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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2003

or

Commission file number 0-24218

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

6922 Hollywood Boulevard, 12^th Floor, Los Angeles, California 90028

(Address of principal executive offices including zip code)

(323) 817-4600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.01 per share

(Title of class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

As of February 13, 2004, there were 418,373,489 shares of the registrant’s common stock outstanding. As of June 30, 2003, the aggregate market value of common stock held by non-affiliates of the registrant was approximately $1.0 billion, based on the closing sale price of $5.01 per share as reported by the Nasdaq Stock Market. Shares of common stock held by officers, directors, and 5% holders have been excluded from this calculation because such persons may be deemed to be affiliates. The determination of affiliate status is not a conclusive determination for other purposes.

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement related to the 2004 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days after December 31, 2003, are incorporated by reference into Part III of this Form 10-K.

INDEX

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PART I

ITEM 1. BUSINESS.

Overview

We are a leading media and technology company that develops, licenses, markets and distributes technologies, products and services targeted at the television guidance and home entertainment needs of consumers worldwide. Effective January 1, 2003, we restructured our businesses into four groups that also represent our reportable business segments. Segments are now organized along three industry lines in addition to a segment comprising certain corporate functions and related expenses.

Our principal business strategy is to develop technologies, products and services that provide a comprehensive solution to the television guidance needs of consumers worldwide. We believe that viewers today are overwhelmed by the increasing number of programming and channel choices, as well as the new products and services supported by digital technology, such as video-on-demand (“VOD”) and DVRs. We believe our technologies, interactive services, content and publications together are well positioned to simplify and enhance consumers’ television viewing experience. We believe that the relevance of our television guidance products will increase as more and more consumers gain access to the several hundred channel universe of digital television.

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Our interactive program guidance technologies are incorporated into television sets, VCRs, DVD recorders, DVRs, personal computers (“PCs”), and cable and satellite television set-top boxes. In addition to our interactive program guidance technologies, we own and publish TV Guide magazine and operate the website www.tvguide.com. We also own and produce original programming in the form of the TV Guide Channel, which offers editorial content and television listings directly on consumers’ television screens, and TVG, which provides horseracing programming and interactive wagering services. We sell or provide this programming to owners and operators of cable and satellite television systems, including some of the largest cable multiple system operators (“MSOs”), and other programming distributors.

Recent Developments

We have recently entered into new agreements with four of the leading cable operators and DSS providers in the United States. These transactions include licenses to our patented technology and enable the licensees to deploy our IPG, their own IPGs or IPGs developed by third parties.

Time Warner Cable. In October 2003, we signed a long-term licensing and distribution agreement with Time Warner Cable to incorporate our intellectual property and technology, as well as our TV Guide brand and content, on interactive program guides throughout Time Warner’s digital subscriber base. As part of the agreement, Time Warner has the option of providing its systems with a customized version of our interactive program guide, TV Guide Interactive. We also granted a patent license that will allow Time Warner to incorporate TV Guide branded elements and content into its own proprietary guide or into guides provided to it by third party vendors.

DirecTV. In December 2003, we signed a long-term licensing and distribution agreement with DirecTV, Inc. to use our intellectual property and technology, as well as our TV Guide brand, in interactive program guides across its subscriber base. Under this agreement, which began in January 2004, we will receive fees from DirecTV for a non-exclusive patent license that allows DirecTV to use our intellectual property and technology in its own IPGs or, alternatively, in IPGs supplied to DirecTV by its vendors. In addition, our agreement with DirecTV increased our distribution of our TV Guide Channel by over 10 million households.

Comcast. In February 2004, we signed an agreement with Comcast Corporation to form a joint IPG development group using our existing TV Guide Interactive IPG as a foundation to create an industry-leading guide for Comcast and the cable industry. We also agreed to enter into a long-term non-exclusive patent license and distribution agreement, which provides Comcast with the right to use our intellectual property and technology as well as our TV Guide brand and content on its IPGs in exchange for a one-time payment to us of $250 million in cash, payable at closing. Additionally, pursuant to the agreement, we will enter into a new distribution arrangement with Comcast that will provide for carriage of our TV Guide Channel, TV Guide On Demand and our TVG throughout various Comcast systems.

EchoStar Communications. In March 2004, we entered into a long-term non-exclusive patent license and distribution agreement with EchoStar Communications Corporation, which does business as DISH Network. The agreement includes a one-time payment by EchoStar of $190 million in cash and entitles EchoStar to utilize our intellectual property and technology as well as the TV Guide brand and content on its interactive program guides. Additionally, we entered into distribution arrangements with EchoStar providing for the launch and carriage of the TV Guide Channel as well as the extension of their existing distribution agreement for carriage of TVG. We also signed an agreement with EchoStar that resolves all outstanding litigation between us. Separately, EchoStar will acquire the assets of SNG, UVTV and SpaceCom for approximately $48 million in cash. Our sale of these assets to EchoStar is subject to certain regulatory approvals. We also agreed to purchase from Wisdom Media Group the minority interest in SNG that we do not already own for $15 million in cash. The licenses and settlement agreement will become effective upon the closing of the asset sale transaction.

In February 2004, we agreed to settle our pending legal disputes with Pioneer Corporation and its affiliates and enter into a licensing arrangement going forward. This arrangement includes a one-time payment of $14 million by Pioneer to us along with multi-year licensing agreements under which Pioneer will pay us a per-unit license fee for cable set-top boxes incorporating Pioneer IPGs and for the incorporation of our technology into various Pioneer consumer electronics products.

In February 2004, we reached an agreement to settle the consolidated shareholder class action lawsuits pending in the U.S. District Court for the Central District of California. Charges in the suits relate to certain accounting practices and financial reporting under former management. Under the proposed agreement, we will pay a total settlement amount of $67.5 million in cash and stock. We will pay an aggregate of $42.5 million in cash to the class in a combination of direct payments and payments which may be made through the SEC. In addition, we agreed to issue 4,105,090 shares of our common stock which was valued at

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$6.09 per share on the date the agreement was reached, or $25 million in the aggregate. The number of shares will increase if the price per share at the time of distribution to the class is less than $6.09 per share. The agreement also provides us with the option to substitute cash for up to 2,052,545 of the shares at $6.09 per share prior to the final settlement being approved. We will assign to the class certain of our claims against our former auditors, KPMG LLP. The class will retain all of its securities fraud claims against our former chief executive officer, former chief financial officer and KPMG LLP, and we will retain all of our claims against former management and our insurance carriers related to the defense and settlement of these actions and related matters. Pursuant to the proposed settlement, we recorded a pre-tax charge of $67.5 million in the fourth quarter of 2003. This settlement is subject to approval by the Court and notice to the class. The settlement does not resolve the related shareholder derivative suits or the non-consolidated securities fraud cases still pending against us.

Technologies, Products and Services

Interactive Program Guides

IPGs allow television viewers to retrieve program listings and content information on demand and to perform various interactive functions designed to enhance the television viewing experience. We believe that interactive television guidance technology is quickly becoming a must-have tool for television viewers bombarded with an increasing number of programming choices, an increasing number of digital cable and satellite television channels, and VOD services. We also believe that IPGs will become an entry point for consumers to avail themselves of a range of new services and content that will be available on television screens.

Program listings and detailed program descriptions can be viewed on our IPGs by time, channel or category, or the listings can be scanned alphabetically. Other functions offered by our IPGs include parental control features, reminder notices to viewers, programming features (for recording) and pay-per-view and VOD integration. In addition, some of our IPGs allow viewers to set a recording device to record television programming for later viewing.

We currently market and license our IPG technologies, products and services to consumer electronics manufacturers and to service providers and manufacturers that supply service providers with cable and satellite set-top boxes. In the consumer electronics business, our IPG technology enables licensed manufacturers to enhance the functionality and appeal of their products. Our IPG products and services enable service providers to deliver advertising and market additional services and content to subscribers. Our IPG technology allows service providers to customize certain elements of our IPGs for their subscribers and also allows them to upgrade over time the features and services they can offer to their subscribers. Our IPGs are compatible with service providers’ subscription management, pay-per-view and VOD operations. IPGs also allow programmers and programming distributors to continuously disseminate updated program information.

As of December 2003, we had deployed over 11 million CE IPGs, which are incorporated into consumer electronics devices, and over 11 million TV Guide Interactive IPGs, which are incorporated into digital cable set-top boxes. Since the beginning of 2003, we have entered into multi-year licensing agreements with several leading consumer electronics manufacturers, including LG/Zenith, Matsushita (Panasonic), Mitsubishi, Philips, Pioneer, Sony, Samsung, Sharp, Thomson and Toshiba, to incorporate our CE IPGs into various digital television or recording products. Generally, our agreements with consumer electronics manufacturers enable such manufacturers to incorporate our IPG technology into specified products in certain territories, provide that we receive royalties based on the number of units produced and shipped that incorporate our IPG products, and generally do not include minimum aggregate licensing fees or volume commitments. We currently have contracts with more than 200 cable system operators and telephone companies in the United States that license our IPG products and services for distribution to their subscribers in television sets and set-top boxes. We recently entered into licensing and distribution agreements with Time Warner Cable, DirecTV, Comcast and EchoStar pursuant to which such service providers may elect to deploy a TV Guide Interactive IPG, their own IPG or a third party IPG.

In the computer and Internet business, we have licensed our IPG technology to a leading software company, which has adopted our IPG technology in a number of its product offerings. Our IPG technology, products and services have also been licensed by two of the largest tuner card manufacturers in the United States and incorporated into tuner cards for use in PCs.

Interactive Platform Services

Our data service used in conjunction with our IPG products routinely updates the data that appears on these products. That data includes the most currently available program listings and advertising data, which we regularly accumulate from our shared listings databases, and specialized advertising systems for distribution to our IPG products and licensees. We also provide access to our program listings data pursuant to certain of our licensing arrangements with cable and satellite service providers. Advertising data is accumulated, as specified by our advertising customers, and entered into specialized advertising systems.

We process and format the program listings and advertising data into proprietary data formats and deliver it via a variety of transmission means, including land-line telephone links, broadcast signals and satellite feeds to our IPGs. Generally, to populate

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the IPGs incorporated into consumer electronics products, the data is fed to our insertion equipment located in network head-ends, cable head-ends and broadcast stations for inclusion in the vertical blanking interval (“VBI”) of television signals. Norpak Corporation, a majority-owned Canadian subsidiary of the Company, manufactures and supplies us with the VBI insertion equipment. We have arrangements for carriage of our data in the VBI of television stations included in independently owned stations and stations owned and operated by various station group owners. In exchange for the right to transmit our data in a station’s VBI, we generally provide the station with a preferred position on the IPG in its designated market area. In addition, we have an agreement under which we pay for the right to transmit our data in the VBI of Public Broadcasting System member stations throughout the United States. To populate cable set-top boxes, the data is continuously delivered to local affiliate cable systems for delivery to set-top boxes in subscribers’ homes via out-of-band data frequencies.

