distribution is by direct broadcast satellites utilizing video compression technology, which provides more than 200 channels of digital programming over a single high-powered satellite. Direct broadcast satellite (DBS) service can be received virtually anywhere in the United States through small rooftop or side-mounted antennae/dishes and is not subject to certain local restrictions which were imposed on the largest satellite dishes used by earlier generations of broadcast satellite. Two service providers are presently heavily marketing DBS service on a nationwide basis. A recently launched service, VOOM, has begun offering primarily HDTV services on a national basis, but the future of this service is in doubt. Some of the VOOM assets may be acquired by another DBS provider, strengthening its ability to compete. In Williamsport, total customer penetration to homes passed declined from 74.4% as of December 31, 2003 to 71.5% as of December 31, 2004. In Rankin County, total customer penetration to homes passed declined from 54.0% as of December 31, 2002 to 50.5% as of December 31, 2004. We believe that the loss of subscribers in the Williamsport market is indicative of local economic conditions and competitive pressure from DBS providers. We believe that the loss of penetration in Rankin County was exacerbated due to the cable plant not being rebuilt or upgraded not permitting us to provide high-speed Internet access in the market as a competitive response to DBS service. DBS providers have agreed with certain telephone companies to offer bundled services including video, voice and high-speed Internet access. It is undetermined yet what, if any, impact the News Corp. take-over of Direct TV or the recently announced acquisition of additional satellite capacity by Echostar will have on DBS competition.

     Satellite Master Antenna Television Systems. Cable television operators also face competition from private satellite master antenna television systems that serve condominiums, apartment and office complexes, private residential developments, and other multiple dwelling unit facilities. Like cable television systems, satellite master antenna television systems offer both improved reception of local television stations and many of the same satellite-delivered program services. Satellite master antenna television operators often enter into exclusive agreements with building owners or homeowners associations, although some states have enacted laws that authorize franchised cable television operators access to such private complexes. Packages of data and video services are also being offered to private residential and commercial developments. As long as they do not use public rights-of-way, satellite master antenna television systems can interconnect non-commonly owned buildings without having to comply with many of the local, state and federal regulations that are imposed on cable television systems. The Company aggressively competes for customers in residential and commercial developments served by satellite master antenna television operators, however, the outcome of this competition in the future is uncertain.

     Local Exchange Carriers. The Telecommunications Act of 1996 (1996 Telecom Act) allows local exchange carriers and others to compete with cable television systems and other video services in their telephone service territory, subject to certain regulatory requirements. Local exchange carriers may use a variety of distribution methods, including both broadband wire facilities and wireless transmission facilities within and outside of their telephone service areas. Local exchange carriers and other telephone companies have an existing relationship

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with the households in their service areas, have substantial financial resources, and may have an existing infrastructure capable of delivering cable television service. Unlike cable television systems, local exchange carriers may not be required, under certain circumstances, to obtain local franchises to deliver video services and are not subject to certain obligations imposed under such franchises. The large incumbent local exchange carriers have ceased nearly all direct video competition with cable operators across the nation, more importantly however; local exchange carriers also compete with cable providers for broadband Internet access customers through the marketing of digital subscriber lines or DSL.

     We believe that our relatively rural service areas are unlikely to support sustainable wireline competition in the provision of video and telecommunications broadband services given the lower population densities and higher capital costs per household of installing plant. However, the Rural Utilities Service’s (“RUS”) Rural Broadband Access Loan and Loan Guarantee Program has about $2.2 billion available in fiscal year 2005 for loans and loan guarantees to provide broadband access in eligible rural communities. It is uncertain whether this incentive program will prompt additional competition in our markets or the impact such potential competition may have on our cable operations. Certain telephone companies have begun to deploy fiber more extensively in their networks and some have announced plans to deploy broadband services, including video programming services, in a manner designed to avoid the same regulatory burdens imposed on our business. It is uncertain whether any such construction will take place in our rural service areas.

     Advances in communications technology, as well as changes in the marketplace and the regulatory and legislative environments, are constantly occurring. We are not, therefore, able to predict the effect that current or future developments might have on the cable industry or on our operations. See “Cautionary Note Regarding Forward-Looking Statements.”

  Employees

We have approximately 1,675 employees as of December 31, 2004. No employees are covered by collective bargaining agreements, and we consider relations with our employees to be good.

  Radio Employee Stock Plan

     The Radio Employee Stock Plan (“Plan”), as established in 1987, offers certain key employees a right to purchase non-voting Susquehanna Radio Corp. shares at a contractual value. For each share purchased, a participant receives a vested option to purchase two additional shares at the same price for a ten year and one month period from the date of grant.

     On April 10, 2000, the Susquehanna Pfaltzgraff Co. Board of Directors changed the method of determining the Plan’s share value effective July 1, 2000. Over a period ending April 1, 2002, Plan share value transitioned from a formula value to a value based upon Susquehanna Pfaltzgraff Co.’s annual independent ESOP valuation (“Appraised Value”). On July 1, 2000, share value was based one-third on Appraised Value and two-thirds on formula value. As of April 1, 2001, share value was based two-thirds on Appraised Value and one-third on formula value. As of April 1, 2002 and annually thereafter, Plan shares are valued at fair value, Radio’s Appraised Value as of December 31, of the preceding year.

