LIBERTY MEDIA CORP /DE/ - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-20421

LIBERTY MEDIA CORPORATION
(Exact name of Registrant as specified in its charter)

STATE OF DELAWARE 84-1288730
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

12300 LIBERTY BOULEVARD
ENGLEWOOD, COLORADO 80112
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (720) 875-5400

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 and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark whether the Registrant is an accelerated filer as
defined in Rule 12b-2 of the Exchange Act. Yes /X/ No / /

The number of outstanding shares of Liberty Media Corporation's common stock
as of April 29, 2005 was:

Series A common stock 2,679,967,732 shares; and
Series B common stock 121,062,825 shares.

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(continued)

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED

(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

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* See note 4.

See accompanying notes to condensed consolidated financial statements.

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)

(UNAUDITED)

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* See note 4.

See accompanying notes to condensed consolidated financial statements.

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

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* See note 4.

See accompanying notes to condensed consolidated financial statements.

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2005

See accompanying notes to condensed consolidated financial statements.

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS

MARCH 31, 2005

(UNAUDITED)

(1) BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include the
accounts of Liberty Media Corporation and its controlled subsidiaries
(collectively, "Liberty" or the "Company," unless the context otherwise
requires). All significant intercompany accounts and transactions have been
eliminated in consolidation.

Liberty is a holding company which, through its ownership of interests in
subsidiaries and other companies, is primarily engaged in the electronic
retailing, media, communications and entertainment industries in the United
States, Europe and Asia.

The accompanying interim unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States ("GAAP") for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X as
promulgated by the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the results for such periods have been included. The results of operations for
any interim period are not necessarily indicative of results for the full year.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained in
Liberty's Annual Report on Form 10-K for the year ended December 31, 2004.

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. Liberty considers (i) the estimate of the
fair value of its long-lived assets (including goodwill) and any resulting
impairment charges, (ii) the fair value of its derivative instruments and
(iii) its assessment of other-than-temporary declines in fair value of its
investments to be its most significant estimates.

Liberty holds a number of investments that are accounted for using the
equity method. Liberty does not control the decision making process or business
management practices of these affiliates. Accordingly, Liberty relies on
management of these affiliates to provide it with accurate financial information
prepared in accordance with GAAP that Liberty uses in the application of the
equity method. In addition, Liberty relies on audit reports that are provided by
the affiliates' independent auditors on the financial statements of such
affiliates. The Company is not aware, however, of any errors in or possible
misstatements of the financial information provided by its equity affiliates
that would have a material effect on Liberty's condensed consolidated financial
statements.

Certain prior period amounts have been reclassified for comparability with
the 2005 presentation.

(2) STOCK BASED COMPENSATION

The Company has granted to certain of its employees options, stock
appreciation rights ("SARs") and options with tandem SARs (collectively,
"Awards") to purchase shares of Liberty Series A and Series B common stock.

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

The Company accounts for compensation expense related to its Awards pursuant
to the recognition and measurement provisions of Accounting Principles Board
Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" ("APB Opinion
No. 25"). All of the Company's Awards are accounted for as variable plan awards,
and compensation is recognized based upon the percentage of the options that are
vested and the difference between the market price of the underlying common
stock and the exercise price of the options at the balance sheet date. The
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123, "ACCOUNTING FOR STOCK-BASED
COMPENSATION," ("Statement 123") to its options. Compensation expense for SARs
and options with tandem SARs is the same under APB Opinion No. 25 and Statement
123. Accordingly, no pro forma adjustment for such Awards is included in the
following table.

In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (revised 2004), "SHARE-BASED PAYMENTS"
("Statement 123R"). Statement 123R, which is a revision of Statement 123 and
supersedes APB Opinion No. 25, establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services, primarily focusing on transactions in which an entity obtains employee
services. Statement 123R generally requires companies to measure the cost of
employee services received in exchange for an award of equity instruments (such
as stock options and restricted stock) based on the grant-date fair value of the
award, and to recognize that cost over the period during which the employee is
required to provide service (usually the vesting period of the award). Statement
123R also requires companies to measure the cost of employee services received
in exchange for an award of liability instruments (such as stock appreciation
rights) based on the current fair value of the award, and to remeasure the fair
value of the award at each reporting date.

Public companies, such as Liberty, were originally required to adopt
Statement 123R as of the beginning of the first interim period that begins after
June 15, 2005. On April 14, 2005, the Securities and Exchange commission amended
the effective date to the beginning of a registrant's next fiscal year, or
January 1, 2006 for calendar-year companies, such as Liberty. Accordingly, the
provisions of Statement 123R will affect the accounting for all awards granted,
modified, repurchased or cancelled

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

after January 1, 2006. The accounting for awards granted, but not vested, prior
to January 1, 2006 will also be impacted. The provisions of Statement 123R allow
companies to adopt the standard on a prospective basis or to restate all periods
for which Statement 123 was effective. Liberty expects to adopt Statement 123R
on a prospective basis, and will include in its financial statements for periods
that begin after December 31, 2004 pro forma information as though the standard
had been adopted for all periods presented.

While Liberty has not yet quantified the impact of adopting Statement 123R,
it believes that such adoption could have a significant impact on its operating
income and net earnings in the future.

(3) EARNINGS (LOSS) PER COMMON SHARE

Basic earnings (loss) per common share ("EPS") is computed by dividing net
earnings (loss) by the weighted average number of common shares outstanding for
the period. Diluted EPS presents the dilutive effect on a per share basis of
potential common shares as if they had been converted at the beginning of the
periods presented. The basic EPS calculation is based on 2,793 million and
2,903 million weighted average shares outstanding for the three months ended
March 31, 2005 and 2004, respectively. The diluted EPS calculation for the three
months ended March 31, 2005 includes 14.6 million dilutive securities. However,
due to the relative insignificance of these dilutive securities, their inclusion
does not impact the EPS amount as reported in the accompanying condensed
consolidated statement of operations. Excluded from diluted EPS for the
three months ended March 31, 2005 and 2004 are 61 million and 84 million
potential common shares, respectively, because their inclusion would be
anti-dilutive.

(4) DISCONTINUED OPERATIONS

SPIN OFF OF LIBERTY MEDIA INTERNATIONAL, INC.

On June 7, 2004 (the "Spin Off Date"), Liberty completed the spin off (the
"Spin Off") of its wholly-owned subsidiary, LMI, to its shareholders.
Substantially all of the assets and businesses of LMI were attributed to
Liberty's former International Group segment. In connection with the Spin Off,
holders of Liberty common stock on June 1, 2004 (the "Record Date") received
0.05 of a share of LMI Series A common stock for each share of Liberty Series A
common stock owned at 5:00 p.m. New York City time on the Record Date and 0.05
of a share of LMI Series B common stock for each share of Liberty Series B
common stock owned at 5:00 p.m. New York City time on the Record Date. The Spin
Off is intended to qualify as a tax-free spin off. For accounting purposes, the
Spin Off is deemed to have occurred on June 1, 2004, and no gain or loss was
recognized by Liberty in connection with the Spin Off.

In addition to the assets in Liberty's International Group operating
segment, Liberty also contributed certain monetary assets to LMI in connection
with the Spin Off.

DMX MUSIC

During the fourth quarter of 2004, the executive committee of the board of
directors of Liberty approved a plan to dispose of Liberty's approximate 56%
ownership interest in Maxide Acquisition, Inc. (d/b/a DMX Music, "DMX"). DMX is
principally engaged in programming, distributing and marketing digital and
analog music services to homes and businesses and was included

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

in Liberty's Networks Group operating segment. On February 14, 2005, DMX
commenced proceedings under Chapter 11 of the United States Bankruptcy Code. As
a result of marketing efforts conducted prior to the bankruptcy filing, DMX has
entered into an arrangement, subject to the approval by the Bankruptcy Court, to
sell substantially all of its operating assets to an independent third party.
Other prospective buyers have an opportunity to submit offers to purchase all or
a portion of those assets by May 6, 2005. After competitive bids, if any, have
been submitted, Liberty expects that the Bankruptcy Court will make a
determination as to the appropriate buyer, and the operating assets of DMX will
be sold. As a result of the DMX bankruptcy filing, Liberty has deconsolidated
DMX. For financial reporting purposes such deconsolidation was deemed to be
effective January 1, 2005.

The condensed consolidated financial statements and accompanying notes of
Liberty have been prepared to reflect LMI and DMX as discontinued operations.
Accordingly, the assets and liabilities, revenue, costs and expenses, and cash
flows of LMI (for periods prior to the Spin Off Date) and DMX (for periods prior
to January 1, 2005) have been excluded from the respective captions in the
accompanying condensed consolidated balance sheets, statements of operations,
statements of comprehensive earnings (loss) and statements of cash flows and
have been reported under the heading of discontinued operations in such
condensed consolidated financial statements.