We began efforts to sell advertising on our IPG platforms in 1999. Our IPG advertisers today include some of the most recognized names in American product and service marketing and some significant programmers and entertainment distributors. Since the IPG is a relatively new and unique advertising medium, advertising sales volume is still relatively small. A portion of the advertising on our IPGs is advertising from third parties with which we have other business relationships. In many cases, these relationships require us to make payments to the advertiser in the form of market development or similar funds related to our IPGs, or to provide economic incentives to such advertisers through the use of advertising inventory on other Company advertising platforms. We account for such transactions as multiple-element arrangements (see Note 1, “Description of Business and Summary of Significant Accounting Policies,” to Consolidated Financial Statements). We are currently re-evaluating our IPG advertising strategy with the goal of maximizing what we believe could be a long-term revenue opportunity presented by this advertising medium.

The Company also conducts electronic commerce on certain websites, including www.skymall.com and www.tvguide.com.

VCR Plus+

Our first proprietary product, the VCR Plus+ system for selecting television programming for recording, was introduced in 1990. Since then, our VCR Plus+ technology has been adopted as the industry standard for VCR recording of television programming by virtually every major consumer electronics manufacturer worldwide. We have developed and introduced additional features to enhance the functionality of the VCR Plus+ setup procedures, including controlling set-top boxes and updating the clock and cable channel lineup information. VCR Plus+ is offered internationally in more than 35 countries. It is incorporated into VCRs, television sets and digital devices such as DVD recorders and DVRs by licensed consumer electronics manufacturers and enables consumers to record a television program by simply entering a proprietary one- to eight-digit PlusCode number into the device via a remote control unit. PlusCode numbers are printed next to television listings in participating newspapers and television program guides.

PlusCode numbers are generated through a patented process developed by us and are now carried by over 1,700 publications worldwide, with a combined circulation of over 300 million, including the New York Times, the Los Angeles Times, TV Guide, the Asahi Shimbun (Japan), the Sun (U.K.), the Daily Mirror (U.K.) and the Oriental Daily News (Hong Kong). In North America, we pay an agency to manage, collect and remit payments from owners of newspapers and magazines that publish our PlusCode numbers. We also license our PlusCode numbers to a data company that bundles the codes with other data sold to owners of newspapers and magazines. In Europe, Australia, New Zealand and Asia (other than Japan and South Korea), our subsidiaries directly handle our PlusCode publication contracts and manage and collect the fees under those contracts. One of our subsidiaries also collects, processes and distributes television listings data for more than 20 countries in Europe. In Japan and South Korea, the sale of PlusCode numbers is handled by a third party company called Gemstar Japan. Prior to our initial public offering in 1995, Gemstar Japan was a wholly owned subsidiary of our predecessor company. Upon the closing of our initial public offering, the stock was “spun-off” to entities that were controlled by former stockholders and executives of our predecessor company. Also upon the closing of our initial public offering, Gemstar Japan entered into service contracts with us for PlusCode publication in Japan and South Korea that have since expired. In June 2002, Gemstar Japan transferred certain trademark registrations back to us. We are currently in the process of negotiating a new arrangement with Gemstar Japan with respect to the distribution of our PlusCodes in Japan and South Korea in the future.

TV Guide Magazine

TV Guide magazine has been published continuously since 1953 and is the most widely circulated paid weekly magazine in the United States. TV Guide magazine offers television viewers television program guidance, listings and descriptions. The magazine also provides feature entertainment information about shows, stars, technology and developments in the world of on- screen entertainment. We anticipate that TV Guide magazine will continue to be a valuable and viable product in print form even with the emergence of electronic listings data because of its convenience, simplicity and integration of editorial expertise and commentary with listings. As channel choices and time shifting proliferate, we believe TV Guide magazine will become more valuable as a planning and decision tool for readers/viewers. We plan to continue to evolve TV Guide magazine as a planning tool and entertainment source to guide program choices and complement the other guidance tools that we deploy, all under one trusted brand — TV Guide.

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As of December 31, 2003, TV Guide magazine had a circulation of approximately 9 million copies that reached approximately 27 million readers each week, according to MediaMark Research, Inc. We publish over 175 separate digest and ultimate size editions of this magazine weekly, including geographic and cable specific editions. On a monthly basis, we also published The Cable Guide, which had approximately 575,000 subscribers. The magazine discontinued publishing the Cable Guide in December 2003. In addition, we produce a monthly pay-per-view guide for more than 30 cable systems in the United States. TV Guide magazine attracts new subscribers to its cable-specific editions through the continued customization of the magazine for regional cable systems and through customer marketing programs in conjunction with some of the country’s largest MSOs.

TV Guide magazine’s rate base, the volume of circulation guaranteed to advertisers, was 9 million as of December 31, 2003, which was unchanged from December 31, 2002. The magazine’s rate base was last adjusted from 9.9 million in June 2001 to the current 9 million. TV Guide magazine fully complies with the Audit Bureau of Circulations’ audit requirements. TV Guide magazine’s circulation comprises a number of sources, including newsstand sales, individually paid subscriptions and sponsored sales sold in bulk. Sponsored sales increased from a monthly average of 2.2 million copies in December 2002 to 2.7 million copies in December 2003. Sponsored sales, which support advertising revenues, produce little or no circulation contribution and are of substantially lesser economic value than other sources of circulation.

TV Guide magazine revenues have accounted for 42%, 42% and 43% of our consolidated revenues in the years ended December 31, 2003, 2002 and 2001, respectively. TV Guide magazine’s circulation revenues are derived from four primary sources: new subscriptions (sold through insert cards in TV Guide magazine, our website tvguide.com, direct mail and direct mail agents), subscription renewals, single-copy newsstand sales, and subscriptions for cable and satellite-specific editions sold through MSOs and satellite TV companies. TV Guide magazine circulation revenues have been decreasing due to declines in the number of subscribers available for renewal promotion, lower renewal prices and reduced newsstand sales. The overall decrease in circulation revenues of TV Guide magazine may continue and could be significant.

In 2003, TV Guide magazine carried more than 2,400 total advertising pages. The national feature section, which has traditionally attracted general-appeal category advertisers such as food, drug, automobile, entertainment and packaged goods companies, comprised approximately 50% of these pages. The listings section, which typically includes network and cable tune-in advertising, comprised 34% of total advertising pages; and insert advertising represented approximately 16% of these pages. TV Guide magazine sells advertising principally through an internal advertising sales force, TV Guide Media Sales. Advertisers may purchase pages on either a national or regional basis in TV Guide according to their needs.

The printing of TV Guide magazine and the other publications published by the TV Guide magazine group is outsourced to seven independent commercial printers located throughout the United States. We believe there is an adequate supply of alternative printing services available to publish TV Guide magazine at competitive prices should the need arise. The principal raw materials used in the publication of TV Guide magazine are coated and uncoated paper. Paper prices are affected by a variety of factors, including demand, capacity, pulp supply and general economic conditions. Increases in the price of coated and uncoated paper could have a material adverse effect on TV Guide magazine’s operating performance. We do not hedge against increases in paper costs. Postage for product distribution and direct mail solicitations is also a significant expense to TV Guide magazine and a material increase in postage prices would adversely affect the magazine’s operating performance.

Prior to 2002, a wholly owned subsidiary of the Company provided newsstand distribution for TV Guide magazine and magazines published by unaffiliated parties. In 2002, we shut down this distribution company and effectively exited the distribution business. The decision to exit the business was driven by the general level of consolidation in the magazine distribution industry, which made it economically impractical for TV Guide magazine to maintain its own distribution operation. Our former distribution business was responsible for billing and collections for all non-affiliated publishers, a practice that increased our accounts receivable collection risk. The shutdown was achieved by contracting with an outside company for distribution of TV Guide magazine and assigning existing contracts with unaffiliated publishers to that company.

SkyMall

Acquired in July 2001, SkyMall is a specialty retailer that offers airline passengers a large selection of premium-quality products and services from a wide variety of merchants and partners through the SkyMall in-flight catalog and www.skymall.com. SkyMall has a sophisticated vendor relationship management system, which can be customized to interface with a merchant’s sales and distribution system in a turn-key manner. With this business model, SkyMall holds minimal product inventory, providing maximum flexibility for the type of products that may be made available to consumers from time to time. The SkyMall in-flight catalogs currently reach airline passengers making approximately 600 million paid trips annually. SkyMall has agreements with all of the major domestic airlines, representing 93% of the total passengers boarded in the United States each year, granting it access to a captive audience with upscale demographics for its quarterly catalogs.

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TV Guide Channel

TV Guide Channel is an entertainment network that offers television viewers information on programs, celebrities and trends in television, as well as program listings and descriptions. We offer multichannel video providers a fully customized and localized television network, continuously delivering updated entertainment information that promotes the provider’s networks and programs. TV Guide Channel’s hosted format is designed to appeal to cable operators, DSS service providers, advertisers and consumers.

TV Guide Channel is typically included in a basic or expanded basic viewing package offered by programming distributors to their subscribers, and is generally available in both analog and digital channel lineups. Subscribers do not need additional equipment to receive the channel. The screen for TV Guide Channel is divided into two components, with the upper half devoted to programming that drives the cable operator’s primary revenue generators, such as pay-per-view or VOD, creates an entertainment environment in which media buyers want to place their clients’ advertising and gives consumers customized entertainment information on upcoming programs. This portion of the screen combines behind-the-scenes footage, in-depth interviews and localized information with reviews, recommendations and previews related to upcoming programming options. The lower half of the screen displays listings that contain viewing times, channel numbers, network identification, program titles, weather, movie descriptions, program ratings and ordering instructions for pay-per-view services, updated in 2,300 cable TV distribution systems around the country on a daily basis. As of December 31, 2003, TV Guide Channel was distributed to 57.1 million households as measured by Nielsen and now reaches nearly 70 million households as a result of its January 2004 launch on DirecTV. In January 2004, we launched a revamped TV Guide Channel that features a new programming line-up, on-air branding and a new studio.

TVG

We own 93% of TVG. We produce, market and distribute TVG, a cable and satellite sports entertainment television network that combines live horseracing from many of the premier horse racetracks in the United States with the convenience of interactive wagering from home. In 2003, TVG delivered racing content and accepted wagers on races from 62 horse racetracks in return for a fee based on a percentage of gross wagering handled by TVG.