     The July 1, 2000 change in the method for valuing shares was a plan modification that subjected shares formerly accounted for under Accounting Principles Board Opinion 25 “Accounting for Stock Issued to Employees” to Statement of Financial Accounting Standard No. 123, “Accounting for Stock-Based Compensation”. This change in accounting treatment required the value of outstanding shares to be classified as liability (Radio Employee Share Plan Liability). As of April 1, 2002, Plan share values were based solely on Appraised Value and the Radio Employee Share Plan Liability was recast as minority interests. Subsequent increases in Plan share value were accounted for as minority interests in the consolidated statement of operations.

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  Cable Performance Share Plan

     On July 1, 2000, the first of a three-step change in the valuation of Susquehanna Cable’s performance share plan occurred. Performance shares were previously valued using a formula. On July 1, 2000, performance shares were revalued based 2/3 on the former formula and 1/3 on fair value as determined by an independent valuation of Susquehanna Pfaltzgraff Co. for ESOP purposes performed as of December 31, 1999. On April 1, 2001, performance shares were valued based 1/3 on the former formula and 2/3 on fair value as of December 31, 2000. As of April 1, 2002 and thereafter, performance shares values were valued at fair value based on the Parent’s annual independent ESOP valuation. As of April 1, 2004, the Cable and Other segments recognized charges against operating income of $1.0 million and $0.5 million, respectively. For 2003, the Cable and Other segments recognized a reduction of expense of $0.3 million and $0.1 million, respectively. In 2002, the Cable and Other segments recognized charges against operating income of $2.7 million and $1.5 million, respectively.

  Federal Regulation of Radio Broadcasting

  Introduction

     The ownership, operation and sale of broadcast stations, including those licensed to us, are subject to the jurisdiction of the FCC, which acts under authority derived from the Communications Act of 1934 (the Communications Act). The Communications Act was amended in 1996 by the 1996 Telecom Act to make changes in several broadcast laws. Among other things, the FCC grants permits and licenses to construct and operate radio stations; assigns frequency bands for broadcasting; determines whether to approve changes in ownership or control of station licenses; regulates equipment used by stations and the operating power and other technical parameters of stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of stations; regulates some forms of radio broadcasting programming; and has the power to impose penalties for violations of its rules under the Communications Act.

  License Grant and Renewal

     Radio broadcast licenses are granted and renewed for maximum terms of eight years. Licenses must be renewed through an application to the FCC. The Communications Act requires that the FCC grant the renewal of a station’s license if the FCC finds that, during the preceding term of the license, the station has served the public interest, convenience and necessity, that there have been no serious violations by the licensee of the Communications Act or the rules and regulations of the FCC, and that 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.

     Petitions to deny license renewal applications can be filed by interested parties, including members of the public. Such petitions may raise various issues before the FCC. The FCC is required to hold hearings on renewal applications if it is unable to determine that renewal of a license would serve the public interest, convenience and necessity, or if a petition to deny raises a “substantial and material question of fact” as to whether the grant of the renewal application would be prima facie inconsistent with the public interest, convenience and necessity. Also, during certain periods when a renewal application is pending, the transferability of the applicant’s license may be restricted. Historically, we have not experienced any material problems renewing our licenses to operate our radio stations and are not currently aware of any facts that would prevent the timely renewal of our licenses. There can be no assurance, however, that our licenses will be renewed.

     The following table sets forth certain regulatory information regarding each of the stations owned by us. “HAAT,” which applies to FM stations only, represents height above average terrain. Height above average terrain means the actual height of the station’s transmitting antenna above the ground level of the surrounding terrain and is used to measure the coverage of an FM station. The FCC class determines the maximum power and maximum height above average terrain for the particular station. Height Above Average Terrain is not applicable to AM stations.

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  Regulatory Approvals

     Broadcast licenses may not be assigned nor may the control of broadcast licenses be transferred without the prior approval of the FCC. In determining whether to assign, transfer, grant or renew a broadcast license, the FCC considers a number of factors pertaining to the proposed licensee, including limits on common ownership of media properties, financial qualifications of the proposed licensee, the “character” of the proposed licensee (including that no party to the application (i.e. officer, director, or 5% or greater owner) is subject to the denial of federal benefits that include FCC benefits pursuant to Section 5301 of the Anti-Drug Abuse Act of 1988, 21 U.S.C. sec. 862), limitations on alien ownership, and compliance with programming, public file and anti-discrimination requirements.

     Assigning a license or transferring control requires the filing of an application with the FCC. The FCC staff reviews the application and determines whether to grant the application. This process generally takes about four months. During the application process, interested parties and the public may file petitions, during specific periods of time, to deny or raise objections to the application. A full FCC review of staff action can be requested, and final FCC approval or disapproval is subject to judicial review.