Certain combined financial information for LMI and DMX, which is included in
loss from discontinued operations for the three months ended March 31, 2004, is
as follows (amounts in millions):

Revenue..................................................... $ 619
Loss before income taxes and minority interests............. $(150)

SPIN OFF OF DISCOVERY HOLDING COMPANY

Liberty's Board of Directors has approved a resolution authorizing the
spin-off of a newly formed subsidiary, Discovery Holding Company ("DHC"). DHC's
assets will be comprised of Liberty's 100% ownership interest in Ascent Media
Group, Inc. ("Ascent Media") and Liberty's 50% ownership interest in Discovery
Communications, Inc. ("Discovery"). The spin off, which will be effected as a
tax-free distribution of DHC's shares to Liberty's shareholders, is expected to
occur in the second or third quarter of 2005, subject to, among other things,
the receipt of a favorable tax opinion and regulatory and other third party
approvals. Upon completion of this transaction, DHC will be a separate publicly
traded company. This transaction is expected to be accounted for at historical
cost due to the pro rata nature of the distribution. Subsequent to the
completion of the spin off, the historical results of operations of DHC for
periods prior to the spin off will be included in discontinued operations in
Liberty's consolidated financial statements. The carrying value of Liberty's
investment in Discovery was $2,966 million at March 31, 2005. In addition,
enterprise-level goodwill of $1,771 million is allocable to the Discovery
investment. Liberty's share of earnings related to Discovery was $23 million and
$9 million for the three months ended March 31, 2005 and 2004, respectively.
Summarized statement of operations data for Discovery is presented in the table
below. See note 11 for certain financial information for Ascent Media. Also see
"Management's Discussion and Analysis of Financial Condition

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

and Results of Operations" included in this Quarterly Report on Form 10-Q for a
discussion Ascent Media's results of operations.

(5) INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES AND OTHER COST INVESTMENTS

Investments in available-for-sale securities and other cost investments are
summarized as follows:

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(1) Includes $159 million and $176 million of shares pledged as collateral for
share borrowing arrangements at March 31, 2005 and December 31, 2004,
respectively.

(2) Includes $569 million and $654 million of shares pledged as collateral for
share borrowing arrangements at March 31, 2005 and December 31, 2004,
respectively.

(3) Includes $73 million and $77 million of shares pledged as collateral for
share borrowing arrangements at March 31, 2005 and December 31, 2004,
respectively.

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

(4) At March 31, 2005, other available-for-sale debt securities include
$206 million of investments in third-party marketable debt securities held
by Liberty parent and $38 million of such securities held by subsidiaries of
Liberty. At December 31, 2004, such investments aggregated $276 million and
$41 million, respectively.

UNREALIZED HOLDING GAINS AND LOSSES

Unrealized holding gains and losses related to investments in
available-for-sale securities are summarized below.

The aggregate fair value of securities with unrealized holding losses at
March 31, 2005 was $4,094 million. None of these securities had unrealized
losses for more than 12 continuous months.

(6) INTANGIBLE ASSETS

GOODWILL

Changes in the carrying amount of goodwill for the three months ended
March 31, 2005 are as follows:

AMORTIZABLE INTANGIBLE ASSETS

Amortization of intangible assets with finite useful lives was $119 million
and $120 million for the three months ended March 31, 2005 and 2004,
respectively. Based on its current amortizable intangible

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

assets, Liberty expects that amortization expense will be as follows for the
next five years (amounts in millions):

Remainder of 2005........................................... $357
2006........................................................ $444
2007........................................................ $401
2008........................................................ $366
2009........................................................ $344

(7) DERIVATIVE INSTRUMENTS

The Company's derivative instruments are summarized as follows:

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

Realized and unrealized gains (losses) on financial instruments are
comprised of the following:

(8) LONG-TERM DEBT

Debt is summarized as follows:

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

PARENT COMPANY DEBT

During the three months ended March 31, 2005, and pursuant to a previously
announced debt reduction plan, Liberty retired $293 million principal amount of
its parent company debt (primarily comprised of its senior notes) for aggregate
cash consideration of $295 million plus accrued interest. In connection with
these debt retirements, Liberty recognized a loss on early extinguishment of
debt of $2 million, which is included in other income (expense) in the
accompanying condensed consolidated statement of operations.

SUBSIDIARY DEBT

Subsidiary debt at March 31, 2005, is comprised primarily of capitalized
satellite transponder lease obligations.

FAIR VALUE OF DEBT

Liberty estimates the fair value of its debt based on the quoted market
prices for the same or similar issues or on the current rate offered to Liberty
for debt of the same remaining maturities. The fair value of Liberty's publicly
traded debt securities at March 31, 2005 is as follows (amounts in millions):

Fixed rate senior notes..................................... $2,204
Floating Rate Notes......................................... $2,291
Senior debentures........................................... $1,498
Senior exchangeable debentures, including call option
obligation................................................ $3,962

Liberty believes that the carrying amount of its subsidiary debt
approximated fair value at March 31, 2005.

(9) STOCKHOLDERS' EQUITY

As of March 31, 2005, there were 52.1 million shares of Liberty Series A
common stock and 28.2 million shares of Liberty Series B common stock reserved
for issuance under exercise privileges of outstanding stock options and
warrants.

At December 31, 2004, Liberty had entered into zero-strike call spreads
("Z-Call") with respect to six million shares of its Series A common stock. The
Z-Call is comprised of a call option purchased by Liberty from the counterparty
with a zero strike price and a similar call option purchased by the counterparty
from Liberty with a strike price equal to the market price of the Series A
common stock on the date of execution (the "Counterparty Strike Price"). Upon
expiration of the Z-Call, Liberty can purchase the subject shares of Series A
common stock from the counterparty for no additional cost, and the counterparty
can purchase the same shares from Liberty at the Counterparty Strike Price, or
the parties can net cash settle. Liberty accounted for the Z-Calls pursuant to
Statement of Financial Accounting Standards No. 150, "ACCOUNTING FOR CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY"
("Statement 150"). Liberty net cash settled all of its Z-Calls during the first
quarter of 2005 for net cash proceeds of $63 million. Changes in the fair value
of the Z-Calls prior to

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

settlement are included in realized and unrealized gains (losses) on financial
instruments in the accompanying condensed consolidated statement of operations.

(10) COMMITMENTS AND CONTINGENCIES

FILM RIGHTS

Starz Entertainment Group, LLC ("SEG"), a wholly-owned subsidiary of
Liberty, provides premium video programming distributed by cable operators,
direct-to-home satellite providers and other distributors throughout the United
States. SEG has entered into agreements with a number of motion picture
producers which obligate SEG to pay fees ("Programming Fees") for the rights to
exhibit certain films that are released by these producers. The unpaid balance
of Programming Fees for films that were available for exhibition by SEG at
March 31, 2005 is reflected as a liability in the accompanying condensed
consolidated balance sheet. The balance due as of March 31, 2005 is payable as
follows: $159 million in 2005, $24 million in 2006 and $12 million thereafter.

SEG has also contracted to pay Programming Fees for the rights to exhibit
films that have been released theatrically, but are not available for exhibition
by SEG until some future date. These amounts have not been accrued at March 31,
2005. SEG's estimate of amounts payable under these agreements is as follows:
$330 million in 2005; $420 million in 2006; $118 million in 2007; $106 million
in 2008; $91 million in 2009; and $133 million thereafter.

In addition, SEG is also obligated to pay Programming Fees for all
qualifying films that are released theatrically in the United States by studios
owned by The Walt Disney Company ("Disney") through 2009, all qualifying films
that are released theatrically in the United States by studios owned by Sony
Pictures Entertainment ("Sony") through 2010 and all qualifying films released
theatrically in the United States by Revolution Studios through 2006. Films are
generally available to SEG for exhibition 10 - 12 months after their theatrical
release. The Programming Fees to be paid by SEG are based on the quantity and
the domestic theatrical exhibition receipts of qualifying films. As these films
have not yet been released in theatres, SEG is unable to estimate the amounts to
be paid under these output agreements. However, such amounts are expected to be
significant.

In addition to the foregoing contractual film obligations, each of Disney
and Sony has the right to extend its contract for an additional three years. If
Sony elects to extend its contract, SEG has agreed to pay Sony a total of
$190 million in four annual installments of $47.5 million beginning in 2011.
This option expires December 31, 2007. If made, SEG's payments to Sony would be
amortized ratably as programming expense over the extension period beginning in
2011. An extension of this agreement would also result in the payment by SEG of
Programming Fees for qualifying films released by Sony during the extension
period. If Disney elects to extend its contract, SEG would not be obligated to
pay any amounts in excess of its Programming Fees for qualifying films released
by Disney during the extension period.