As of December 31, 2003, TVG’s television network was available in more than 12.3 million U.S. households on DISH Network satellite service (basic tier), DirecTV satellite service, which carries TVG in its SPORTS Pack premium package, C-band satellite systems and on cable systems in regional areas. In certain states, TVG customers may establish wagering accounts to wager on the horse races through patented, proprietary interactive applications utilizing automated telephone, online closed loop subscriber-based systems and digital set-top box remote control software developed or in development by us.

In early 2002, TVG began to offer wagering services to residents of California, the most substantial revenue producing opportunity for the business to date. With the development of television distribution in California and other major racing markets and the expansion of markets from which accounts are accepted, we believe that increased fee revenue, network advertising, merchandising and data delivery, home shopping, e-commerce and interactive advertising opportunities may become available.

TVG is also party to license and content agreements with Youbet.com, Inc. and America TAB, Ltd. Pursuant to these agreements, TVG receives royalties in exchange for licenses to certain of its intellectual property and sublicenses to certain of its audiovisual and pari-mutuel account wagering rights for content from various horse racetracks.

TVG is a growing business in which we have made substantial investment. Future growth in the business will depend on the legislative and regulatory environment on both Federal and state levels, the continued expansion of cable and satellite television distribution and the integration of interactive wagering technologies for online and interactive television applications.

SNG Direct-to-Home Satellite Programming Services

We own approximately 80% of SNG. SNG markets and distributes entertainment programming to C-band home satellite dish owners in the United States in subscription periods of one, three, six and twelve months. The C-band business is declining primarily as a result of competition from DSS and cable television systems. DSS providers such as DISH Network and DirecTV transmit on the Ku band, which uses a higher power signal than C-band satellites, enabling DSS customers to use smaller, less obtrusive satellite dishes. In addition, DSS and digital cable operators transmit digital signals that allow for a larger number of channels, including local network stations.

To further its strategy of reducing operational involvement in this business while maximizing profitability, in 1999, SNG entered into a marketing alliance agreement to promote and solicit orders for DISH Network. In exchange, SNG receives an initial commission for each SNG subscriber who subscribes to DISH Network and a monthly residual commission over the life of the

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agreement, which expires at the end of 2005. In 2003, the total number of C-band subscribers in the industry decreased by 27% to approximately 428,000 subscribers. At December 31, 2003, SNG provided service to 236,000 of these subscribers, a decrease of 35% from the subscribers served by SNG at December 31, 2002. We expect the decline in our C-band business to continue and this decline may be accelerated by our agreement with EchoStar. In March 2004, we entered into an agreement with EchoStar that, among other things, includes the sale of substantially all of the assets of SNG. In February 2004, we also agreed to purchase from Wisdom Media Group the minority interest in SNG that we do not already own.

UVTV Satellite Distribution of Video Entertainment Services

Through our UVTV subsidiary, we market and distribute television superstations WPIX (New York) and KTLA (Los Angeles) to cable systems and direct-to-home subscribers, including C-band and DSS, and the Denver 5 networks to C-band subscribers. During 2002, we ceased to operate a separate business that sold programming packages to satellite master antenna television systems serving hotels and multi-unit dwellings. In March 2004, we entered into an agreement with EchoStar that, among other things, includes the sale of substantially all of the assets of UVTV.

SpaceCom Satellite Transmission Services for Private Networks

Our SpaceCom subsidiary provides point-to-multipoint and commercial point-to-point two-way broadband satellite communications for various industries throughout North and South America, including radio programmers, paging network operators, financial information providers, news services, Internet service providers and other private business networks. SpaceCom leases two Ku-band satellite transponders and several portions of other Ku and C-band transponders, communications on which originate from its teleport facility. In March 2004, we entered into an agreement with EchoStar that, among other things, includes the sale of substantially all of the assets of SpaceCom.

Electronic Book Publishing

In early 2000, we entered the eBook business with the acquisition of SoftBook Press, Inc. (“SoftBook”) and NuvoMedia, Inc. (“NuvoMedia”), two pioneering companies in the eBook business, and later, Les Editions 00h00, an electronic publisher in Europe. We earned revenues in our eBook business through licensing technology and selling e-book devices and content. During 2003, we significantly scaled back the operations of our eBook subsidiaries. Sales of eBook reading devices and content were discontinued in June and July 2003, respectively. Although consumers can no longer purchase new devices or content, current device owners are able to access previously purchased content and add unencrypted content to their content libraries.

Intellectual Property Rights and Proprietary Information

We operate in an industry in which innovation, investment in new ideas and protection of our intellectual property rights are important for success. We protect our innovations and inventions via a variety of means, including but not limited to applying for patent protection internationally and domestically. We believe we have one of the world’s most extensive portfolios of intellectual property in the area of interactive program guides, which broadly covers fundamental advances related to interactive program guide information delivery, storage, retrieval, advertising, two-way interaction, electronic commerce, and related user interfaces, including those relevant to online and interactive television services. We are engaged in significant litigation regarding our intellectual property. See “Legal Proceedings.”

Our technology and intellectual properties have been licensed to significant consumer electronics manufacturers and MSOs. We currently market IPGs under brands that include TV Guide On Screen, GUIDE Plus+, G-GUIDE and TV Guide Interactive. We currently have over 260 issued U.S. patents in the general area of audio-visual technologies with more than 6,500 claims, and over 600 issued foreign patents. Each of our issued patents will expire at a different time based on the particular filing date or issue date of that respective patent, with expiration dates as late as 2020. We continue to actively pursue a worldwide intellectual property program and currently have approximately 360 United States and 1,000 foreign patent applications pending.

We hold extensive trademark and service mark registrations throughout the world and have multiple trademark and service mark applications pending for a variety of marks. Marks for which we have registrations or applications to register in the United States or foreign countries include TV Guide, TV Guide Interactive, TV Guide On Screen, GUIDE Plus+ (G-GUIDE in Asia), VCR Plus+ (VIDEO Plus+, ShowView and G-CODE in Europe and Asia), PlusCode, Gemstar, TVGuide.com, TVG and SkyMall.

We hold various domain names relating to our trademarks and service marks including gemstar.com, tvguide.com, gemstartvguide.com, tvgnetwork.com and skymall.com.

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Competition

Our technologies, products and services compete with those of other companies. Many of our present and potential future competitors have, or may have, substantially greater resources than ours to devote to further technological and new product developments. We believe that we will compete effectively based primarily on the originality of our concepts, the speed with which we can introduce such concepts to the market, the uniqueness of our designs, the focus of our business approach, the strength of our intellectual property portfolio, the extensiveness of our business relationships, the quality and innovation of our technologies and our ability to identify and meet consumer needs.

Interactive Program Guides

Competition in the market for the delivery of television program schedule information is intense. There are a number of companies that produce and market television schedule information in various formats and that compete or will compete with our IPG products and services. These alternative formats currently include traditional printed television guides (including our own TV Guide magazine and other printed cable guides), as well as passive and interactive on-screen electronic guide services, printed television guides in newspapers and weekly publications, and local cable television guides, many of which are similar to other products of the Company.

Improvements in software porting and in software substitutability, together with government mandated introduction of so-called Open Cable platforms, will increasingly permit the creation of new guides and their quick placement in set-top boxes—both those purchased from service providers and those purchased at retail. We intend to modify and improve our technology to be competitive on these new platforms.

Many of our competitors and other companies and individuals have obtained, and may be expected to obtain in the future, patents that may directly or indirectly affect the products or services offered or under development by us. We are currently developing a variety of enhancements to our IPGs. We cannot assure you that any enhancements developed by us would not be found to infringe patents that are currently held or may be issued to others. Patents of third parties may have an important bearing on our ability to offer certain products and services. There can be no assurance that we are or will be aware of all patents containing claims that may pose a risk of infringement by our products and services. In addition, patent applications are generally confidential for a period of 18 months from the filing date, or until a patent is issued in some cases, so we cannot evaluate the extent to which certain products and services may be covered or asserted to be covered by claims contained in pending patent applications prior to their publication. In general, if one or more of our products or services were to infringe patents held by others, we may be required to stop developing or marketing the products or services, to obtain licenses to develop and market the services from the holders of the patents or to redesign the products or services in such a way as to avoid infringing the patent claims. In addition, we may be required to defend ourselves or certain of our licensees against claims of infringement by third parties. We cannot assess the extent to which we may be required in the future to defend our products or those of our licensees or to obtain licenses with respect to patents held by others, whether such licenses would be available or, if available, whether we would be able to obtain such licenses on commercially reasonable terms. If we were unable to obtain such licenses, we may not be able to redesign our products or services to avoid infringement.

Although we believe that our IPGs are in a strong competitive position with respect to our known competitors, there may be competitors with additional strengths that are unknown to us. Such potential competitors, which may include hardware manufacturers, software developers, broadcasters or service providers, could be larger, more established companies with greater resources in the program information delivery market.

VCR Plus+ System

We are not aware of any product other than the VCR Plus+ system that allows the user to program a VCR by entering a numerical code. However, several products on the market offer other simplified VCR programming functions and thus compete with the VCR Plus+ system. Such products include on-screen program guides incorporating point-and-click recording capability. In addition, some products, such as DVRs, permit consumers to record programs directly from air, cable or satellite for later viewing through the use of memory chips and hard disk drives contained in the devices. Worldwide shipments of VCRs decreased in 2003 and are expected to continue to decrease in future years due to the introduction of these digital recording devices. The VCR Plus+ system is beginning to be incorporated into some of these digital recording devices, notably DVD recorders and DVRs. However, to the extent that IPGs with recording capability are widely adopted, such guides may reduce the need for VCR Plus+. All IPGs, including those that do not have a point-and-click recording feature, may compete with the printed television guides, and may adversely affect our PlusCode number coverage and publication license income.

TV Guide Magazine and TV Guide Channel

TV Guide magazine and TV Guide Channel have the following primary sources of competition: television listings included in local and national newspapers, as well as free supplements in Sunday newspapers; niche cable-guide publications; general entertainment and other magazines and television programming focused on television stars and programs; other electronic,

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interactive and online programming guides; and our own interactive and Internet program listings guide services. In addition, TV Guide Channel competes with other programming for limited analog cable television system channel slots. This competition has increased, and we believe competition will continue to increase, as programming distributors recapture analog channels to launch digital services. To date, the impact of channel recapture has not been significant to TV Guide Channel. In addition, the TV Guide Channel also faces competition from cable television operators such as Cablevision, which may wish to launch their own programming guide channels, and from Zap2it, a unit of Tribune Media.