     Absent a timely request for reconsideration, administrative review or judicial review, the FCC staff’s grant of an application becomes final by operation of law and generally is no longer subject to administrative or judicial review.

     The pendency of a license renewal application may alter the aforementioned timetables, because the FCC’s general policy is that it will not issue an unconditional assignment grant if the station’s license renewal is pending.

  Ownership Matters

     The 1996 Telecom Act and the FCC’s broadcast multiple ownership rules do not restrict the number of radio stations one person or entity may own (including having an attributable interest in), operate or control on a national level, but do impose restrictions on a local level.

These restrictions are:

     (i) in a market with 45 or more commercial radio signals, an entity may own up to eight commercial radio stations, not more than five of which are in the same service (FM or AM);

     (ii) in a market with between 30 and 44 (inclusive) commercial radio signals, an entity may own up to seven commercial radio stations, not more than four of which are in the same service;

     (iii) in a market with between 15 and 29 (inclusive) commercial radio signals, an entity may own up to six commercial radio stations, not more than four of which are in the same service; and

     (iv) in a market with 14 or fewer commercial radio signals, an entity may own up to five commercial radio stations, not more than three of which are in the same service, except that an entity may not own more than 50% of the stations in such market.

     The foregoing summarizes the material radio broadcast industry regulations with which we must comply. However, it does not purport to describe all present and proposed regulations and legislation relating to the radio broadcasting industry, some of which may be subject to judicial and legislative review and change, and their impact on the radio broadcasting industry or us cannot be predicted at this time.

  Regulation of Cable Television

     The cable television industry is regulated by the FCC, some state governments and substantially all local governments. In addition, various legislative and regulatory proposals under consideration from time to time by the Congress and various federal agencies have in the past, and may in the future, materially affect us and the cable television industry. The following is a summary of federal laws and regulations materially affecting the growth and operation of the cable television industry and a description of certain state and local laws. We believe

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that the regulation of the cable television industry remains a matter of interest to Congress, the FCC and other regulatory authorities. There can be no assurance as to what, if any, future actions such legislative and regulatory authorities may take or the effect thereof on us.

  Federal Legislation

     The principal federal statute governing the cable television industry is the Communications Act of 1934, as amended. As it affects the cable television industry, the Communications Act has been significantly amended on three occasions, by the 1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act. The 1996 Telecom Act altered the regulatory structure governing the nation’s telecommunications providers. It removed barriers to competition in both the cable television market and the local telephone market. Among other things, it also reduced the scope of cable rate regulation.

  Federal Regulation

     The FCC is the principal federal regulatory agency with jurisdiction over cable television. It has adopted regulations covering such areas as cross-ownership between cable television systems and other communications businesses, horizontal and vertical ownership, carriage of television broadcast programming, cable rates, pole attachment rates, consumer protection and customer service, leased access, obscene and indecent programming, programmer access to cable television systems, availability of satellite-delivered programming services to cable system competitors, technical standards, consumer electronics equipment compatibility, ownership of home wiring, mandatory deletion of certain imported broadcast programming, equal employment opportunity, consumer education and lockbox enforcement, origination cablecasting and sponsorship identification, political programming and advertising, advertising during children’s programming, closed captioning, signal leakage and frequency use, maintenance of various records, and antenna structure notification, marking and lighting. The FCC has the authority to enforce these regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities often used in connection with cable operations. A brief summary of certain of these federal regulations as adopted to date follows.

  Rate Regulation

     Where a cable television system is not subject to effective competition, the rates for the basic service tier (the lowest level of cable programming service which must include local broadcast channels and public access channels) and related equipment may be regulated by the local franchising authority at its option. Rates for cable programming service tiers, which generally include programming other than the channels carried on the basic service tier, and for programming offered on a per-channel or per-program basis, are not subject to governmental regulations. If local franchising authorities choose to regulate basic service rates, they may order reductions and, in certain circumstances, refunds of existing monthly rates and charges for associated equipment. In carrying out their rate regulatory authority, however, local officials are subject to certain FCC standards such as the obligation to evaluate rates in accordance with FCC approved benchmark formulas or cost-of-service showings. Future rates of regulated cable systems may not exceed an inflation-indexed amount, plus increases in certain costs beyond the cable operator’s control, such as taxes, franchise fees and increased programming costs. Cost-based adjustments to these capped rates also can be made in the event a cable television operator adds or deletes channels. There is also a streamlined cost-of-service methodology available to justify a rate increase for “significant” system rebuilds or upgrades. We currently have four franchise authorities that are certified to regulate basic service, installation and equipment rates, three in Maine and one in Mississippi.