GUARANTEES

Liberty guarantees SEG's obligations under certain of its studio output
agreements. At March 31, 2005, Liberty's guarantee for obligations for films
released by such date aggregated $722 million. While the guarantee amount for
films not yet released is not determinable, such amount is expected to be
significant. As noted above, SEG has recognized the liability for a portion of
its obligations under the

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

output agreements. As this represents a commitment of SEG, a consolidated
subsidiary of Liberty, Liberty has not recorded a separate liability for its
guarantee of these obligations.

At March 31, 2005, Liberty has guaranteed Y4.6 billion ($43 million) of the
bank debt of Jupiter Telecommunications, Co., Ltd. ("J-COM"), a former equity
affiliate that provides broadband services in Japan. Liberty's guarantees expire
as the underlying debt matures and is repaid. The debt maturity dates range from
2005 to 2018. Liberty's investment in J-COM was attributed to LMI in the Spin
Off. In connection with the Spin Off, LMI has indemnified Liberty for any
amounts Liberty is required to fund under these guarantees.

In connection with agreements for the sale of certain assets, Liberty
typically retains liabilities that relate to events occurring prior to its sale,
such as tax, environmental, litigation and employment matters. Liberty generally
indemnifies the purchaser in the event that a third party asserts a claim
against the purchaser that relates to a liability retained by Liberty. These
types of indemnification guarantees typically extend for a number of years.
Liberty is unable to estimate the maximum potential liability for these types of
indemnification guarantees as the sale agreements typically do not specify a
maximum amount and the amounts are dependent upon the outcome of future
contingent events, the nature and likelihood of which cannot be determined at
this time. Historically, Liberty has not made any significant indemnification
payments under such agreements and no amount has been accrued in the
accompanying condensed consolidated financial statements with respect to these
indemnification guarantees.

OPERATING LEASES

Liberty and its subsidiaries lease business offices, have entered into
satellite transponder lease agreements and use certain equipment under lease
arrangements.

LITIGATION

Liberty has contingent liabilities related to legal and tax proceedings and
other matters arising in the ordinary course of business. Although it is
reasonably possible Liberty may incur losses upon conclusion of such matters, an
estimate of any loss or range of loss cannot be made. In the opinion of
management, it is expected that amounts, if any, which may be required to
satisfy such contingencies will not be material in relation to the accompanying
condensed consolidated financial statements.

(11) OPERATING SEGMENTS

Liberty is a holding company which, through its ownership of interests in
subsidiaries and other companies, is primarily engaged in the electronic
retailing, media, communications and entertainment industries. Each of these
businesses is separately managed. Liberty identifies its reportable segments as
(A) those consolidated subsidiaries that represent 10% or more of its
consolidated revenue, earnings before income taxes or total assets and
(B) those equity method affiliates whose share of earnings represent 10% or more
of Liberty's earnings before income taxes. Prior to the first quarter of 2005,
we had organized our businesses into four groups--Interactive Group, Networks
Group, International Group and Corporate and Other. On June 7, 2004, we
completed the spin off of our wholly-owned subsidiary, LMI, to our shareholders.
Substantially all of the assets and businesses of LMI were included in our
International Group. In the first quarter of 2005, our board of directors
approved a

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

resolution authorizing the spin off of our newly formed subsidiary, Discovery
Holding Company. DHC's assets will be comprised of our 100% ownership interest
in Ascent Media, which was included in our Interactive Group, and our 50%
ownership interest in Discovery Communications, which was included in our
Networks Group. As a result of the LMI spin off and the proposed DHC spin off,
we now operate and analyze our businesses individually, rather than combining
them with other businesses into Groups. The segment presentation for prior
periods has been conformed to the current period segment presentation.

Liberty evaluates performance and makes decisions about allocating resources
to its operating segments based on financial measures such as revenue, operating
cash flow, gross margin, average sales price per unit, number of units shipped,
and revenue or sales per customer equivalent. In addition, Liberty reviews
non-financial measures such as average prime time rating, prime time audience
delivery, subscriber growth and penetration, as appropriate.

Liberty defines operating cash flow as revenue less cost of sales, operating
expenses, and selling, general and administrative expenses (excluding stock
compensation). Liberty believes this is an important indicator of the
operational strength and performance of its businesses, including each
business's ability to service debt and fund capital expenditures. In addition,
this measure allows management to view operating results and perform analytical
comparisons and benchmarking between businesses and identify strategies to
improve performance. This measure of performance excludes depreciation and
amortization, stock compensation, litigation settlements and restructuring and
impairment charges that are included in the measurement of operating income
pursuant to GAAP. Accordingly, operating cash flow should be considered in
addition to, but not as a substitute for, operating income, net income, cash
flow provided by operating activities and other measures of financial
performance prepared in accordance with GAAP. Liberty generally accounts for
intersegment sales and transfers as if the sales or transfers were to third
parties, that is, at current prices.

For the three months ended March 31, 2005, Liberty has identified the
following consolidated subsidiaries as its reportable segments:

- QVC--consolidated subsidiary that markets and sells a wide variety of
consumer products in the U.S. and several foreign countries, primarily by
means of televised shopping programs on the QVC networks and via the
Internet through its domestic and international websites.

- SEG--consolidated subsidiary that provides premium programming distributed
by cable operators, direct-to-home satellite providers and other
distributors throughout the United States.

- Ascent Media--consolidated subsidiary that provides sound, video and
ancillary post-production and distribution services to the motion picture
and television industries in the United States, Europe and Asia.

Liberty's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
segment requires different technologies, distribution channels and marketing
strategies. The accounting policies of the segments that are also consolidated
subsidiaries are the same as those described in the summary of significant
policies.

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLDIATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2005

(UNAUDITED)

PERFORMANCE MEASURES

BALANCE SHEET INFORMATION

The following tables provide a reconciliation of consolidated segment
operating cash flow to earnings from continuing operations before income taxes
and minority interests:

I-19

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

Certain statements in this Quarterly Report on Form 10-Q constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. To the extent that such statements are not
recitations of historical fact, such statements constitute forward-looking
statements which, by definition, involve risks and uncertainties. Where, in any
forward-looking statement, we express an expectation or belief as to future
results or events, such expectation or belief is expressed in good faith and
believed to have a reasonable basis, but there can be no assurance that the
statement of expectation or belief will result or be achieved or accomplished.
The following include some but not all of the factors that could cause actual
results or events to differ materially from those anticipated:

- general economic and business conditions and industry trends;

- consumer spending levels, including the availability and amount of
individual consumer debt;

- spending on domestic and foreign television advertising;

- the regulatory and competitive environment of the industries in which we,
and the entities in which we have interests, operate;

- continued consolidation of the broadband distribution and movie studio
industries;

- uncertainties inherent in the development and integration of new business
lines and business strategies;

- changes in distribution and viewing of television programming, including
the expanded deployment of personal video recorders, video on demand and
IP television and their impact on television advertising revenue and home
shopping networks;

- increased digital TV penetration and the impact on channel positioning of
our networks;

- rapid technological changes;

- capital spending for the acquisition and/or development of
telecommunications networks and services;

- uncertainties associated with product and service development and market
acceptance, including the development and provision of programming for new
television and telecommunications technologies;

- future financial performance, including availability, terms and deployment
of capital;

- fluctuations in foreign currency exchange rates and political unrest in
international markets;

- the ability of suppliers and vendors to deliver products, equipment,
software and services;

- the outcome of any pending or threatened litigation;

- availability of qualified personnel;

- changes in, or failure or inability to comply with, government
regulations, including, without limitation, regulations of the Federal
Communications Commission, and adverse outcomes from regulatory
proceedings;

- changes in the nature of key strategic relationships with partners and
joint venturers;

- competitor responses to our products and services, and the products and
services of the entities in which we have interests; and

- threatened terrorists attacks and ongoing military action in the Middle
East and other parts of the world.

I-20

These forward-looking statements and such risks, uncertainties and other
factors speak only as of the date of this Quarterly Report, and we expressly
disclaim any obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein, to reflect any change in its
expectations with regard thereto, or any other change in events, conditions or
circumstances on which any such statement is based.

The following discussion and analysis provides information concerning our
results of operations and financial condition. This discussion should be read in
conjunction with our accompanying condensed consolidated financial statements
and the notes thereto and our Annual Report on Form 10-K for the year ended
December 31, 2004.

OVERVIEW

We are a holding company that owns controlling and noncontrolling interests
in a broad range of electronic retailing, media, communications and
entertainment companies.

Prior to the first quarter of 2005, we had organized our businesses into
four groups--Interactive Group, Networks Group, International Group and
Corporate and Other. On June 7, 2004, we completed the spin off of our
wholly-owned subsidiary, LMI, to our shareholders. Substantially all of the
assets and businesses of LMI were included in our International Group. In the
first quarter of 2005, our board of directors approved a resolution authorizing
the spin off of our newly formed subsidiary, Discovery Holding Company. DHC's
assets will be comprised of our 100% ownership interest in Ascent Media, which
was included in our Interactive Group, and our 50% ownership interest in
Discovery Communications, which was included in our Networks Group. As a result
of the LMI spin off and the proposed DHC spin off, we now operate and analyze
our businesses individually, rather than combining them with other businesses
into Groups.