SNG

The C-band direct-to-home satellite industry is declining primarily as a result of competition from DSS and cable television systems. DSS providers such as DISH Network and DirecTV transmit on the Ku band, which uses a higher power signal than C-band satellites, enabling DSS customers to use smaller, less obtrusive satellite dishes. In addition, DSS and digital cable operators transmit digital signals that allow for a larger number of channels, including local network stations, and subscribers of C-band programming are encountering reduced availability of programming as the number of channels transmitted as analog signals capable of being received and descrambled by C-band satellite equipment decreases.

In March 2004, we entered into an agreement with EchoStar that, among other things, includes the sale of substantially all of the assets of our C-band direct-to-home business. In February 2004, we also agreed to purchase from Wisdom Media Group the minority interest in SNG that we do not already own.

TVG

TVG has competitors in television and pari-mutuel account wagering. In the television area, the only known competitor to TVG on a national basis is HRTV, a subsidiary of Magna Entertainment Corporation (“MEC”). In the area of pari-mutuel account wagering, TVG Network’s primary competitors are Xpressbet, also a subsidiary of MEC, Youbet.com, Inc., America TAB, Ltd., Greenwood Racing, Inc. (also known as OneClickBetting) and various offshore entities. TVG is party to agreements with Youbet.com, Inc. and America TAB, Ltd. pursuant to which it receives royalties in exchange for licenses to certain of its intellectual property and sublicenses to certain of its audiovisual and pari-mutuel account wagering rights for content from various horse racetracks. While we believe that TVG is in a strong competitive position with its television distribution agreements, intellectual property portfolio and racetrack content agreements, there may be competitors with additional strengths that are unknown to us.

SkyMall

Our SkyMall subsidiary faces competition from a variety of sources. In our airline catalog business, competitors, typically other catalog retailers, have attempted to secure contracts with various airlines to offer merchandise to their customers. SkyMall also faces competition for customers from airport-based retailers, duty-free retailers, specialty stores, department stores and specialty and general merchandise catalogs, many of which have greater financial and marketing resources. In addition, SkyMall competes for customers with other in-flight marketing media, such as airline-sponsored in-flight magazines and airline video programming.

Research and Development

The market for our products and services is subject to rapid and significant changes in technology and frequent new service and product introductions. We believe that one of the keys to our future success will be our ability to enhance our existing technologies and to introduce products and services using such new technologies on a competitive basis. Accordingly, we will continue to engage in significant research and development activities. Our expenses for research and development in 2003, 2002 and 2001 were $27.0 million, $27.4 million and $31.1 million, respectively. We cannot assure, however, that we will successfully complete the development of any future technology. There is also no assurance that this technology, even if fully developed, could be incorporated in our products and services or in products of third parties. Any significant delay or failure to develop new or enhanced technology could have a material adverse effect on us.

Regulation

The satellite transmission, cable and telecommunications industries are subject to pervasive federal regulation, including Federal Communications Commission (“FCC”) licensing and other requirements. The industries are also often subject to extensive regulation by local and state authorities. Although most cable and telecommunication industry regulations do not apply directly to us, they affect programming distributors, a primary customer for our products and services. We monitor pending legislation and administrative proceedings to ascertain relevance, analyze impact and develop strategic direction surrounding regulatory trends and developments within the industry.

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Satellite Home Viewer Improvement Act of 1999

The Satellite Home Viewer Improvement Act of 1999 (“SHVIA”) restricts the distribution of distant network stations and superstations to dish owners by UVTV and these restrictions may increase the cost of uplinking distant network stations and superstations. In addition, although SNG is not a satellite carrier, certain programming sold by SNG is subject to these rules. Congress is currently considering legislation to reauthorize the distant station provisions of SHVIA, which expires on December 31, 2004. Although we believe Congress is likely to approve this legislation, it is too early to determine whether such legislation will include any changes in the law that could impact UVTV or SNG.

“Local-Into-Local”

SHVIA provides satellite carriers with a compulsory copyright license, which is permanent and royalty-free, for the delivery of local network stations into local markets (defined as the station’s designated market area, or DMA, and county of license). We have no plans to distribute local signals in the C-band markets. DSS carriers now provide local-into-local service in many of the top 100 television markets and have announced plans to serve all 210 television markets with local stations. The distribution of local signals enhances the ability of DSS carriers to compete with cable. SHVIA also permits the distribution of superstations and distant network stations to DSS subscribers in certain circumstances. The availability of local signals to DSS, without corresponding local signals for C-band, may contribute to the ongoing decline of C-band subscribers.

VBI and Digital Data Carriage Matters

We use the VBI, or vertical blanking interval, in the analog television signals of the local affiliates of major broadcast networks such as PBS (through National Datacast), ABC, CBS, NBC, Fox and national cable networks to supply updates throughout the day of program listing information to our TV Guide On Screen and GUIDE Plus+ branded consumer electronics devices in the United States. On December 6, 2001, Time Warner Cable, a division of AOL/Time Warner, obtained a ruling from the FCC that it is within the discretion of a cable MSO to retransmit or strip out data transmitted in the VBI lines of broadcast stations carried on that MSO’s system. On January 7, 2002, we filed a Petition for Reconsideration of this ruling. Subsequent negotiations between us and Time Warner Cable led to an agreement which provided for carriage by Time Warner of our program listing information in either the VBI or within the digital signal of broadcast television stations. As a result of the agreement with Time Warner Cable, on December 5, 2003, we filed a Petition to Dismiss the Petition for Reconsideration, which was granted on January 15, 2004.

In the digital television context, the local affiliates of major broadcast networks and national cable networks plan to carry our CE IPG updating information in their digital broadcast signals. In January 2001, the FCC suggested that electronic program guide enabling data in the digital context would not be considered “program-related” and therefore cable systems would not be required to pass through to subscribers such data when transmitted as part of the digital signals of broadcast stations carried on those systems. The FCC is currently evaluating how ultimately to define “program-related” in the digital context. At this time, it is too early to assess what economic impact, if any, a final decision by the FCC that electronic program guide data in digital signals is not “program-related,” would have on our CE IPG services.

In a related proceeding, the FCC issued a Notice of Inquiry (“NOI”) on January 18, 2001 concerning Interactive Television (“Interactive TV”), questioning whether cable operators who are affiliated with Interactive TV providers should be subject to a non-discrimination requirement to prevent them from using their broadband platforms to favor affiliated Interactive TV services over third-party providers. The NOI also indicated the FCC’s tentative conclusion that Interactive TV includes electronic program guides, interactive video content, and supplementary signals that wrap around video and provide additional content or services. The NOI is still pending before the FCC.

Compatibility Between Cable Systems and Consumer Electronic Equipment

On September 10, 2003, the FCC adopted regulations implementing an agreement between cable MSOs and consumer electronics manufacturers to facilitate the retail availability of unidirectional “plug and play” digital televisions and other digital devices that connect directly to cable systems and receive one-way digital services without the need for a set-top box. The parties have begun negotiations on a bi-directional “plug-and-play” agreement, which would allow interactive services to be provided on digital televisions and other digital devices without the need for a set-top box. In April 2003, the FCC extended to July 1, 2006 a deadline under which multichannel video program distributors (except DSS providers) must phase out consumer electronic navigation devices (e.g., set-top boxes) with combined security and non-security functions. The FCC has indicated that it may eliminate this separation requirement altogether if the cable and consumer electronics industries successfully negotiate a bi-directional “plug-and-play” agreement. Such an agreement could affect demand for IPGs incorporated into set-top boxes or consumer electronics devices, such as TV Guide Interactive and our CE IPGs.

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Pari-Mutuel Wagering

TVG’s pari-mutuel account wagering operations are located in Oregon and operated pursuant to a license granted by the Oregon Racing Commission. Operations must be in compliance with Oregon law and regulations. Oregon law also states that licensees must comply with the applicable provisions of the Federal Interstate Horseracing Act (15 U.S.C. Sections 3001 – 3007 et. seq.). Pursuant to its compliance with Oregon and federal law, TVG is permitted to do business in Oregon, California and other states where pari-mutuel wagering on horseracing is legal. Currently, TVG maintains wagering accounts for residents of California, Idaho, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, New Mexico, New York, North Dakota, Ohio, Oregon and Wyoming.

Segment and Geographical Information

Information regarding our business segments and operations by geographical area is contained in Note 16, “Segment and Geographical Information,” to Consolidated Financial Statements.

Employees

As of December 31, 2003, we employed 2,166 individuals, of whom 133 were employed outside the United States.

Executive Officers of the Registrant

The following table provides information regarding the Executive Officers. The ages shown are as of March 1, 2004.

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Website Access to SEC Reports

Our Internet website can be found at www.gemstartvguide.com. Information contained on our Internet website is not part of this report. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available on our website, free of charge, as soon as reasonably practicable after such reports are filed with or furnished to the SEC.

Alternatively, you may access these reports at the SEC’s Internet website: www.sec.gov.

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CERTAIN RISKS AFFECTING BUSINESS,

OPERATING RESULTS AND FINANCIAL CONDITION

This section highlights specific risks affecting our business, operating results and financial condition. The order in which the risks appear is not intended as an indication of their relative weight or importance.

TV Guide magazine, which is a significant business, has experienced significant declines in circulation and operating results and such declines may continue.

We provide TV Guide magazine to households and newsstands and customized weekly and monthly program guides to customers of cable and satellite service providers. TV Guide magazine has seen circulation decline significantly over the past several years. The primary cause of this decline is increased competition from free television listings included in local newspapers, IPGs incorporated into digital cable and satellite services, and other sources. Declines in TV Guide magazine’s circulation and operating results may continue and could be significant. Although we made a substantial investment in redesigning the magazine during the third and fourth quarters of 2003, there can be no assurance that this redesign will affect these declines or address competitive pressures. To date, we have not seen a reversal in the decline in our newsstand sales, which are important to TV Guide magazine’s profitability. Unless the decline in newsstand sales is reversed, our results will continue to be adversely affected.

Our C-band business, which is a significant business, is declining as a result of competition from superior technologies.

We market and distribute entertainment programming to C-band satellite dish owners in the United States through our approximately 80% owned subsidiary, SNG. The C-band business is declining primarily as a result of competition from DSS and cable television systems. DSS providers such as DISH Network and DirecTV transmit on the Ku band, which uses a higher power signal than C-band satellites, enabling DSS customers to use smaller, less obtrusive satellite dishes. In addition, DSS and digital cable operators transmit digital signals that allow for a larger number of channels, including local network stations and subscribers of C-band programming are encountering reduced availability of programming as the number of channels transmitted as analog signals capable of being received and descrambled by C-band satellite equipment decreases.