     Existing regulations require cable television systems to permit customers to purchase video programming that it chooses to offer on a per channel or a per program basis without the necessity of subscribing to any tier of service, other than the basic service tier. The FCC recently conducted an inquiry into the advisability of mandating the a la carte offering of programming, as opposed to the cable industry’s practice of packaging numerous channels into tiers. Although the FCC recommended against an a la carte mandate, it is possible that in the future rate regulation on the cable industry could be expanded to include new restrictions on the retail pricing or packaging of cable programming. Such restrictions could adversely impact our business.

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  Telephony Regulation

     Media provides local exchange services to subscribers in the Carmel, New York area. While the regulatory status of telephone service offered over cable television systems has not been finally determined, a telecommunications service is generally subject to varying degrees of federal, state and local regulation. The FCC exercises jurisdiction over all aspects of interstate and international telecommunications services and the facilities used to provide those services. The 1996 Telecommunications Act established a national policy of promoting local exchange competition and set standards to govern relationships among telecommunications providers, including, among others, the interconnection of competitive carriers and the unbundling of monopoly incumbent local telephone company services. Media’s ability to offer telephone services in competition with incumbent local telephone companies and others will be affected by the degree and form of regulatory flexibility ultimately afforded by the FCC to incumbent local telephone companies and other companies, and will depend, in part, upon FCC determinations regarding telecommunications markets generally.

  Carriage of Broadcast Television Signals

     The 1992 Cable Act contains signal carriage requirements which allow commercial television broadcast stations that are “local” to a cable television system (i.e., the system is located in the station’s designated market area) to elect every three years whether to require the cable television system to carry the station, subject to certain exceptions, or whether the cable television system will have to negotiate for “retransmission consent” to carry the station. The next election between must-carry and retransmission consent must occur by October 1, 2005. A cable television system is generally required to devote up to one-third of its activated channel capacity for the carriage of local commercial television stations whether pursuant to the mandatory carriage requirements or retransmission consent requirements of the 1992 Cable Act. Local non-commercial television stations are also given mandatory carriage rights, subject to certain exceptions, on cable systems with the principal headend located within the larger of: (i) a 50-mile radius from the station’s city of license; or (ii) the station’s Grade B contour (a measure of signal strength). Unlike commercial stations, noncommercial stations are not given the option to negotiate retransmission consent for the carriage of their signal. In addition, cable television systems have to obtain retransmission consent for the carriage of all “distant” commercial broadcast stations, except for certain “superstations” (i.e., commercial satellite-delivered independent stations such as WGN).

     Under legislation enacted in 1999, Congress barred broadcasters from entering into exclusive retransmission consent agreements (through 2006) and required that broadcasters negotiate retransmission consent agreements in “good faith.” In November 2004, Congress extended the ban on exclusive retransmission consent agreements to cover all multi-channel video programming distributors.

     The FCC has opened an inquiry into the impact on competition in the multichannel video programming distribution market of the Cable Act’s provisions and the FCC’s rules on retransmission consent, network non-duplication, syndicated exclusivity and sports blackouts. The FCC’s inquiry will form the basis for a report to Congress mandated by the Satellite Home Viewer Extension and Reauthorization Act of 2004, which is due September 8, 2005. Neither the outcome of these proceedings nor their impact upon subsequent legislation, FCC regulations or the cable industry or our business or operations can be predicted at this time.

     To date, compliance with the “retransmission consent” and “must carry” provisions of the 1992 Cable Act has not had a material effect on us, although this result may change in the future depending on such factors as market conditions, channel capacity and similar matters when such arrangements are renegotiated, including demands by television stations for increased compensation in return for retransmission consent.

     The FCC has adopted interim regulations regarding carriage of digital television signals offered by local television broadcasters. Under these regulations, local television broadcast stations transmitting solely in a digital format are entitled to request carriage in their choice of digital or converted analog format. Stations transmitting in both digital and analog formats (“Dual Format Broadcast Stations”), which is permitted during the current ongoing transition period, have no carriage rights for the digital format during the transition unless and until they return their analog channel. In its proceeding to determine whether cable operators will be required to carry the digital signal of Dual Format Broadcast Stations that currently have must-carry rights for their analog signals, the FCC recently affirmed that it will not adopt the “dual carriage” requirement during the transition, and that a cable operator need only carry a broadcaster’s “primary video” service (rather than all of the digital “multi-cast” services). In addition, in November 2004, Congress passed a non-binding resolution urging that legislation be

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considered in 2005 that would set a firm date for the broadcasters to return their analog spectrum. The final outcome of this proceeding or any subsequent legislation or court decisions could have a material effect on the number of services that a cable operator will be required to carry.