Our most significant consolidated businesses at March 31, 2005 are QVC, SEG
and Ascent Media. Discovery is our most significant equity method investment.
QVC markets and sells a wide variety of consumer products in the United States
and several foreign countries, primarily by means of televised shopping programs
on the QVC networks and via the Internet through its domestic and international
websites. SEG provides premium programming distributed by cable operators,
direct-to-home satellite providers and other distributors throughout the United
States. Ascent Media provides sound, video and ancillary post-production and
distribution services to the motion picture and television industries in the
United States, Europe and Asia. Discovery operates cable and satellite
television networks in the United States and around the world.

QVC has identified improved domestic growth and continued international
growth as key areas of focus in 2005. QVC's steps to achieving these goals will
include (1) continued domestic and international efforts to increase the number
of customers who have access to and use its service and (2) continued expansion
of brand selection and available products. The key challenges to achieving these
goals in both the U.S. and international markets are (1) increased competition
from other home shopping and Internet retailers, (2) advancements in technology,
such as video on demand and personal video recorders, which may alter TV viewing
habits and (3) maintaining favorable channel positioning as digital TV
penetration increases.

In 2005, SEG will concentrate its efforts on improving performance by
(1) expanding distribution of its services through co-operative marketing
efforts with its primary distributors, (2) exploiting the increased penetration
of digital TV and video on demand and (3) growing distribution of new services,
such as Internet delivery of movies. The challenges that SEG faces include the
continued consolidation of the cable and satellite TV distribution industries
and negotiating favorable new affiliation agreements as existing agreements
expire.

I-21

In 2005, Ascent Media intends to focus on leveraging its broad array of
media services to market itself as a full service provider to new and existing
customers within the motion picture and television industries. With facilities
in the U.S., United Kingdom and Asia, Ascent Media also hopes to increase its
services to multinational companies. The challenges that Ascent Media faces
include differentiating its products and services to help maintain or increase
operating margins and financing capital expenditures for equipment and other
items to satisfy customers' desire for services using the latest technology.

Certain of our subsidiaries and affiliates are dependent on the
entertainment industry for entertainment, educational and informational
programming. In addition, a significant portion of the revenue of certain of our
affiliates is generated by the sale of advertising on their networks. A downturn
in the economy could reduce (i) the development of new television and motion
picture programming, thereby adversely impacting their supply of service
offerings; (ii) consumer disposable income and consumer demand for their
products and services; and (iii) the amount of resources allocated for network
and cable television advertising by major corporations.

The "Corporate and Other" category includes our other consolidated
subsidiaries and corporate expenses. Our other consolidated subsidiaries include
On Command Corporation ("On Command"), OpenTV Corp. ("OpenTV") and
TruePosition, Inc. ("TruePosition"). On Command provides in-room, on-demand
video entertainment and information services to hotels, motels and resorts
primarily in the United States. OpenTV provides interactive television
solutions, including operating middleware, web browser software, interactive
applications, and consulting and support services. TruePosition provides
equipment and technology that deliver location-based services to wireless users.

In addition to the foregoing businesses, we continue to maintain significant
investments in public companies such as News Corporation, IAC/InterActiveCorp,
Time Warner Inc., Motorola, Inc. and Sprint Corporation, which are accounted for
as available-for-sale ("AFS") securities and are included in corporate and
other.

MATERIAL CHANGES IN RESULTS OF OPERATIONS

To assist you in understanding and analyzing our business in the same manner
we do, we have organized the following discussion of our results of operations
into two parts: Consolidated Operating Results, and Operating Results by
Business.

I-22

CONSOLIDATED OPERATING RESULTS

REVENUE. Our consolidated revenue increased 13.9% for the three months
ended March 31, 2005, as compared to the corresponding prior year period. This
increase is due to increases in revenue for each of our reportable segments, as
well as those subsidiaries included in corporate and other. See "OPERATING
RESULTS BY BUSINESS" below for a more complete discussion of these increases.

OPERATING CASH FLOW. We define Operating Cash Flow as revenue less cost of
sales, operating expenses and selling, general and administrative expenses
(excluding stock compensation). Our chief operating decision maker and
management team use this measure of performance in conjunction with other
measures to evaluate our businesses and make decisions about allocating
resources among our businesses. We believe this is an important indicator of the
operational strength and performance of our businesses, including each
business's ability to service debt and fund capital expenditures. In addition,
this measure allows us to view operating results, perform analytical comparisons
and benchmarking between businesses and identify strategies to improve
performance. This measure of performance excludes such costs as depreciation and
amortization, stock compensation, litigation settlements and impairments of
long-lived assets that are included in the measurement of operating income
pursuant to generally accepted accounting principles. Accordingly, Operating
Cash Flow should be considered in addition to, but not as a substitute for,
operating income, net income, cash flow provided by operating activities and
other measures of financial performance prepared in accordance with GAAP. See
note 11 to the accompanying condensed consolidated financial statements for a
reconciliation of Operating Cash Flow to Earnings From Continuing Operations
Before Income Taxes and Minority Interests.

Consolidated Operating Cash Flow increased 8.2% during the three months
ended March 31, 2005, as compared to the corresponding prior year period. This
increase is due primarily to an increase in QVC's operating cash flow resulting
from higher revenue both domestically and internationally. The

I-23

QVC increase was partially offset by a decrease in SEG's operating cash flow,
which resulted primarily from higher programming costs in 2005.

STOCK COMPENSATION. Stock compensation includes compensation related to
(1) options and stock appreciation rights for shares of our common stock that
are granted to certain of our officers and employees, (2) phantom stock
appreciation rights ("PSARs") granted to officers and employees of certain of
our subsidiaries pursuant to private equity plans and (3) amortization of
restricted stock grants. The amount of expense associated with stock
compensation is generally based on the vesting of the related stock options and
stock appreciation rights and the market price of the underlying common stock,
as well as the vesting of PSARs and the equity value of the related subsidiary.
The expense reflected in our condensed consolidated financial statements is
based on the market price of the underlying common stock as of the date of the
financial statements and is subject to future adjustment based on market price
fluctuations, vesting percentages and, ultimately, on the final determination of
market value when the options are exercised.

LITIGATION SETTLEMENTS. During the three months ended March 31, 2004,
TruePosition settled a patent infringement lawsuit that resulted in income of
$42 million.

OPERATING INCOME. Consolidated operating income decreased $10 million for
the three months ended March 31, 2005, as compared to the corresponding prior
year period. This decrease is the net effect of a decrease for SEG (due to
increased programming costs) and corporate and other (due to the TruePosition
litigation settlement in 2004) and an increase in operating income for QVC.

OTHER INCOME AND EXPENSE

INTEREST EXPENSE. Interest expense was $149 million for each of the three
month periods ended March 31, 2005 and 2004, as the effects of increases in the
interest rates for our variable rate debt in 2005 were offset by decreases for
debt retirements.

DIVIDEND AND INTEREST INCOME. Dividend and interest income was $42 million
and $45 million for the three months ended March 31, 2005 and 2004,
respectively. Interest and dividend income for the three months ended March 31,
2005 was comprised of interest income earned on invested cash ($11 million),
dividends on News Corp. common stock ($21 million), dividends on other AFS
securities ($6 million), and other ($4 million).

INVESTMENTS IN AFFILIATES ACCOUNTED FOR USING THE EQUITY METHOD. A summary
of our share of earnings (losses) of affiliates is included below:

GAINS (LOSSES) ON DISPOSITIONS. We recognized losses on dispositions of
$380 million for the three months ended March 31, 2005 and gains on dispositions
of $218 million for the three months ended March 31, 2004. Included in our
accumulated other comprehensive earnings (loss) at December 31, 2004 was
$123 million, net of income taxes, of foreign currency translation losses
related to Cablevision S.A. ("Cablevision"), a former equity method investment,
and $175 million, net of income taxes, of foreign currency translation losses
related to Telewest Global, Inc. ("Telewest"),

I-24

another former equity method investment. In the first quarter of 2005, we
disposed of our interests in each of Cablevision and Telewest. Accordingly, we
recognized approximately $488 million of foreign currency translation losses,
before related income taxes, related to these two investments that were
previously included in accumulated other comprehensive earnings (loss). These
foreign currency losses were partially offset by gains on disposition of certain
of our AFS securities and other assets. Our 2004 gains related primarily to the
sale of certain of our AFS securities. The foregoing gains or losses were
calculated based upon the difference between the cost basis of the assets
relinquished, as determined on an average cost basis, and the fair value of the
assets received.