In 1999, SNG entered into a marketing alliance agreement with EchoStar to promote and solicit orders for its DISH Network. In exchange, SNG receives an initial commission for each SNG subscriber who subscribes to DISH Network and a monthly residual commission over the life of the agreement, which expires at the end of 2005. We expect the decline in our C-band business to continue and this decline may be accelerated by our agreement with Echostar. In March 2004, we entered into an agreement with EchoStar that, among other things, includes the sale of substantially all of the assets of SNG. In February 2004, we also agreed to purchase from Wisdom Media Group the minority interest in SNG that we do not already own.

The market for interactive program guides may not develop rapidly.

The market for IPGs, is rapidly evolving and is increasingly competitive. Demand and market acceptance for IPGs are subject to uncertainty and risk. We cannot predict whether, or how fast, this market will grow or how long it can be sustained. For our CE IPGs, the deployment rate depends on the strength or weakness of the consumer electronics industry, and in particular, the sale of television sets, DVD recorders and DVRs. For TV Guide Interactive, which is deployed through digital set-top boxes, the deployment rate depends on the growth of digital cable and DSS subscribers and our penetration of the market for IPGs for these subscribers. Revenues from the licensing of our IPG technology to cable and satellite distributors will also depend upon the growth of digital cable television subscribers in the systems operated by our licensees. Purchases of consumer electronics products and digital cable and DSS subscriptions are largely discretionary and may be affected by general economic trends in the countries or regions in which such products or subscriptions are offered. If the market for our IPG products and services, and those of our licensees, develops slowly or becomes saturated with competitors, our operating results could be adversely impacted.

Our business may be adversely affected by fluctuations in demand for consumer electronics devices employing our technologies.

We derive significant revenues from manufacturer license fees for our VCR Plus+ and CE IPG technologies based on the number of units shipped. We do not manufacture hardware, but rather depend on the cooperation of consumer electronics manufacturers to incorporate our technology into their products. Generally, our license agreements do not require manufacturers to include our technology in any specific number or percentage of units, and only a few of these agreements guarantee a minimum aggregate licensing fee. Demand for new consumer electronics devices, such as television sets, VCRs, integrated satellite receiver decoders, DVRs, hard disk recorders, personal computers and Internet appliances, may be adversely impacted by increasing market saturation, durability of products in the marketplace, new competing products and alternate consumer entertainment options. As a result, our future operating results may be adversely impacted by fluctuations in sales of consumer electronics devices employing our technologies. In addition, our license agreements recently expired with three consumer electronics manufacturers. We cannot assure you that we will be able to renew these agreements, or others that will expire in the future, upon terms as favorable to us as those contained in prior contracts.

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VCR Plus+ revenues have declined and may decline further due to full penetration of the product in a declining market.

Revenues derived from VCR Plus+ have declined and may decline further due to the fact that virtually all major VCR manufacturers have licensed the VCR Plus+ technology and the fact that we have already expanded into most major markets worldwide. The worldwide shipment of VCRs is expected to decline as VCRs are replaced by digital recording devices such as DVD recorders and DVRs. Although VCR Plus+ is now being incorporated into some digital recording devices, there is no assurance that this practice will become widespread. In addition, our license agreements recently expired with three consumer electronics manufacturers. There can be no assurance that we will be able to renew these agreements, or others that will expire in the future, upon terms as favorable to us as those contained in prior contracts.

Any infringement by us or some of our licensees on patent rights of others could result in litigation.

Patents of third parties may have an important bearing on our ability to offer certain products and services. Many of our competitors as well as other companies and individuals have obtained, and may be expected to obtain in the future, patents that concern products or services related to the types of products and services we plan to offer. We cannot provide assurance that we will be aware of all patents containing claims that may pose a risk of infringement by our products and services. In addition, patent applications are generally confidential for a period of 18 months from the filing date, or until a patent is issued in some cases, so we cannot evaluate the extent to which our products and services may be covered or asserted to be covered by claims contained in pending patent applications prior to their publication. If one or more of our products or services is found to infringe patents held by others, we may be required to stop developing or marketing the products or services, to obtain licenses to develop and market the products or services from the holders of the patents or to redesign the products or services in such a way as to avoid infringing the patent claims. We cannot assess the extent to which we may be required in the future to obtain licenses with respect to patents held by others and whether the licenses would be available or, if available, whether we would be able to obtain the licenses on commercially reasonable terms. If we were unable to obtain the licenses, we might not be able to redesign our products or services to avoid infringement. Furthermore, we provide indemnification protection to certain of our consumer electronics IPG licensees and to certain of our service provider licensees under which we may be obligated to indemnify such licensees and hold them harmless from certain claims, including claims that our or their products infringe other parties’ patents. The costs of investigating, defending or remedying alleged infringement could be substantial and could have a material adverse effect on our financial condition or results of operations.

Some terms of our agreements with licensees could be interpreted in a manner that could adversely affect licensing revenue payable to us under those agreements.

Some of our agreements with CE manufacturers and cable and satellite operators contain “most favored nation” clauses. These clauses typically provide that if we enter into an agreement with another licensee on more favorable terms, we must offer some of those terms to our existing licensee. We have recently entered into a number of license agreements with terms that may differ in some respects from those contained in our prior agreements. While we believe that we have appropriately accounted for the most favored nation terms included in our license agreements, these contracts are complex and other parties could reach a different conclusion that, if correct, could have a material adverse effect on our financial results.

Dependence on the cooperation of cable systems, television broadcasters, publications and data providers could adversely affect our revenues.

IPG program data and advertising data is delivered to network headends, cable headends, and broadcast stations for inclusion in the VBI of television signals for delivery to consumer electronics devices and to local affiliate cable systems for delivery to set-top boxes in subscribers’ homes via the out-of-band frequencies of local cable systems. There can be no assurance that these delivery mechanisms will distribute the data without error or that the agreements governing certain of these relationships can be maintained on economical terms. To populate consumer electronics devices, we have arrangements for carriage of our data in the VBI of television stations included in the public broadcasting network, independently owned stations, and stations owned and operated by various station group owners. Our contract related to the public broadcasting network stations covers substantially all of the territory required to be covered to effectively transmit our data for delivery to consumer electronics devices incorporating our IPGs. We nevertheless continue to rely on arrangements, which are not long-term, with station group owners and operators and independently-owned stations for VBI carriage of our program guide and advertising data. Until we fully deploy our VBI carriage contract related to the public broadcasting network stations, we cannot assure you that our carriage arrangements with station group owners and operators and independently owned operators will continue. Furthermore, even if we have full deployment, our data broadcast through the VBI can be, and has been in the past in certain markets, deleted or modified by some of the local cable systems. Widespread deletion or modification of such data could have a material adverse impact on our CE IPG business.

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In addition, we purchase some of our program guide information from commercial vendors. The quality, accuracy or timeliness of such data may not continue to meet our standards or be acceptable to consumers. Our VCR Plus+ system relies on consumer access to PlusCode numbers through licensed publications. We depend on the maintenance and renewal of agreements governing the PlusCode publications to ensure the distribution of the PlusCodes.

Seasonality and variability of consumer electronics product shipments and newsstand sales of our print products may affect our revenues and results of operations on a quarterly or annual basis.

Shipments of consumer electronics products tend to be higher in the third and fourth calendar quarters. General advertising also tends to be higher in the fourth quarter. In addition, manufacturer shipments vary from quarter to quarter depending on a number of factors, including retail inventory levels and retail promotional activities. Newsstand sales of our print products tend to be higher in the first and fourth calendar quarters. As a result, we may experience variability in our licensing and advertising revenues.

Paper and postal price increases can materially raise our costs associated with the production and delivery of the TV Guide print products, including TV Guide magazine.

The price of paper can be a significant factor affecting TV Guide magazine’s operating performance. We do not hedge against increases in paper costs. If paper prices increase and we cannot pass these costs on to our customers, the increases may have a material adverse effect on us. Postage for product distribution and direct mail solicitations is also a significant, uncontrollable expense to us. Postal rates increased in February 2001, July 2001 and again in June 2002.

We face risks related to an SEC investigation and securities litigation.

In October 2002, the SEC issued a formal order of investigation to determine whether we have violated federal securities laws, and in June 2003 the SEC filed securities fraud charges against our former Chief Executive Officer and former Chief Financial Officer. Although we have fully cooperated with the SEC in this matter and intend to continue to fully cooperate, the SEC may determine that we have violated federal securities laws. We cannot predict when this investigation will be completed or its outcome. If the SEC makes a determination that we have violated federal securities laws, we may face sanctions, including, but not limited to, significant monetary penalties and injunctive relief.

In addition, we have been named a defendant in a number of class-action and related lawsuits. Certain of our current and former officers and directors have also been named as defendants in certain of these cases. While we have recently reached an agreement to settle the consolidated shareholder class action lawsuits pending against us in the United States District Court for the Central District of California, subject to Court approval and notice to the class, this settlement does not resolve the related shareholder derivative suits or the non-consolidated securities fraud cases still pending against us. Furthermore, the class will retain all of its securities fraud claims against our former Chief Executive Officer and former Chief Financial Officer. We are generally obligated, to the extent permitted by law, to indemnify our directors and our former directors and officers who are named defendants in some of these lawsuits.

The cost of participating and defending against these actions is substantial and will require the continuing diversion of management’s attention and corporate resources. We cannot assure that the significant time and effort spent by management dealing with these matters will not adversely affect our operations. We cannot predict or determine the outcome or resolution of these actions other than the consolidated shareholder class action lawsuits referred to above, or estimate the amounts of, or potential range of, loss with respect to these proceedings. In addition, the timing of the final resolution of these proceedings is uncertain. The possible resolutions of these proceedings could include judgments or settlements against us or our indemnitees that could require substantial payments by us, which could have a material adverse effect on our financial position, results of operations, and cash flows.

An unfavorable outcome of intellectual property litigation or other legal proceedings may adversely affect our business and operating results.