  Renewal of Franchises and Franchise Fees

     The 1984 Cable Act established renewal procedures and criteria designed to protect incumbent franchisees against arbitrary denials of renewal. While these formal procedures are not mandatory unless timely invoked by either the cable television operator or the franchising authority, they can provide substantial procedural and substantive safeguards to incumbent franchisees. Even after the formal renewal procedures are invoked, franchising authorities and cable television operators remain free to negotiate a renewal outside the formal process. Nevertheless, renewal is by no means assured, as the franchisee must meet certain statutory standards. Even if a franchise is renewed, a franchising authority may impose new and more onerous requirements such as upgrading cable-related facilities and equipment and complying with voluntary commitments, although the municipality must take in to account the cost of meeting such requirements. The 1984 Cable Act, under certain limited circumstances, permits a cable operator to obtain modifications of franchise obligations. Franchises have generally been renewed for cable television operators that have provided satisfactory services and have complied with the terms of their franchises. We believe that we have generally complied with the terms of our franchises and have provided quality levels of service and we are not aware of any current or past material failure on our part to comply with our franchise agreements. Historically, we have not experienced any material problems renewing our franchise agreements, however, we cannot predict the outcome of any future franchise renewals.

     The 1992 Cable Act makes several changes to the process under which a cable television operator seeks to enforce his renewal rights, which could make it easier in some cases for a franchising authority to deny renewal. Franchising authorities may consider the “level” of programming service provided by a cable television operator in deciding whether to renew. For alleged franchise violations occurring after December 29, 1984, franchising authorities have the right to deny renewal because of an operator’s failure to substantially comply with the material terms of the franchise even if the franchising authority has “effectively acquiesced” to such past violations. The franchising authority is, however, precluded from denying renewal if, after giving the cable television operator notice and opportunity to cure, it fails to respond to a written notice from the cable television operator of its failure or inability to cure. Courts may not reverse a denial of renewal based on procedural violations found to be “harmless error.”

     Franchising authorities may generally impose franchise fees of up to 5% of a cable television system’s annual gross cable service revenues, excluding revenues derived from services other than cable service. However, they may be able to exact some compensation for cable systems’ use of public rights-of-way to provide telecommunications service. In the past several years, substantial controversy has arisen with regard to the ability of local franchise authorities to regulate high speed Internet access provided by cable television systems. Among the key issues in dispute are the franchise authority’s ability to require cable operators to offer multiple unaffiliated Internet service providers access to their systems (“open access”), to impose franchise fees on revenues that cable systems earn from providing cable modem service or to impose service or other requirements on a cable system’s Internet offerings. In connection with its decision in March 2002 classifying high-speed Internet services provided over a cable system as interstate information services and therefore exempt from local regulation of the service, the FCC stated that revenues derived from cable operators’ Internet services should not be included in the revenue base from which franchise fees are calculated. In 2003 an appellate court vacated the FCC’s decision classifying cable operators’ Internet services; however, the United States Supreme Court has agreed to hear the FCC’s appeal of the appellate court decision. Because of the FCC’s decision, we are no longer collecting and remitting franchise fees on our high-speed Internet service revenues. We are unable to predict the ultimate resolution of these matters.

  Channel Set-Asides

     The 1984 Cable Act permits local franchising authorities to require cable television operators to set aside certain television channels for public, educational and governmental access programming. The 1984 Cable Act further requires cable television systems with thirty-six or more activated channels to designate a portion of their channel capacity for commercial leased access by unaffiliated third parties to provide programming that may compete with services offered by the cable television operator. The 1992 Cable Act requires leased access rates to be set according to a formula determined by the FCC.

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  Horizontal and Vertical Ownership/Cross-Ownership

     In March of 2001, the U.S. Court of Appeals for the District of Columbia Circuit reversed and remanded the FCC’s cable television horizontal and vertical ownership limits for further consideration. The horizontal ownership limit had barred a cable operator from having an attributable interest in more than 30 percent of the nationwide multichannel video programming subscribership. The vertical ownership limit had barred a cable operator from carrying attributable programming on more than 40 percent of channels, up to 75 channels of capacity. In its March 2001 decision, the D.C. Circuit Court of Appeals also reversed and remanded two provisions of the FCC’s ownership attribution rules (the elimination of the single majority shareholder exemption and the loss of insulation from attribution for limited partners that sell programming to the partnership.) In September 2001, the FCC issued a Further Notice of Proposed Rulemaking seeking to develop a complete record that would help the FCC produce and support changes to the affected cable ownership and attribution rules in accordance with the March 2001 court decision. The FCC has not yet released its decision, and thus, we cannot predict the impact of the results of the FCC’s pending cable ownership and attribution rulemaking on our business. However, revised FCC rules could affect the investment of Susquehanna Cable held by Comcast Corporation, as well as our ability to enter into other strategic relationships with larger cable companies in the future. If Comcast divests its ownership interest in Susquehanna Cable, our programming costs are likely to increase faster than they would otherwise.

     In February 2003, the FCC repealed its cable/television station cross-ownership restriction in response to a D.C. Circuit Court of Appeals decision that the FCC had failed to demonstrate that the restriction continued to be necessary in light of increased competition. Thus, the principal remaining cross-ownership restriction that still applies to cable operators is the prohibition from owning or operating a satellite master antenna system or multichannel multipoint distribution system in any area where a cable operator provides franchised cable service and is not subject to effective competition. However, a cable operator may acquire and operate a satellite master antenna system in its existing franchise service area if the programming and other services provided to the satellite master antenna system subscribers are offered according to the terms and conditions of the cable operator’s local franchise agreement.