REALIZED AND UNREALIZED GAINS (LOSSES) ON FINANCIAL INSTRUMENTS. Realized
and unrealized gains (losses) on financial instruments are comprised of the
following:

INCOME TAXES. Our effective tax rate was 48.2% for the three months ended
March 31, 2005 and 44.9% for the three months ended March 31, 2004. Our
effective tax rate exceeds the U.S. federal income tax rate of 35% in 2005
partially due to an increase in the valuation allowance related to deferred tax
assets of one of our subsidiaries that is not consolidated for income tax
purposes. In addition, our tax expense also includes provisions for state and
foreign taxes in 2005 and 2004.

OPERATING RESULTS BY BUSINESS

QVC. QVC is a retailer of a wide range of consumer products, which are
marketed and sold primarily by merchandise-focused televised shopping programs
and, to a lesser extent, via the Internet. In the United States, the programs
are aired through its nationally televised shopping network--24 hours a day,
7 days a week ("QVC-US"). Internationally, QVC has electronic retailing program
services based in the United Kingdom ("QVC-UK"), Germany ("QVC-Germany") and
Japan ("QVC-Japan"). QVC-UK broadcasts live 19 hours a day, and QVC-Germany
broadcasts live 24 hours a day. In May 2004, QVC-Japan increased its daily
broadcast time from 17 hours to 24 hours.

I-25

The following discussion describes QVC's results of operations for the
three months ended March 31, 2005 and 2004.

Net revenue for the three months ended March 31, 2005 and 2004 includes the
following revenue by geographical area:

QVC's consolidated net revenue increased 14.1% during the three months ended
March 31, 2005, as compared to the corresponding prior year period. This
increase was driven by (i) a 10.9% increase in the number of units shipped from
31.2 million in 2004 to 34.6 million in 2005, (ii) a 1.5% to 4.0% increase in
the average sales price per unit ("ASP") (calculated in local currency) in each
of QVC's markets, except QVC-UK, and (iii) the impact of favorable foreign
currency rate fluctuations. The ASP in local currency for QVC-UK decreased 5.0%
due to purchases of lower priced items within the jewelry category and a shift
in product mix to lower priced apparel and accessories. Average sales per
subscriber also increased in each of QVC's markets, except QVC-UK, in 2005, and
returns as a percent of gross product revenue decreased from 18.6% in 2004 to
18.3% for the three months ended March 31, 2005. Each of QVC's markets added
subscribers in 2005. The number of homes receiving QVC's services are as
follows:

I-26

As the QVC service is already received by substantially all of the cable
television and direct broadcast satellite homes in the U.S., future growth in
U.S. sales will depend on continued additions of new customers from homes
already receiving the QVC service and continued growth in sales to existing
customers. QVC's future sales may also be affected by (i) the willingness of
cable and satellite distributors to continue carrying QVC's programming service,
(ii) QVC's ability to maintain favorable channel positioning, which may become
more difficult as distributors convert analog customers to digital,
(iii) changes in television viewing habits because of personal video recorders,
video on demand and IP television and (iv) general economic conditions.

As noted above, during the three months ended March 31, 2005, the increases
in revenue and expenses were also impacted by changes in the exchange rates for
the UK pound sterling, the euro and the Japanese yen. In the event the U.S.
dollar strengthens against these foreign currencies in the future, QVC's revenue
and operating cash flow will be negatively impacted. The percentage increase in
revenue for each of QVC's geographic areas in dollars and in local currency is
as follows:

Gross profit increased from 36.8% of net revenue for the three months ended
March 31, 2004 to 37.6% for the three months ended March 31, 2005. This increase
in gross profit percentage is primarily the result of (i) a higher product
margin for all product categories, (ii) a higher product margin due to a shift
in the product mix from lower margin home products to higher margin apparel and
accessory and jewelry categories and (iii) a lower inventory obsolescence
provision.

QVC's operating expenses are comprised of commissions, order processing and
customer service expenses, provision for doubtful accounts, and credit card
processing fees. Operating expenses increased 12.2% for the three months ended
March 31, 2005, as compared to the corresponding prior year period. This
increase is primarily due to the increase in sales volume. As a percentage of
net revenue, operating expenses decreased to 8.8% from 9.0% for the
three months ended March 31, 2005 and 2004, respectively. As a percentage of net
revenue, order processing and customer service expenses decreased in each market
in 2005. Such decrease is a result of reduced personnel expense due to increased
Internet sales and efficiencies in call handling and staffing. In addition,
QVC's telecommunications expenses decreased in 2005 due to new contracts with
certain of its service providers.

QVC's SG&A expenses increased 12.6% for the three months ended March 31,
2005, as compared to the corresponding prior year period. The majority of this
increase is due to increases in personnel, information technology and other
outside service costs. Personnel cost increases reflect the addition of
personnel to support the increased sales of QVC's foreign operations.
Information technology expenditure increases are the result of higher
third-party service costs related to various software projects, as well as
higher software maintenance fees. Increases in other outside services are the
result of increased consulting expenses due to Sarbanes-Oxley compliance and
higher funding fees associated with QVC's private label credit card, which is
managed by an unrelated third party.

SEG. SEG provides premium programming distributed by cable operators,
direct-to-home ("DTH") satellite providers and other distributors throughout the
United States. The majority of SEG's

I-27

revenue is derived from the delivery of movies to subscribers under affiliation
agreements with these video programming distributors.

SEG's revenue increased 9.5% for the three months ended March 31, 2005, as
compared to the corresponding prior year period. This increase is primarily due
to an increase in the average number of subscription units for SEG's Thematic
Multiplex, STARZ! and Encore services. The Thematic Multiplex service is a group
of up to six channels, each of which exhibits movies based on an individual
theme. Total average subscription units, which represent the number of SEG
services that are purchased by cable, DTH and other distribution media
customers, increased 13.5% during the three months ended March 31, 2005, as
compared to the corresponding period in 2004. These increases in subscription
units are due in part to (i) new affiliation agreements between SEG and certain
multichannel video program distributors and (ii) participation with distributors
in national marketing campaigns and other marketing strategies. Under these new
affiliation agreements, SEG has obtained benefits such as more favorable
promotional offerings of its services and increased co-operative marketing
commitments.

While SEG's average subscription units increased 13.5% for the first quarter
of 2005, as compared to the first quarter of 2004, total period-end subscription
units increased less than 1% from December 31, 2004 to March 31, 2005. As in
past years, SEG's channels were not included in the first quarter promotional
offers of many of the multichannel distributors. This lack of promotional
offers, combined with normal churn, results in growth in SEG's subscription
units that is traditionally lower in the first quarter of the year than in the
last three quarters.

As noted above, the increase in subscription units is due primarily to
subscription units for the Thematic Multiplex service, which has a lower
subscription rate than other SEG services. In addition, SEG has entered into
fixed-rate affiliation agreements with certain of its customers. Pursuant to
these agreements, the customers pay a fixed rate regardless of the number of
subscribers. The fixed rate is increased annually or semi-annually as the case
may be, and the agreements expire in 2006 through 2008. Due to the foregoing
factors, the percentage increase in average subscriptions exceeds the percentage
increase in revenue. DirecTV, Comcast and Echostar Communications generated
25.3%, 22.6% and 11.6%, respectively, of SEG's revenue for the three months
ended March 31, 2005. SEG's affiliation agreement with Echostar Communications
expires on June 30, 2005, and SEG is currently in negotiations with Echostar
regarding a new agreement.

SEG's affiliation agreements generally do not provide for the inclusion of
its services in specific programming packages of the distributors. The
affiliation agreement with Comcast, however, does include a short-term packaging
commitment to carry the Encore and Thematic Multiplex channels (EMP) in
specified digital tiers on Comcast's cable systems. Although the affiliation
agreement expires at the end of 2010, Comcast's packaging commitment expires at
the end of 2005. SEG and Comcast are currently negotiating an extension of this
packaging commitment. At this time, SEG is unable to predict

I-28

whether it will be able to obtain an extended packaging commitment from Comcast
comparable to the current commitment on economic terms that are acceptable to
SEG. If such an extension cannot be obtained, Comcast may elect to place the EMP
services on a less favorable digital tier, which could negatively affect SEG's
ability to retain and add EMP subscribers in Comcast service areas.

SEG's period-end subscription units are presented in the table below.

At March 31, 2005, cable, DTH satellite, and other distribution media
represented 65.4%, 33.4% and 1.2%, respectively, of SEG's total subscription
units.

SEG's operating expenses increased 28.7% for the three months ended
March 31, 2005, due to increases in programming costs, which increased from
$127 million for the three months ended March 31, 2004 to $165 million in 2005.
Such increases are due primarily to (i) a higher cost per title due to new rate
cards for movie titles under certain of its license agreements that were
effective for movies made available to SEG beginning in 2004 and (ii) an
increase in the percentage of first-run movie exhibitions (which have a
relatively higher cost per title) as compared to the number of library product
exhibitions in the first quarter of 2005.