Our results may be affected by the outcome of pending and future litigation and the protection and validity of patents and other intellectual property rights. Our patents and other intellectual property rights are important competitive tools and many generate income under license agreements. We cannot assure you that our intellectual property rights will not be challenged, invalidated or circumvented in the United States or abroad. Furthermore, we are subject to various antitrust claims asserted by third parties in connection with pending intellectual property litigation. Some of these matters involve potential compensatory, punitive or treble damage claims, or sanctions that, if granted, could have a material adverse effect on us. Unfavorable rulings in

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our legal proceedings, including those described in Note 13, “Litigation and Other Contingencies,” to the Consolidated Financial Statements, may have a negative impact on us that may be greater or smaller depending on the nature of the rulings. In addition, we are currently, and from time to time in the future may be, subject to various other claims, investigations, legal and administrative cases and proceedings (whether civil or criminal) or lawsuits by governmental agencies or private parties. If the results of such investigations, proceedings or suits are unfavorable to us or if we are unable to successfully defend against third party lawsuits, we may be required to pay monetary damages or may be subject to fines, penalties, injunctions or other censure that could have a material adverse effect on our business, financial condition and operating results. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues, which could harm our business, financial condition and operating results.

We face competition in many areas and the competition could negatively impact our operating results.

We face competition from a wide range of other companies in the communications, advertising, media, entertainment, publishing, information, Internet services, software and technology fields. The competitive environment could, among other results, require price reductions for our products, require increased spending on marketing and product development, limit our ability to develop new products and services, limit our ability to expand our customer base or even result in attrition in our customer base. Any of these occurrences could negatively impact our operating results. Many of our competitors have greater financial and human resources than we do. As a result, these competitors can compete more effectively by offering customers better pricing and other terms and conditions, including indemnifying customers against patent infringement claims. Advertising revenue at the TV Guide Channel is dependent on the number of subscribers as well as viewership ratings, such as Nielsen. A decrease in subscriber numbers or ratings could have a material adverse effect on our Cable and Satellite Segment results of operations. TVG competes for viewers with other television networks, one of which is under common ownership with several racetracks, and competes for wagering revenue with other account wagering operations and industry participants.

New products and rapid technological change may adversely affect our operations.

The emergence of new consumer entertainment products and technologies, changes in consumer preferences and other factors may limit the life cycle of our technologies and any future products we might develop. Our future operations could be adversely impacted by our ability to identify emerging trends in our markets and to develop and market new products and services that respond to competitive offerings, technological changes and changing consumer preferences in a timely manner and at competitive costs. Although we believe that we will continue to develop attractive new products, the industry in which we operate is characterized by rapid changes, including technological changes. The process of developing and marketing new products is inherently complex and uncertain, and there are a number of risks, including the following:

Our failure to anticipate adequately changes in the industry and the market, and to develop attractive new products, including any of the risks described above, may reduce our future growth and profitability and may adversely affect our business results and financial condition.

Digital recapture could adversely affect carriage of our analog products.

Cable television is transmitted on a limited frequency spectrum that must be allocated between multiple analog and digital channels. As digital penetration increases, MSOs are reclaiming analog bandwidth to launch more digital networks and interactive television services, and are likely to continue this recapture until such time as they rebuild their plants to increase bandwidth or there is stability in the mix of analog and digital carriage. If this trend continues, digital recapture may result in a significant decline in the distribution of our analog TV Guide Channel, which could negatively impact our operating results.

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Government regulations may adversely affect our business.

The satellite transmission, cable and telecommunications industries are subject to pervasive federal regulation, including FCC licensing and other requirements. These industries are also often subject to extensive regulation by local and state authorities. While these regulations do not apply directly to us, they affect cable television providers and other multichannel video programming distributors (“MVPDs”), which are the primary customers for our products and services. Certain programming sold by SNG is subject to the Satellite Home Viewer Improvement Act of 1999. In 2001, the FCC issued a Notice of Inquiry concerning interactive television services, which may indicate that the FCC intends to promulgate rules that could directly or indirectly affect our IPG business. In April 2003, the FCC extended to July 1, 2006 a deadline under which MVPDs (except DSS providers) must phase-out consumer electronic navigation devices (e.g., set-top boxes) with combined security and non-security functions. The FCC has indicated that it may eliminate this separation requirement altogether if the cable and consumer electronics industries successfully negotiate a bi-directional “plug-and-play” agreement, which would allow interactive services to be provided on digital televisions without the need for a set-top box. Such an agreement could affect demand for IPGs incorporated into set-top boxes or consumer electronics devices, such as TV Guide Interactive and our CE IPGs. Future developments relating to any of these or other regulatory matters may adversely affect our business.

The gaming activities of TVG are extensively regulated.

TVG derives a substantial portion of its revenue from pari-mutuel wagering, which is subject to extensive statutory and regulatory oversight. We rely upon a multi-jurisdictional simulcast and wagering totalizator hub license granted by the Oregon Racing Commission and must operate in compliance with applicable state and federal law, specifically including the Interstate Horseracing Act (15 U.S.C. Sec. 3001 et seq.). Adverse changes in the political climate, new legislation or regulatory activity could harm our business. From time to time, members of Congress and state legislatures have introduced bills that would prohibit or severely restrict off-track interstate pari-mutuel wagering. In addition, a leading payment system has, on behalf of its member financial institutions, recently taken an interest in limiting the use of credit cards for non face-to-face gaming transactions as a means of combating illegal Internet-based gambling operations. Although such efforts to restrict payment mechanisms may not be targeted at the lawful activity of licensed operations such as TVG, the resulting inconvenience to our customers caused by such measures could harm our business or growth prospects.

Continued consolidation of the cable and satellite broadcasting industry and other factors could change the terms of existing agreements; the impact of these changes is not certain.

We have entered into agreements with a large number of cable MSOs for the licensing or distribution of our IPG technology, products and services. If, as expected, consolidation of the cable and satellite broadcasting industry continues, some of these agreements may be affected by mergers, acquisitions or system swaps. There can be no assurance that any measures that we have taken to protect us against any negative consequences resulting from such transactions will be effective. In addition, some of our agreements with MSOs allow for the agreement to be terminated prior to the scheduled expiration date at the option of the service provider. Even in the absence of such early termination rights, a service provider that files a bankruptcy petition or otherwise restructures or liquidates could avoid its future obligations and discharge its past payment obligations under the agreement in some circumstances. The exercise of any such unilateral termination rights could have a material adverse effect on the amount of revenue received by the Company under these agreements.

Our stock price has been volatile.

The market price of our common stock has historically been volatile. It is likely that the market price of our common stock will continue to be subject to significant fluctuations. We believe that future announcements concerning us, our competitors or our principal customers, including technological innovations, new product introductions, governmental regulations, litigation or changes in earnings estimated by analysts may cause the market price of our common stock to fluctuate substantially in the future. Sales of substantial amounts of outstanding common stock in the public market could materially and adversely affect the market price of our common stock. Further, in recent years the stock market has experienced extreme price fluctuations in equity securities of technology and media companies. Such price and volume fluctuations often have been unrelated to the operating performance of those companies. These fluctuations, as well as general economic, political and market conditions, such as armed hostilities, acts of terrorism, civil disturbances, recessions, international currency fluctuations, or tariffs and other trade barriers, may materially and adversely affect the market price of our common stock.

We do not have a comprehensive disaster recovery plan or back-up system, and a disaster could severely damage our operations.

We currently do not have a comprehensive disaster recovery plan and do not have fully redundant systems for certain critical operations. Although we have some technology redundancy and back-up capabilities for our production, publishing and

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transmission capabilities, there are currently single points of failure within our processes and technology that, in the event of a catastrophic disruption, would cause us to lose our ability to provide transmission or publishing capabilities. In that event, we would have to operate at reduced service levels that could have a material adverse affect on our relationships with our customers, our revenue generation and our brand.

Our interests may diverge from those of substantial stockholders.

The News Corporation Limited (“News Corporation”) has significant influence over our business because of its beneficial ownership of our common stock and the number of its executives who serve on our Board of Directors. There can be no assurance that its interests are aligned with that of the Company’s other shareholders. Investor interests can differ from each other and from other corporate interests and it is possible that this significant stockholder with a stake in corporate management may have interests that differ from those of other stockholders and of the Company itself. If News Corporation were to sell large amounts of its holdings, our stock price could decline and we could find it difficult to raise capital through the sale of additional equity securities. In addition, this concentration of ownership could delay or prevent a third party from acquiring control over us at a premium over the then-current market price of our common stock.

The terms of our bank credit agreement could limit our flexibility.

Our wholly owned subsidiary, TV Guide, Inc., has a $254.5 million six-year revolving credit facility, which expires in February 2005. The Company is a guarantor of TV Guide’s obligations under the credit facility and the credit facility contains certain financial covenants with which we must comply. Although we believe that our anticipated cash flows from operations and existing cash, cash equivalents and short-term marketable securities balances will be sufficient to satisfy our expected working capital, capital expenditure and debt service requirements in the foreseeable future, the debt level and the covenants contained in this debt instrument could limit our flexibility in planning for or reacting to changes in our business because certain financing options may be limited or prohibited. In addition, we will be obligated to repay or refinance any outstanding balance when the facility expires in February 2005. There can be no assurance that we will be able to refinance this debt, if necessary, with terms as favorable as those in the existing facility.

Forward-Looking Statements

This Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this document and in the documents incorporated herein by reference, the words “may,” “will,” “continue,” “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to the Company or its management, are intended to identify such forward-looking statements. Such statements reflect the current views of the Company or its management with respect to future events and are subject to certain risks, uncertainties and assumptions including, but not limited to those set forth above under “Certain Risks Affecting Business, Operating Results and Financial Condition.”

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results, performance or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements. Factors that could cause or contribute to such material differences include, but are not limited to, those discussed in Item 1 under “Business” and “Certain Risks Affecting Business, Operating Results and Financial Condition” and Item 3, “Legal Proceedings,” as well as those factors discussed elsewhere in this Form 10-K and in the documents incorporated herein by reference. The inclusion of such forward-looking information should not be regarded as a representation by us or any other person that the future events, plans or expectations contemplated by us will be achieved. We undertake no obligation to release publicly any updates or revisions to any such forward-looking statements that may reflect events or circumstances occurring after the date of this Form 10-K.

ITEM 2. PROPERTIES.

We own the Chicago International Teleport, a 15-acre satellite traffic and uplink facility located approximately 35 miles south of Chicago. The Teleport operates 13 C-band and Ku-band transmit/receive antennas and has the capacity to add many more. These antennas are used to transmit or receive video, audio and data to and from various satellites for us and our customers. The Teleport also has approximately 25 receive-only antennas. We also operate an uplink in Tulsa, Oklahoma for our TV Guide Channel that allows us to monitor our signal on a real-time basis. In addition, we lease uplink station facilities in other cities as needed. Information is generally delivered to the uplink transmit station via satellite, dedicated telephone or fiber optic lines and is usually scrambled at the uplink transmit site to avoid unauthorized receipt.