  Privacy

     The 1984 Cable Act imposes a number of restrictions on the manner in which cable television operators can collect and disclose data about individual system customers. The statute also requires that the system operator periodically provide all customers with written information about its policies regarding the collection and handling of data about customers, their privacy rights under federal law and their enforcement rights. In the event that a cable television operator is found to have violated the customer privacy provisions of the 1984 Cable Act, it could be required to pay damages, attorneys’ fees and other costs. Under the 1992 Cable Act, the privacy requirements were strengthened to require that cable television operators take such actions as are necessary to prevent unauthorized access to personally identifiable information. Certain of these requirements were modified by the Electronic Communications Privacy Act of 2001.

  Copyright Matters

     Cable systems must obtain copyright licenses for programming and television signals they carry. Copyright authority for programming on non-broadcast networks typically is obtained from the networks in question, and copyright authority for programming originated locally by the cable system must be obtained directly from copyright holders. The Copyright Act provides a compulsory license for copyrighted material on television stations whose signals a cable system retransmits in accordance with FCC rules. Cable operators can obtain this license by filing semi-annual reports and paying a percentage of their revenues as a royalty fee to the U.S. Copyright Office, which then distributes the royalty pool to copyright holders. For larger cable systems, these payments vary with the numbers and type of distant television stations the system carries. From time to time, Congress considers proposals to alter the compulsory copyright license, some of which could make the license more costly.

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  State and Local Regulation

     Cable television systems generally are operated pursuant to nonexclusive franchises, permits or licenses granted by a municipality or other state or local government entity. The terms and conditions of franchises vary materially from jurisdiction to jurisdiction. Franchises generally contain provisions governing fees to be paid to the franchising authority, length of the franchise term, renewal, sale or transfer of the franchise, territory of the franchise, design and technical performance of the system, use and occupancy of public streets and number and types of cable television services provided. The 1992 Cable Act prohibits exclusive franchises and allows franchising authorities to regulate customer service and basic rates. Franchising authorities may operate their own multichannel video distribution system without a franchise. States and local franchising authorities may adopt certain restrictions on cable television system ownership.

     The foregoing summarizes the material cable television industry regulations with which we must comply. However, it does not purport to describe all present and proposed federal, state and local regulations and legislation relating to the cable television industry, some of which are subject to judicial and legislative review and change, and their impact on the cable television industry or us cannot be predicted at this time.

Item 2. Properties

     The headquarters of our radio and cable television operations are located in York, Pennsylvania in office space acquired from a related party during 2003.

     We lease seven studio facilities for our radio operations. We own broadcast towers for 19 of our radio stations and lease 14 other main broadcast towers. We own the real property under ten of our main broadcast towers and lease the land under our other 23 main towers. We own 2 auxiliary towers and lease 7 others as backup facilities for main broadcast towers. We own the real property under one of our auxiliary towers and lease the land under the other.

     We own nine, and lease five, headend facilities for our cable television operations. In connection with our cable operations, we own nine tower locations and lease eight others. In addition, we own the real estate for five and lease the real estate for three fiber optic hub sites. See also “Business—Radio Properties” in Item 1 of this annual report.

     Our principal physical assets with respect to our cable operations consist of cable television operating plant and equipment, including signal receiving, encoding and decoding devices, headends and distribution systems and customer house drop equipment for each of our cable television systems. The signal receiving apparatus typically includes a tower, antenna, ancillary electronic equipment and earth stations for reception of satellite signals. Headends, consisting of associated electronic equipment necessary for the reception, amplification and modulation of signals, are located near the receiving devices. Our distribution system consists primarily of coaxial and fiber optic cables and related electronic equipment. See also “Business—Cable Properties” and “—Cable Systems” in Item 1 of this annual report.

     We believe that our properties are in good condition and suitable for our operations.

Item 3. Legal Proceedings

     On July 29, 2004, Bridge Capital Investors II (“BCI”) sued Media for $10.0 million alleging breach of contract and unjust enrichment in connection with Media’s acquisition of Radio Station WHMA-FM. On January 26, 2005, the United States District Court for the Northern District of Georgia granted summary judgment in favor of BCI against Media. The summary judgment granted BCI $10.0 million, interest at 9% per annum from January 22, 2001 and recovery of attorney’s costs. On February 22, 2005, Media appealed the judgment. See the notes to the consolidated financial statements which describe the accounting for this matter.

     We currently and from time to time are involved in litigation incidental to the conduct of our business, but we are not currently a party to any lawsuit or proceeding, other than the above, that, in our opinion, is likely to have a material adverse effect on us.

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Item 4. Submission of Matters to a Vote of Security Holders

     None.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

     There is no market for our common stock. All of our outstanding common stock is owned by our corporate parent, Susquehanna Pfaltzgraff Co. Our preferred stock has a 7% annual cumulative dividend that is payable quarterly. We do not have any equity compensation plans under which our equity securities are issued. We did not issue or purchase any of our equity securities during 2004.