SEG expects that its full year 2005 programming costs will exceed the 2004
costs by approximately $115 million to $135 million due to the factors described
above. Assuming a similar quantity of movie titles is available to SEG in 2006
and the box office performance of such titles is consistent with the performance
of titles received in 2005, SEG expects that its 2006 programming expense will
be less than 10% higher than its 2005 programming expense. These estimates are
subject to a number of assumptions that could change depending on the number and
timing of movie titles actually becoming available to SEG and their ultimate box
office performance. Accordingly, the actual amount of cost increases experienced
by SEG may differ from the amounts noted above. SEG currently does not expect to
generate increases in revenue or reductions in other costs to fully offset the
2005 programming increases. Accordingly, the increased programming costs are
expected to result in a reduction to SEG's operating income in 2005.

SEG's SG&A expenses increased 14.8% for the three months ended March 31,
2005, as compared to the corresponding prior year period. The majority of this
increase is due to an increase in sales and marketing expenses. As noted above,
SEG has entered into new affiliation agreements with certain multichannel
television distributors, which, in some cases, has resulted in new promotional
offerings for SEG's services and increased co-operative marketing commitments.
As a result, sales and marketing expenses increased $2.4 million for the
three months ended March 31, 2005, as compared to the corresponding period in
2004.

SEG has granted phantom appreciation rights to certain of its officers and
employees. Compensation relating to the phantom appreciation rights has been
recorded based upon the estimated fair value of SEG. The amount of expense
associated with the phantom appreciation rights is generally based on the
vesting of such rights and the change in the fair value of SEG.

I-29

ASCENT MEDIA. Ascent Media provides sound, video and ancillary post
production and distribution services to the motion picture and television
industries in the United States, Europe and Asia. Accordingly, Ascent Media is
dependent on the television and movie production industries and the commercial
advertising market for a substantial portion of its revenue.

Ascent Media's revenue increased 19.2% during the three months ended
March 31, 2005, as compared to the corresponding prior year period. The three
month increase is due primarily to new business growth and acquisitions by
Ascent Media's Networks Group ($17 million and $9 million, respectively).

Ascent Media's operating expenses increased 26.1% during the three months
ended March 31, 2005, as compared to the corresponding prior year period. This
increase is due to increases in expenses such as personnel and material costs
that vary with revenue, as well as the acquisitions by Ascent Media's Networks
Group noted above. As a percent of revenue, Ascent Media's operating expenses
increased to 63.8% in 2005, as compared to 60.3% in 2004. This increase is due
primarily to the addition of more labor intensive, lower margin systems
integration projects in Ascent Media's Networks Group.

Ascent Media's SG&A expenses increased 16.7% during the three months ended
March 31, 2005, as compared to the corresponding prior year period. This
increase is due primarily to the acquisitions by Ascent Media's Networks Group
and various individually insignificant increases.

OTHER. Other consolidated subsidiary revenue and operating cash flow were
relatively comparable over the 2005 and 2004 periods. The change in operating
loss in 2005 for our other consolidated subsidiaries is due primarily to the
litigation settlement income that TruePosition recognized in 2004.

MATERIAL CHANGES IN FINANCIAL CONDITION

CORPORATE

Our sources of liquidity include our available cash balances, cash generated
by the operating activities of our privately-owned subsidiaries (to the extent
such cash exceeds the working capital needs of the subsidiaries and is not
otherwise restricted), proceeds from asset sales, monetization of our public
investment portfolio (including derivatives), debt and equity issuances, and
dividend and interest receipts.

During the three months ended March 31, 2005, our primary corporate use of
cash was the retirement of $293 million principal amount of debt for aggregate
cash payments of $295 million. We funded these retirements primarily with cash
on hand.

At March 31, 2005, we have $1,591 million in cash and marketable debt
securities, $8,315 million of non-strategic AFS securities (including related
derivatives with an estimated fair value of $996 million) and $10,543 million of
total face amount of corporate debt. In addition, we own

I-30

$8,804 million of News Corp. common stock and $3,083 million of
IAC/InterActiveCorp common stock, which we consider to be strategic assets.
Accordingly, we believe that our liquidity position at March 31, 2005 is very
strong.

Our projected uses of cash for the remainder of 2005 include $707 million of
additional parent company debt repayments, which we expect to fund with cash on
hand and cash transfers from QVC. We may also refinance additional parent
company debt with proceeds from a new QVC bank credit facility. In this regard,
subsequent to March 31, 2005, we commenced cash tender offers for up to
$1.0 billion in aggregate principal amount of our outstanding debt securities
due 2006. The tender offers consisted of two separate offers. In one offer, we
offered to purchase any and all of our 3.50% Senior Notes due 2006 (the "3.50%
Notes") at a price of $988.02, plus any accrued and unpaid interest, for each
$1,000 principal amount tendered; and in the second offer, we offered to
purchase up to a specified maximum amount of our Floating Rate Senior Notes due
2006 (the "Floating Rate Notes"), at a price of $1,012.36, plus any accrued and
unpaid interest, for each $1,000 principal amount tendered. We also offered to
pay an additional $2.50 per $1,000 Floating Rate Note tendered by April 15,
2005. The maximum principal amount of Floating Rate Notes to be purchased was
equal to the difference between the $1.0 billion cap on the aggregate principal
amount subject to the tender offers and the aggregate principal amount of 3.50%
Notes that we accepted for purchase in the offer for the 3.50% Notes.

The offer for the 3.50% Notes expired at 5:00 p.m., New York City time, on
Friday, April 15, 2005, and $200.2 million principal amount of 3.50% Notes were
validly tendered by bondholders and accepted for payment by us. The offer for
the Floating Rate Notes expired at midnight, New York City time, on Tuesday,
May 3, 2005, and $1,427.1 million of the Floating Rate Notes were validly
tendered (including $1,416.3 million that were tendered prior to April 15,
2005). Pursuant to the terms of the tender offer, we accepted $799.8 million of
such Floating Rate Notes for payment. We funded the debt repurchases under our
tender offer with cash on hand and proceeds from a short-term credit facility
collateralized by certain of our derivative instruments.

We and QVC are currently negotiating the terms of a $2.0 billion bank credit
facility for QVC which we expect to be completed by the end of May 2005. We
expect to use proceeds from this bank credit facility to repay amounts borrowed
under the aforementioned short-term credit facility. In addition to our debt
repayments, we may make additional investments in existing or new businesses.
However, we are unable to quantify such investments at this time.

Our derivatives ("AFS Derivatives") related to certain of our AFS
investments provide us with an additional source of liquidity. Based on the put
price and assuming we physically settle each of our AFS Derivatives and
excluding any provision for income taxes, we would be entitled to cash proceeds
of approximately $1,014 million in 2005, $396 million in 2006, $386 million in
2007, $101 million in 2008, $1,383 million in 2009, and $3,017 million
thereafter upon settlement of our AFS Derivatives.

Prior to the maturity of our equity collars, the terms of certain of our
equity and narrow-band collars allow us to borrow against the future put option
proceeds at LIBOR or LIBOR plus an applicable spread, as the case may be. As of
March 31, 2005, such borrowing capacity aggregated approximately
$5,900 million. Such borrowings would reduce the cash proceeds upon settlement
noted in the preceding paragraph.

Based on currently available information, we expect to receive approximately
$110 million in dividend and interest income during the year ended December 31,
2005. Based on current debt levels and current interest rates, we expect to make
interest payments of approximately $490 million during the year ended
December 31, 2005, primarily all of which relates to parent company debt.

As of December 31, 2004, each of Standard and Poor's Rating Service ("S&P"),
Moody's Investors Service ("Moody's") and Fitch Ratings ("Fitch") rated our
senior debt at the lowest level of investment

I-31

grade. At that date, S&P and Moody's both had a negative ratings outlook, while
Fitch had a stable outlook. On March 15, 2005, S&P and Fitch each lowered its
rating on our senior debt to one level below investment grade. None of our
existing indebtedness includes any covenant under which a default would occur as
a result of such downgrades. However, such downgrades could adversely affect our
access to the public debt markets and our overall cost of future corporate
borrowings. Notwithstanding the foregoing, we do not believe that the downgrade
will adversely impact the ability of our subsidiaries to arrange bank financing
or our ability to borrow against the value of our equity collars.

SUBSIDIARIES

As noted above, we expect QVC to enter into a bank credit facility in
May 2005 with total commitments of up to $2.0 billion. As currently
contemplated, the bank credit facility would be comprised of a $1.6 billion term
loan and a $400 million revolving credit facility. Borrowings would accrue
interest at LIBOR plus an applicable spread, and the final maturity would be
2010.

During the three months ended March 31, 2005, our subsidiaries funded
capital expenditures ($61 million), an increase in working capital
($17 million) and the repurchase of certain subsidiary common stock
($34 million) with cash on hand and cash generated by their operating
activities.