We lease a total of 10 full transponders on several different satellites owned and operated by various satellite companies. Lease payments for a single transponder range from $48,000 to $200,000 per month, depending upon the location of the satellite, the satellite’s footprint, the date of the lease and the power of the satellite. Certain of the transponder leases are for fixed terms while others have terms through the operational life of the respective satellite. The transponder leases expire in 2004 and 2005.

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We lease approximately 784,000 square feet of office space in various locations in the United States. In addition, we lease approximately 25,300 square feet of office space in various locations outside of the United States. The leases have various expiration dates through fiscal year 2010. We own buildings in Phoenix, Arizona, consisting of approximately 34,000 square feet of office space located on approximately seven acres of land under long-term leases expiring in 2015. The lease period may be extended to 2065 at our option. We believe that our facilities are adequate to meet our needs for the foreseeable future. Should we need additional space, management believes that we will be able to secure additional space at reasonable rates.

In March 2004, we entered into an agreement with EchoStar that, among other things, includes the sale of substantially all of the assets of SNG, UVTV and SpaceCom. As a part of this transaction, EchoStar will purchase the teleport, assume a majority of the transponder leases and sublease a portion of our office space.

ITEM 3. LEGAL PROCEEDINGS.

In addition to the items listed below, we are party to various legal actions, claims and proceedings incidental to our business. Litigation is uncertain, and the outcome of individual cases is not predictable with any assurance. We have established loss provisions only for matters in which losses are probable and can be reasonably estimated. Some of the matters pending against us involve potential compensatory, punitive or treble damage claims, or sanctions, that if granted, could require us to pay damages or make other expenditures in amounts that could have a material adverse effect on our financial position or results of operations.

SEC Matters

On October 17, 2002, the SEC issued a formal order of investigation to determine whether there have been violations of the federal securities laws by the Company and/or others formerly involved with the Company. We continue to fully cooperate with the SEC in its investigation.

We have been ordered by the court in a proceeding captioned In the Matter of an Application for a Temporary Order Pursuant to Section 1103 of the Sarbanes-Oxley Act, Securities and Exchange Commission v. Gemstar-TV Guide International, Inc., Case No. CV-03-3124 MRP (PLAx), in the United States District Court for the Central District of California to maintain approximately $37 million in segregated, interest-bearing bank accounts established in connection with our November 2002 management and corporate governance restructuring. This order prevents us from paying any portion of those funds to our former Chief Executive Officer, Dr. Henry Yuen, or our former Chief Financial Officer, Elsie Ma Leung. On July 1, 2003, Dr. Yuen and Ms. Leung filed an appeal of the orders requiring us to maintain the accounts.

On June 19, 2003, the SEC filed an action entitled Securities and Exchange Commission v. Yuen and Leung, Case No. CV 03-4376 NM (MANx), alleging violations of the federal securities laws by Dr. Yuen and Ms. Leung and seeking declarative and injunctive relief in connection with alleged violations of the federal securities laws, disgorgement of all monies received as a result of their alleged illegal conduct, and civil penalties under Section 20(d) of the Securities Act of 1933 and Section 21(d)(3) of the Securities Exchange Act of 1934. On January 6, 2004, the SEC amended its action to include three more of our former employees, Peter C. Boylan, Craig Waggy, and Jonathan B. Orlick. The Company is not named as a party in this action.

Shareholder and Derivative Litigation

As of February 27, 2004, six shareholder and derivative lawsuits are pending against us. In 2002, the Company and certain of its executive officers and directors were served with a number of complaints, filed in the United States District Court for the Central District of California, alleging violations of the federal securities laws. Pursuant to the parties’ stipulation, the District Court has consolidated all of these federal lawsuits (and any subsequently filed lawsuits) into one case known as In re Gemstar-TV Guide International Securities Litigation, Master File No. 02-2775, NM (PLAx) (C.D. Cal.). As discussed more fully below, the parties in this consolidated shareholder class action have reached an agreement to settle the lawsuit, subject to court approval after notice to the class. During the same period, the Company, along with certain directors and executive officers, was sued in three purported shareholder derivative actions in the California Superior Court for the County of Los Angeles. These purported derivative lawsuits were consolidated as In re Gemstar-TV Guide International Derivative Litigation, in the Superior Court of the State of California, County of Los Angeles, Lead Case No. GC029296. In November 2002, a separate lawsuit captioned Knowles v. Henry C. Yuen, et al., was filed against us in the United States District Court for the Central District of California, based on the same core allegations as the federal shareholder class action and the state court derivative litigation. In January 2003, we were served with a complaint brought by the Investment Division of the State of New Jersey in California Superior Court against the Company, Dr. Yuen and Ms. Leung captioned State of New Jersey v. Gemstar-TV Guide International, Inc., Henry C. Yuen and Elsie Ma Leung, Case No. GC030987. On July 17, 2003, Silvertree Capital, LLC filed a separate shareholder action against us in the United States District Court for the Central District of California. Finally, on February 17, 2004, individual shareholders filed

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a separate suit against us in the United States District Court for the Northern District of Indiana captioned Minas Litos, et al v. Gemstar-TV Guide International, Inc., Case No. 204CV69RL. Some of these suits also name The News Corporation Limited, a significant shareholder of the Company, as a defendant. The lawsuits name some or all of the same parties as defendants, and purport to state claims on behalf of all persons who purchased our common stock during various periods, the broadest of which is August 11, 1999 through April 4, 2002. Generally, the lawsuits allege that the defendants failed to properly account for revenue accrued from Scientific-Atlanta, Inc. (“SA”), failed to properly account for a non-monetary transaction, pursuant to which intellectual property rights were obtained in exchange for cash and advertising credits; and failed to properly record the fair value of technology investments and marketable securities acquired in connection with our acquisition of TV Guide. Plaintiffs allege that this had the effect of materially overstating our reported financial results and seek money damages on behalf of a purported class of holders of our securities during the relevant time period.

Settlement of the Consolidated Shareholder Class Action

On February 12, 2004, we entered into an agreement with the lead plaintiffs to settle the claims against us in the above-described consolidated shareholder class action known as In re Gemstar-TV Guide International Securities Litigation (the “Consolidated Federal Securities Litigation”). Under the agreement, the total settlement amount is $67.5 million, to be paid in cash and stock. Specifically, we will pay an aggregate of $42.5 million in cash to the class in a combination of direct payments and payments which may be made through the SEC. In addition, we will issue 4,105,090 shares of common stock that was valued at $6.09 per share on the date the agreement was reached, or $25 million in the aggregate. As part of the settlement, we will assign to the class certain of our claims against our former auditor, KPMG LLP. The class retains all of its securities fraud claims against our former Chief Executive Officer, former Chief Financial Officer and former auditor. We retain all of our claims against our former management and our claims against our insurance carriers related to the defense and settlement of these actions and related matters. The settlement does not resolve the related shareholder derivative suits or the non-consolidated shareholder cases pending against us.

Status of Remaining Shareholder and Derivative Suits

The remaining shareholder and derivative suits listed above are still in the early stages of litigation. In In re Gemstar-TV Guide International Derivative Litigation, the plaintiffs filed a consolidated third amended complaint, alleging various breaches of fiduciary duty and violations of the California Corporations Code, and seeking unspecified monetary damages. We filed our answer to the plaintiffs’ consolidated third amended complaint on November 18, 2003. In State of New Jersey v. Gemstar-TV Guide International, Inc., et al., the plaintiffs allege violations of state corporations laws including California Business and Professions Code sections 17200 et seq. and common law torts. The lawsuit seeks restitution and compensatory, special and exemplary damages of an unspecified monetary amount. On October 29, 2003, the Court overruled the Company’s demurrer to the Plaintiff’s second amended complaint. The Company filed its answer to the Plaintiff’s second amended complaint on November 18, 2003 and discovery has commenced.

In Knowles v. Henry C. Yuen, et al., the plaintiffs assert state law based derivative claims, including those based on various breaches of fiduciary duty. The plaintiffs have agreed to a voluntary stay while the defendants’ motion to dismiss the federal class action is pending. Pursuant to the parties’ stipulation and court order, no response is due to the federal derivative complaint until thirty days after a ruling on a motion to dismiss in the class action.

In Silvertree Capital LLC v. Gemstar-TV Guide International, Inc. et al., the plaintiff Silvertree Capital LLC filed an action in the United States District Court for the Central District of California that is identical to the amended complaint in the In re Gemstar TV Guide International Securities Litigation, except that it is brought on behalf of a single plaintiff rather than a purported class. On September 22, 2003, we filed a motion to dismiss the complaint. On November 3, 2003, the plaintiff filed an amended complaint. We are to file an answer or other response to the amended complaint within twenty-one days after a ruling on any motion to dismiss the federal class action.

In Minas Litos, et al v. Gemstar-TV Guide International, Inc., the plaintiffs allege various breaches of fiduciary duty and violations of state and federal securities laws based on the same core allegations as the federal shareholder class action and the state court derivative litigation. We were served with the complaint in this action on February 26, 2004.

In addition to the lawsuits described above, an Oklahoma limited partnership filed a lawsuit in the United States District Court for the Northern District of Oklahoma on October 7, 2002 against the Company, Dr. Yuen, Ms. Leung and KPMG, LLP, based on the same core allegations and purported causes of action alleged in the consolidated class action. We were never served in this action. On November 27, 2002, KPMG filed a motion to dismiss the lawsuit. On September 8, 2003, the Court granted KPMG’s motion and dismissed the case.

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We intend to defend all of our pending shareholder and derivative litigation, other than the Consolidated Federal Securities Litigation, vigorously. Because of the preliminary nature of certain of these proceedings and the uncertainty of litigation generally, we are unable to predict at this time the likely outcome of the litigation or estimate its liability, if any, with regard to these cases. However, we may be required to pay judgments or settlements and incur expenses in these matters in aggregate amounts that could have a material adverse effect on our financial condition or results of operations.

Patent and Antitrust Litigation

We are involved in several pending patent and antitrust litigations.

On November 17, 2000, Pioneer Digital Technologies, Inc. (“Pioneer”) filed suit against us and various of our subsidiaries in the California Superior Court for the County of Los Angeles, which claims, among other matters, that we and certain of our subsidiaries have violated state antitrust and unfair competition laws. Pioneer is seeking damages and injunctive relief against us. The parties have submitted and responded to limited written discovery requests and began depositions in March 2003. The trial date in this matter has been continued until September 2004. In February 2004, we entered into an agreement to settle outstanding litigation between us and Pioneer. The agreement includes a one-time payment by Pioneer of $14 million, multi-year license agreements for our CE IPG in North America, Japan and Europe, and a patent license to incorporate our technology into Pioneer’s digital cable products in North America.