Item 6. Selected Annual and Quarterly Financial Data

     The below selected financial data as of and for the years ended December 31, 2004, 2003, 2002, 2001 and 2000 is derived from our audited consolidated financial statements. Our audited consolidated financial statements and related notes for the years ended December 31, 2004, 2003 and 2002 are included elsewhere in this annual report. You should read this information and the accompanying notes in conjunction with the consolidated financial statements and related notes and the other financial information included elsewhere in this annual report.

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  Unaudited Quarterly Financial Information

     The following unaudited quarterly financial information for 2004 and 2003 was derived from our unaudited financial statements and as originally filed included, in the opinion of our management, only those normal and recurring adjustments that our management considers necessary for a fair presentation of the results of operations for these periods. These unaudited quarterly operating results are not necessarily indicative of results that may be achieved for a full fiscal year or for periods in the future. Amounts shown in the tables below are in thousands.

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

     The following discussion and analysis should be read in conjunction with “Selected Annual and Quarterly Financial Data” and our financial statements and the notes thereto included in Item 8 of this annual report. Much of the discussion in this section involves forward-looking statements. Our actual results may differ significantly from the results suggested by these forward-looking statements. Please review “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of factors that may impact our actual future results.

  Overview

     We are a diversified communications company with operations in radio broadcasting and cable television. We are the largest privately owned radio broadcaster and the 12th largest radio broadcaster overall in the United States based on revenues. As of December 31, 2004 we owned and operated 7 FM and 5 AM stations that serve three of the nation’s ten largest radio markets (San Francisco, Dallas, and Houston), as well as five other markets (Atlanta, Cincinnati, Indianapolis, Kansas City and York, Pennsylvania). We were also the 17th largest cable multiple system operator in the United States with nine cable systems serving approximately 233,100 subscribers as of December 31, 2004. We also sell content management collaborative intranets, eCommerce and eProcurement solutions to associations, government and mid-market business clients, primarily in the Mid-Atlantic region, under the trade name Susquehanna Technologies.

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     For the year ended December 31, 2004, we had revenues and operating income of $413.5 million and $82.2 million, respectively, with approximately 78% of operating income generated by our radio broadcast operations and 26% by our cable television operations. Our Other segment incurred a $3.6 million operating loss. For the year ended December 31, 2004, our net income was $25.1 million, our cash flows from (used in) operating, investing and financing activities were $110.8 million, $(165.8) million and $54.5 million, respectively, and our ratio of earnings to fixed charges was 2.5x.

     Revenues. Our principal source of radio broadcasting revenue is the sale of broadcasting time on our stations for advertising. Radio revenue is reported net of agency commissions. Sales of advertising are affected by changes in demand for advertising time by national and local advertisers and by advertising rates charged by the stations. Radio station advertising rates are based on a station’s ability to attract audiences that match the demographic groups that advertisers want to reach, the number of stations competing in a marketplace, and economic conditions. Radio stations attempt to maximize revenue by adjusting advertising rates based upon local market conditions, by controlling inventory, by creating demand, and by increasing audience ratings. Radio stations sometimes use barter or trade agreements to exchange merchandise or services for advertising time with advertisers, in lieu of cash. It is our policy not to pre-empt advertising paid in cash with advertising paid in trade. For the years ended December 31, 2002 through 2004, cash advertising revenue was 99% of broadcasting revenue. Seasonal revenue fluctuations are common in the radio broadcasting industry, due primarily to fluctuations in expenditure levels by local and national advertisers. Our radio revenues are lowest in the first quarter and are relatively level in the other quarters.

     Most of our cable revenues are derived from monthly subscriber fees for cable television programming services, high-speed Internet access via cable modems and from fees incident to the provision of such services, such as installation fees and fees for converter rentals and rentals of remote control devices. Some revenues are derived from advertising. Since cable is subject to regulation at the federal, state and local levels, increases in rates charged for regulated services may be governed by the 1992 Cable Act and the 1996 Telecom Act. Cable revenues are affected by the timing of subscriber rate increases. In 2004 and thereafter, revenues from telephony services are included in cable revenues.

     Operating expenses. Radio operating expenses are comprised of employee salaries and commissions, depreciation and amortization, programming expenses, advertising expenses, promotion expenses and selling, general and administrative expenses. General and administrative expenses include office administration and other support functions that are handled on a centralized basis. Radio Employee Stock Plan charges in 2002 recognize the increase in value of the plan during the transition to fair value that ended April 1, 2002.

     Cable operating expenses include programming expenses, employee salaries and benefits, electricity, Internet backbone circuits, depreciation, amortization and selling, general and administrative expenses for accounting and billing services, franchise fees, office administration expenses and corporate charges. Starting in 2004, cable operating expenses include costs for providing telephony services.