Our subsidiaries currently expect to spend approximately $435 million for
capital expenditures in 2005, including $275 million by QVC. These amounts are
expected to be funded by the cash flows of the respective subsidiary.

OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS

SEG has entered into agreements with a number of motion picture producers
which obligate SEG to pay fees for the rights to exhibit certain films that are
released by these producers. The unpaid balance for Programming Fees for films
that were available for exhibition by SEG at March 31, 2005 is reflected as a
liability in the accompanying condensed consolidated balance sheet. The balance
due as of March 31, 2005 is payable as follows: $159 million in 2005,
$24 million in 2006 and $12 million thereafter.

SEG has also contracted to pay Programming Fees for the rights to exhibit
films that have been released theatrically, but are not available for exhibition
by SEG until some future date. These amounts have not been accrued at March 31,
2005. SEG's estimate of amounts payable under these agreements is as follows:
$330 million in 2005; $420 million in 2006; $118 million in 2007; $106 million
in 2008; $91 million in 2009 and $133 million thereafter.

In addition, SEG is obligated to pay Programming Fees for all qualifying
films that are released theatrically in the United States by studios owned by
The Walt Disney Company through 2009, all qualifying films that are released
theatrically in the United States by studios owned by Sony Pictures
Entertainment through 2010 and all qualifying films released theatrically in the
United States by Revolution Studios through 2006. Films are generally available
to SEG for exhibition 10 - 12 months after their theatrical release. The
Programming Fees to be paid by SEG are based on the quantity and the domestic
theatrical exhibition receipts of qualifying films. As these films have not yet
been released in theatres, SEG is unable to estimate the amounts to be paid
under these output agreements. However, such amounts are expected to be
significant.

In addition to the foregoing contractual film obligations, each of Disney
and Sony has the right to extend its contract for an additional three years. If
Sony elects to extend its contract, SEG has agreed to pay Sony a total of
$190 million in four annual installments of $47.5 million beginning in 2011.
This option expires December 31, 2007. If made, SEG's payments to Sony would be
amortized ratably as programming expense over the extension period beginning in
2011. An extension of this agreement would also result in the payment by SEG of
Programming Fees for qualifying films released by Sony

I-32

during the extension period. If Disney elects to extend its contract, SEG would
not be obligated to pay any amounts in excess of its Programming Fees for
qualifying films released by Disney during the extension period.

Liberty guarantees SEG's film licensing obligations under certain of its
studio output agreements. At March 31, 2005, Liberty's guarantee for studio
output obligations for films released by such date aggregated $722 million.
While the guarantee amount for films not yet released is not determinable, such
amount is expected to be significant. As noted above, SEG has recognized the
liability for a portion of its obligations under the output agreements. As this
represents a commitment of SEG, a consolidated subsidiary of ours, we have not
recorded a separate liability for our guarantee of these obligations.

At March 31, 2005, we guaranteed Y4.6 billion ($43 million) of the bank debt
of J-COM, a former equity affiliate that provides broadband services in Japan.
Our guarantees expire as the underlying debt matures and is repaid. The debt
maturity dates range from 2005 to 2018. Our investment in J-COM was attributed
to LMI in the Spin Off. In connection with the Spin Off, LMI has indemnified us
for any amounts we are required to fund under these guarantees.

From time to time we enter into total return debt swaps in connection with
our purchase of our own or third-party public and private indebtedness. Under
these arrangements, we direct a counterparty to purchase a specified amount of
the underlying debt security for our benefit. We initially post collateral with
the counterparty equal to 10% of the value of the purchased securities. We earn
interest income based upon the face amount and stated interest rate of the
underlying debt securities, and we pay interest expense at market rates on the
amount funded by the counterparty. In the event the fair value of the underlying
debt securities declines more than 10%, we are required to post cash collateral
for the decline, and we record an unrealized loss on financial instruments. The
cash collateral is further adjusted up or down for subsequent changes in fair
value of the underlying debt security. At March 31, 2005, the aggregate purchase
price of debt securities underlying total return debt swap arrangements, all of
which related to our senior notes and debentures, was $367 million. As of such
date, we had posted cash collateral equal to $37 million. In the event the fair
value of the purchased debt securities were to fall to zero, we would be
required to post additional cash collateral of $330 million. The posting of such
collateral and the related settlement of the agreements would reduce our
outstanding debt by an equal amount.

Pursuant to a tax sharing agreement between us and AT&T when we were a
subsidiary of AT&T, we received a cash payment from AT&T in periods when we
generated taxable losses and such taxable losses were utilized by AT&T to reduce
its consolidated income tax liability. To the extent such losses were not
utilized by AT&T, such amounts were available to reduce federal taxable income
generated by us in future periods, similar to a net operating loss carryforward.
During the period from March 10, 1999 to December 31, 2002, we received cash
payments from AT&T aggregating $555 million as payment for our taxable losses
that AT&T utilized to reduce its income tax liability. In the fourth quarter of
2004, AT&T requested a refund from us of $70 million, plus accrued interest,
relating to losses it generated in 2002 and 2003 and was able to carry back to
offset taxable income previously offset by our losses. In the event AT&T
generated capital losses in 2004 and is able to carry back such losses to offset
taxable income previously offset by our losses, we may be required to refund as
much as an additional $229 million (excluding any accrued interest) to AT&T. We
are currently unable to estimate how much, if any, we will ultimately refund to
AT&T, but we believe that any such refund, if made, would not be material to our
financial position.

In connection with agreements for the sale of certain assets, we typically
retain liabilities that relate to events occurring prior to the sale, such as
tax, environmental, litigation and employment matters. We generally indemnify
the purchaser in the event that a third party asserts a claim against the
purchaser that relates to a liability retained by us. These types of
indemnification guarantees typically

I-33

extend for a number of years. We are unable to estimate the maximum potential
liability for these types of indemnification guarantees as the sale agreements
typically do not specify a maximum amount and the amounts are dependent upon the
outcome of future contingent events, the nature and likelihood of which cannot
be determined at this time. Historically, we have not made any significant
indemnification payments under such agreements and no amount has been accrued in
the accompanying consolidated financial statements with respect to these
indemnification guarantees.

We have contingent liabilities related to legal and tax proceedings and
other matters arising in the ordinary course of business. Although it is
reasonably possible we may incur losses upon conclusion of such matters, an
estimate of any loss or range of loss cannot be made. In the opinion of
management, it is expected that amounts, if any, which may be required to
satisfy such contingencies will not be material in relation to the accompanying
condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to market risk in the normal course of business due to our
ongoing investing and financial activities and our subsidiaries in different
foreign countries. Market risk refers to the risk of loss arising from adverse
changes in stock prices, interest rates and foreign currency exchange rates. The
risk of loss can be assessed from the perspective of adverse changes in fair
values, cash flows and future earnings. We have established policies, procedures
and internal processes governing our management of market risks and the use of
financial instruments to manage our exposure to such risks.

We are exposed to changes in interest rates primarily as a result of our
borrowing and investment activities, which include investments in fixed and
floating rate debt instruments and borrowings used to maintain liquidity and to
fund business operations. The nature and amount of our long-term and short-term
debt are expected to vary as a result of future requirements, market conditions
and other factors. We manage our exposure to interest rates by maintaining what
we believe is an appropriate mix of fixed and variable rate debt. We believe
this best protects us from interest rate risk. We have achieved this mix by
(i) issuing fixed rate debt that we believe has a low stated interest rate and
significant term to maturity and (ii) issuing short-term variable rate debt to
take advantage of historically low short-term interest rates. As of March 31,
2005, the face amount of our fixed rate debt (considering the effects of
interest rate swap agreements) was $6,952 million, which had a weighted average
interest rate of 4.8%. Our variable rate debt of $3,708 million had a weighted
average interest rate of 4.2% at March 31, 2005. Had market interest rates been
100 basis points higher (representing an approximate 24% increase over our
variable rate debt effective cost of borrowing) throughout the three months
ended March 31, 2005, we would have recognized approximately $9 million of
additional interest expense.

We are exposed to changes in stock prices primarily as a result of our
significant holdings in publicly traded securities. We continually monitor
changes in stock markets, in general, and changes in the stock prices of our
holdings, specifically. We believe that changes in stock prices can be expected
to vary as a result of general market conditions, technological changes,
specific industry changes and other factors. We use equity collars, put spread
collars, narrow-band collars, written put and call options and other financial
instruments to manage market risk associated with certain investment positions.
These instruments are recorded at fair value based on option pricing models.
Equity collars provide us with a put option that gives us the right to require
the counterparty to purchase a specified number of shares of the underlying
security at a specified price (the "Company Put Price") at a specified date in
the future. Equity collars also provide the counterparty with a call option that
gives the counterparty the right to purchase the same securities at a specified
price at a specified date in the future. The put option and the call option
generally have equal fair values at the time of origination resulting in no cash
receipts or payments. Narrow-band collars are equity collars in which the put
and call prices are set so that the call option has a relatively higher fair
value than the put option at the time of origination. In these cases we receive
cash equal to the difference between such fair values.

I-34

Put spread collars provide us and the counterparty with put and call options
similar to equity collars. In addition, put spread collars provide the
counterparty with a put option that gives it the right to require us to purchase
the underlying securities at a price that is lower than the Company Put Price.
The inclusion of the secondary put option allows us to secure a higher call
option price while maintaining net zero cash to enter into the collar. However,
the inclusion of the secondary put exposes us to market risk if the underlying
security trades below the put spread price and may restrict our ability to
borrow against the derivative.

Among other factors, changes in the market prices of the securities
underlying the AFS Derivatives affect the fair market value of the AFS
Derivatives. The following table illustrates the impact that changes in the
market price of the securities underlying our AFS Derivatives would have on the
fair market value of such derivatives. Such changes in fair market value would
be included in realized and unrealized gains (losses) on financial instruments
in our statement of operations.

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

(1) Includes narrow-band collars.

At March 31, 2005, the fair value of our AFS securities was
$19,450 million. Had the market price of such securities been 10% lower at
March 31, 2005, the aggregate value of such securities would have been
$1,945 million lower resulting in an increase to unrealized holding losses in
other comprehensive earnings (loss). Such decrease would be partially offset by
an increase in the value of our AFS Derivatives as noted in the table above.

In connection with certain of our AFS Derivatives, we periodically borrow
shares of the underlying securities from a counterparty and deliver these
borrowed shares in settlement of maturing derivative positions. In these
transactions, a similar number of shares that we own have been posted as
collateral with the counterparty. These share borrowing arrangements can be
terminated at any time at our option by delivering shares to the counterparty.
The counterparty can terminate these arrangements upon the occurrence of certain
events which limit the trading volume of the underlying security. The liability
under these share borrowing arrangements is marked to market each reporting
period with changes in value recorded in unrealized gains or losses in our
consolidated statement of operations. The shares posted as collateral under
these arrangements continue to be treated as AFS securities and are marked to
market each reporting period with changes in value recorded as unrealized gains
or losses in other comprehensive earnings.

We are exposed to foreign exchange rate fluctuations related primarily to
the monetary assets and liabilities and the financial results of QVC's and
Ascent Media's foreign subsidiaries. Assets and liabilities of foreign
subsidiaries for which the functional currency is the local currency are
translated into U.S. dollars at period-end exchange rates and the statements of
operations are translated at actual exchange rates when known, or at the average
exchange rate for the period. Exchange rate fluctuations on translating foreign
currency financial statements into U.S. dollars that result in unrealized gains
or losses are referred to as translation adjustments. Cumulative translation
adjustments are recorded in other comprehensive earnings (loss) as a separate
component of stockholders' equity. Transactions denominated in currencies other
than the functional currency are recorded based on exchange rates at

I-35

the time such transactions arise. Subsequent changes in exchange rates result in
transaction gains and losses, which are reflected in income as unrealized (based
on period-end translations) or realized upon settlement of the transactions.
Cash flows from our operations in foreign countries are translated at actual
exchange rates when known, or at the average rate for the period. Accordingly,
we may experience economic loss and a negative impact on earnings and equity
with respect to our holdings solely as a result of foreign currency exchange
rate fluctuations.

We periodically assess the effectiveness of our derivative financial
instruments. With regard to interest rate swaps, we monitor the fair value of
interest rate swaps as well as the effective interest rate the interest rate
swap yields, in comparison to historical interest rate trends. We believe that
any losses incurred with regard to interest rate swaps would be offset by the
effects of interest rate movements on the underlying debt facilities. With
regard to equity collars, we monitor historical market trends relative to values
currently present in the market. We believe that any unrealized losses incurred
with regard to equity collars and swaps would be offset by the effects of fair
value changes on the underlying assets. These measures allow our management to
measure the success of its use of derivative instruments and to determine when
to enter into or exit from derivative instruments.

Our derivative instruments are executed with counterparties who are well
known major financial institutions with high credit ratings. While we believe
these derivative instruments effectively manage the risks highlighted above,
they are subject to counterparty credit risk. Counterparty credit risk is the
risk that the counterparty is unable to perform under the terms of the
derivative instrument upon settlement of the derivative instrument. To protect
ourselves against credit risk associated with these counterparties we generally:

- execute our derivative instruments with several different counterparties,
and

- execute equity derivative instrument agreements which contain a provision
that requires the counterparty to post the "in the money" portion of the
derivative instrument into a cash collateral account for our benefit, if
the respective counterparty's credit rating for its senior unsecured debt
were to reach certain levels, generally a rating that is below Standard &
Poor's rating of A-and/or Moody's rating of A3.

Due to the importance of these derivative instruments to our risk management
strategy, we actively monitor the creditworthiness of each of these
counterparties. Based on our analysis, we currently consider nonperformance by
any of our counterparties to be unlikely.

ITEM 4. CONTROLS AND PROCEDURES

In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company carried
out an evaluation, under the supervision and with the participation of
management, including its chief executive officer, principal accounting officer
and principal financial officer (the "Executives"), of the effectiveness of its
disclosure controls and procedures as of the end of the period covered by this
report. Based on that evaluation, the Executives concluded that the Company's
disclosure controls and procedures were effective as of March 31, 2005 to
provide reasonable assurance that information required to be disclosed in its
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.

There has been no change in the Company's internal controls over financial
reporting that occurred during the three months ended March 31, 2005 that has
materially affected, or is reasonably likely to materially affect, its internal
controls over financial reporting.

I-36

LIBERTY MEDIA CORPORATION

PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

KLESCH & COMPANY LIMITED V. LIBERTY MEDIA CORPORATION, JOHN C. MALONE AND
ROBERT R. BENNETT. On September 4, 2001, we entered into agreements with
Deutsche Telekom AG pursuant to which we would purchase its entire interest in
six of nine regional cable television companies in Germany. In February 2002, we
failed to receive regulatory approval for our proposed acquisition. On July 27,
2001, Klesch & Company Limited initiated a lawsuit against us, our chairman,
John C. Malone, and our chief executive officer, Robert R. Bennett, in the
United States District Court for the District of Colorado alleging, among other
things, breach of fiduciary duty, fraud and breach of contract in connection
with actions alleged to have been taken by us with respect to what then was a
proposed transaction with Deutsche Telekom. Klesch sought damages in an
unspecified amount in that action, which was the subject of a jury trial that
began on August 30, 2004. On September 28, 2004, the jury returned a verdict in
our favor on all the legal claims asserted by the plaintiff. The jury also
rejected the plaintiff's claims that Messrs. Malone and Bennett had committed
fraud in their dealings with the plaintiff. On March 30, 2005, the court entered
a judgment in accordance with the jury's verdict and, in addition, entered a
judgment in our favor with respect to various equitable claims asserted by the
plaintiff. The plaintiff has appealed the judgment. We are not aware of any
basis for the reversal of the trial court's judgment, and we intend to contest
the appeal vigorously.

ITEM 6. EXHIBITS

(a) Exhibits

10.1 Time Sharing Agreement regarding personal use of the
Company's aircraft, dated as of March 29, 2005, between
Robert R. Bennett and the Company.

10.2 Letter Agreement regarding personal use of the Company's
aircraft, dated as of May 4, 2005, between Robert R. Bennett
and the Company.

31.1 Rule 13a-14(a)/15d-14(a) Certification.

31.2 Rule 13a-14(a)/15d-14(a) Certification.

31.3 Rule 13a-14(a)/15d-14(a) Certification.

32 Section 1350 Certification

II-1

SIGNATURES

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

LIBERTY MEDIA CORPORATION

Date: May 9, 2005 By: /s/ CHARLES Y. TANABE
-----------------------------------------
Charles Y. Tanabe
Senior Vice President and General Counsel

Date: May 9, 2005 By: /s/ DAVID J.A. FLOWERS
-----------------------------------------
David J.A. Flowers
Senior Vice President and Treasurer
(Principal Financial Officer)

Date: May 9, 2005 By: /s/ CHRISTOPHER W. SHEAN
-----------------------------------------
Christopher W. Shean
Senior Vice President and Controller
(Principal Accounting Officer)

II-2

EXHIBIT INDEX

Listed below are the exhibits which are filed as a part of this Report
(according to the number assigned to them in Item 601 of Regulation S-K):

10.1 Time Sharing Agreement regarding personal use of the
Company's aircraft, dated as of March 29, 2005, between
Robert R. Bennett and the Company.

10.2 Letter Agreement regarding personal use of the Company's
aircraft, dated as of May 4, 2005, between Robert R. Bennett
and the Company.

31.1 Rule 13a-14(a)/15d-14(a) Certification.

31.2 Rule 13a-14(a)/15d-14(a) Certification.

31.3 Rule 13a-14(a)/15d-14(a) Certification.

32 Section 1350 Certification