     Depreciation and amortization expense relates to the depreciation of tangible assets used in the business and the amortization of intangible assets not affected by the adoption of Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets” (SFAS 142) which resulted in the cessation of amortization of FCC licenses, cable franchise values and goodwill on January 1, 2002. When decisions are made to replace cable distribution plant or other significant assets, the remaining useful lives of those assets are adjusted to coincide with the expected replacement period.

  Critical Accounting Policies and Estimates

     Our management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, as described in Note 1 to the consolidated financial statements. In order to prepare these financial statements, we must make certain estimates and judgments that may affect the reported value of assets, liabilities, revenues and expenses as well as contingencies. These estimates and judgments are evaluated on an ongoing basis and change based upon business conditions and circumstances. Critical estimates involve revenue recognition, the value of intangible assets (primarily FCC broadcast licenses and cable franchise values), the value of long-lived assets, income taxes, fair value of financial instruments, allowances for doubtful

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accounts, contingencies and the impact of any litigation. These estimates are based on the known facts, our measured judgments of probable outcomes and values, historical experience and other factors that we believe are applicable and reasonable given the circumstances. Management has discussed the criteria used in the selection of these estimates and judgments with the Audit Committee and the Audit Committee has reviewed the following disclosures.

     We believe the following accounting policies are critical to preparation of our financial statements since they affect the more significant estimates reflected in the financial statements and related disclosures.

     Revenue Recognition. Revenues are recognized when related services are provided. Radio revenues are reported when advertising is aired and when events are held, net of agency commissions. Cable revenues, including telephony revenues in 2004 and thereafter, are recognized when services are provided and billed to our subscribers. Cable’s installation revenues are recognized to the extent of direct selling costs. Cable franchise fees, which may be up to 5% of subscriber revenues, must be collected and remitted to franchising authorities. Franchise fees are passed through to subscribers as permitted and are included in Cable revenues. Other revenues are recognized when services are provided or performed. Revenues are recorded based on a reasonable expectation of collection. Estimates of uncollectible accounts are made and revised regularly based on customer history, economic conditions and other credit information judged relevant given the circumstances.

     Valuation of Long-Lived and Indefinite-Lived Intangible Assets. We evaluate the recoverability of our long-lived assets including property, plant and equipment and intangible assets subject to amortization whenever events or changes in circumstances suggest the carrying values may not be recoverable. Analyses based on undiscounted cash flows generated by the related operations and appraisals, trends or other indicators of fair value are used in these evaluations. If the asset’s carrying value exceeds the indicated fair value, a loss is recognized for the difference between the fair value and the asset’s carrying value. No adjustment to carrying value is made if an asset’s fair value exceeds its carrying value.

     We evaluate the recoverability of our indefinite-lived intangible assets and goodwill annually or whenever events or changes in circumstances suggest that the asset may be impaired. We perform annual impairment testing for the Radio segment’s Federal Communications Commission broadcast licenses and goodwill at the market cluster level; for the Cable segment’s cable franchise values and goodwill at the segment level and Other goodwill at the segment level. Before 2003, cable franchise values were evaluated one level below the segment level. Cable has strategically made a decision to centralize the management of its cable operations, which include marketing as one brand, creating and launching homogeneous product offerings, setting retail price points, centralizing customer care and the majority of administrative functions. Based on the preponderance of evidence, we believe we are managing and operating our cable franchises as a single asset and it is now proper to evaluate those assets at the segment level in accordance with SFAS 142 and guidance of EITF 02-7. Indefinite-lived intangible assets, other than goodwill, are generally valued using discounted cash flow analyses, trends, appraisals and multiples evidenced in the reporting units’ businesses. Comparable current market transactions, estimated future operating results appraisals, trends and other profitability information may also be used in the evaluations. If the carrying value of an asset were greater than its indicated fair value, an impairment charge would be recognized for the difference in values.

     Income Taxes. Our deferred income taxes reflect the probable future tax consequences of temporary differences between the tax bases of assets and liabilities and their financial reporting balances at each reported year-end. Changes in enacted tax rates are reflected as they occur. We routinely evaluate our effective tax rates and adjust those rates based upon estimates and available information pertinent to the statutory rates, apportionment and other factors considered appropriate in the circumstances. We have certain net operating losses for state tax purposes that we believe will not be utilized. Accordingly, a full valuation allowance for the tax effects of these losses has been recorded.

     Contingencies. We are involved in litigation and administrative proceedings primarily arising in the normal course of our business. Based on the outcome of these actions, we may be required to make payments or recognize a loss. On a regular basis, we evaluate circumstances related to these actions, which may include consultation with outside counsel. If a liability is probable and reasonably estimable, a liability is recognized. When a significant liability is probable but not estimable, appropriate financial statement disclosures are made. If circumstances surrounding a significant matter change in the future, our consolidated results of operations and financial position could be adversely affected.

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  Results of Operations

     The following tables summarize our consolidated historical results of operations and consolidated historical results of operations as a percentage of revenues for the years ended December 31, 2004, 2003 and 2002 (in millions of dollars):

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