MDL Patent Litigation in the Northern District of Georgia

The following events have occurred with regard to the patent and antitrust litigation matters consolidated under the action captioned In re Gemstar Development Corporation Patent Litigation, in the United States District Court for the Northern District of Georgia, Master File No. MDL-1274-WBH (the “MDL Litigation”).

(a) Scientific-Atlanta, Inc. v. Gemstar International Group Limited, Gemstar Development Corporation and Index Systems, Inc., in the United States District Court for the Northern District of Georgia, Civil Action File No. :98-CV-3477-WBH. On December 3, 1998, Scientific-Atlanta (“S-A”) commenced this action against us, seeking a declaratory judgment of noninfringement and invalidity of United States Patent Nos. 4,751,578, 4,908,713, 4,963,994, 5,038,211, 5,193,357, 5,508,815, 5,915,068 and 5,568,272. The complaint also alleges that we violated federal antitrust laws and seeks damages and injunctive relief. We counterclaimed for infringement of the ‘815, ‘272, ‘578, ‘713 and ‘068 patents.

The Court entered summary judgment of non-infringement as to the ‘815 and ‘272 patents by Orders dated August 30, 2002 and November 1, 2002, respectively. On June 30, 2003, the Court granted SA’s motion for summary judgment of non-infringement of the ‘357 patent and ‘211 patents, in light of the construction given these patents in the SuperGuide case in the Western District of North Carolina. (See description below, including the Federal Circuit’s recent reversal of the District Court’s summary judgment ruling.) Also in the wake of the SuperGuide claim construction, on July 18, 2003, the Court ruled that SA did not infringe the ‘578 patent. On August 29, 2003 the Court entered a Consent Order whereby SA dismissed without prejudice its declaratory judgment claims under the Levine Patent No. 4,963,994. Also on August 29, 2003, the Court entered a Consent Order stipulating as to the non-infringement of the Levine Patent No. 4,908,713 by certain SA digital set-top box products. SA has moved for summary judgment of non-infringement on U.S. Patents No. 5,915,068 and No. 4,908,713, and we have opposed this motion.

(b) Gemstar Development Corporation and Index Systems, Inc. v. Pioneer Electronic Corp, et al., in the United States District Court for the Northern District of Georgia, Civil Action File No. :99-CV-1258-WBH (transferred from the Central District of California for pretrial proceedings). On December 1, 1998, we commenced this action in the United States District Court for the Central District of California (Case No. CV 98-9630 HLH (RNBx)) against Pioneer Electronic Corporation, Pioneer North America, Inc. and Pioneer New Media Technologies, Inc. alleging infringement by Pioneer of United States Patent Nos. 5,508,815 and 5,568,272 and seeking damages and injunctive relief. By orders dated August 30, 2002 and November 1, 2002, the Court granted summary judgment dismissing all infringement claims under both patents. In February 2004, we entered into an agreement to settle outstanding litigation between us and Pioneer. See “Recent Developments”.

(c) Gemstar Development Corporation and Index Systems Inc. v. Scientific-Atlanta, Inc., in the United States District Court for the Northern District of Georgia, Civil Action File No. :99-CV-1242-WBH (transferred from the Central District of California). On December 4, 1998, we commenced this action against SA in the United States District Court for the Central District of California (Case No. CV 98-9781 HLH (RNBx), and on December 10, 1998, we filed a First Amended Complaint, alleging infringement of United States Patent Nos. 5,508,815 and 5,568,272 and seeking damages and injunctive relief. On August 30, 2002, the Court ruled that the Scientific-Atlanta digital set-top boxes at issue did not infringe the ‘815 and ‘272 patents. On November 4, 2002, the Court ruled that the remaining products at issue did not infringe these patents. By Order dated September 25, 2002 the Court ruled that the invalidity issues would not be heard unless and until the summary judgment orders were reversed in whole or in part. No appeal has been taken at this time. Discovery on antitrust liability issues closed at the end of February 2003. Once the Court has ruled on antitrust summary judgment motions, the parties will undertake damages discovery; that schedule has not yet been set.

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(d) EchoStar Communications Corp., EchoStar Satellite Corp., EchoStar Technologies Corp. v. Gemstar-TV Guide International, Inc., Gemstar Development Corp., TV Guide, Inc. and StarSight Telecast, Inc., Civil Action File No. :01:CV-2426-WBH (transferred from Colorado District Court). The EchoStar parties commenced this action on December 5, 2000 by filing federal and state antitrust claims. We counterclaimed for infringement of U.S. Patent Nos. 4,908,713 and 5,915,068. On June 10, 2003, the Court dismissed the infringement claims under the ‘713 patent for lack of standing. We agreed to stipulate to the dismissal without prejudice of claims based on the ‘068 patent. In February 2004, we entered into an agreement to settle this litigation. See “Recent Developments”.

(e) Pegasus Development Corp., and Personalized Media Communications LLC l. v. DirecTV, Inc., Thomson multimedia, Inc., Thomson Consumer Electronics Inc., Philips Electronics North America Corp., Hughes Electronics Corp., TVG-PMC, Inc., StarSight Telecast, and Gemstar-TV Guide International, Inc., Civil Action No. 00-CV-1020 (D.Del.). On December 4, 2000, Pegasus and PMC filed suit for infringement of U.S. Patent Nos. 4,694,490, 4,704,725, 4,965,825, 5,109,414, 5,233,654, 5,335,277, and 5,887,243. On November 9, 2001, Thomson filed a third-party complaint against us, seeking a declaratory judgment of non-infringement and invalidity of certain patents as to which we are a licensee, and also alleging antitrust violations under federal and state law. On October 16, 2002, Thomson’s antitrust claims were transferred to the MDL proceeding. Thomson’s third-party complaint against us was settled and dismissed with prejudice on June 23, 2003.

(f) Ancillary proceeding in the United States District Court for the Northern District of Oklahoma: In re Gemstar Development Corp., N.D. Ga. Master File No. MDL-1274-WBH, Case No. 02-MC-18-EA(J). On December 17, 2003, a magistrate judge issued a Report and Recommendation recommending that the district court grant our motion for summary judgment dismissing contempt proceedings brought by SA. SA has filed objections to the magistrate’s report.

Non-MDL Patent Litigation in the Northern District of Georgia

On June 25, 1999, SA filed an action against StarSight in the U.S. District Court for the Northern District of Georgia, seeking a declaratory judgment of invalidity and noninfringement of two patents. Scientific-Atlanta, Inc. v. StarSight Telecast, Inc., Civil Action No. 99-CV-1671. On August 2, 1999, StarSight answered the complaint as to one of the patents and counterclaimed against SA for infringement of this patent, seeking damages and injunctive relief. On September 18, 2001, the Court allowed StarSight to amend its answer to assert an additional counterclaim against SA for infringement of the other patent at issue. The action was stayed pending completion of the appeal of the ITC Investigation.

On July 23, 1999, SA filed an action against StarSight in the U.S. District Court for the Northern District of Georgia, alleging infringement of three patents and seeking damages and injunctive relief. Scientific-Atlanta, Inc. v. StarSight Telecast, Inc., Civil Action No. 99-CV-1890. This case has been coordinated for pretrial purposes with the action filed by SA against the Company on April 23, 1999, Scientific-Atlanta, Inc. v. StarSight Telecast, Inc., Civil Action No. 99-CV-1040. The parties are in pretrial proceedings.

On February 9, 2001, the Company and StarSight Telecast, Inc., filed four separate patent infringement actions against: SA; Pioneer Corporation, Pioneer Digital Technologies, Inc., Pioneer North America, Inc. and Pioneer New Media Technologies, Inc.; SCI Systems, Inc.; and EchoStar Communications Corporation in the U.S. District Court for the Northern District of Georgia. Each of these actions was stayed by the Court pending completion of the appeal of the ITC Investigation.

On November 6, 2002, SA and PowerTV, Inc. (“Power TV”) filed a counterclaim against us in a case captioned Personalized Media Communications, L.L.C. v. Scientific-Atlanta, Inc., and PowerTV, Inc., United States District Court for the Northern District of Georgia, Atlanta Division, Civil Action No. 02-CV-824 (CAP). At that time, SA and Power TV asserted declaratory relief claims against us seeking a declaration of non-infringement, invalidity and unenforceability of certain patents as to which we are a licensee. On February 21, 2003, we answered SA’s and Power TV’s counterclaims and asserted causes of action against PMC for patent infringement. A claim construction hearing on the infringement claims was held in February 2004. The parties are awaiting a ruling from the Court.

Appeal of ITC Investigation

On February 14, 2001, the Company and its StarSight subsidiary filed a complaint requesting that the United States International Trade Commission (“ITC”) commence an investigation pursuant to Section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. Section 1337 (“Section 337”), regarding imports of certain set-top boxes and components thereof. The complaint alleges that Pioneer Corporation, Pioneer Digital Technologies, Inc., Pioneer North America, Inc., Pioneer New Media Technologies, Inc., SA, EchoStar Communications Corporation and SCI Systems, Inc. (collectively “Respondents”), are violating Section 337 by their unlawful importation into the United States, sale for importation into the United States, and/or sale in the United States after importation, of set-top boxes and/or components that infringe, directly, contributorily or by inducement, of certain patents owned by the Company. On or about March 16, 2001, the ITC instituted the requested investigation referred to as

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In the Matter of Certain Set-Top Boxes and Components Thereof, Investigation No. 337-TA-454 (ITC) (the “ITC Investigation”). On June 21, 2002, the Administrative Law Judge issued his initial determination (“ID”), finding that all of the patents were valid, that none of the patents at issue had been infringed by any of the Respondents, that one of the patents at issue was unenforceable both because it had been misused by us and also because a co-inventor had not been named on the patent, and that we failed to establish the technical prong of the ITC’s domestic industry requirement, which requires us to practice our inventions covered by the patents in suit. On August 29, 2002, the ITC determined not to review the ID and entered an additional finding with regard to the technical prong of the domestic industry requirement on one claim of one of the patents. The Commission took no position on the patent misuse findings of the Administrative Law Judge. On October 25, 2002, we filed a notice of appeal of the ITC determination to the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”). Arguments were heard on October 10, 2003, and the parties are awaiting a decision by the Federal Circuit.

Appeal of SuperGuide Case

On March 23, 2001, Gemstar Development Corporation, our wholly owned subsidiary, was added as a third-party defendant in the matter of SuperGuide Corporation v. DirecTV Enterprises, Inc., et al., in the U.S. District Court for the Western District of North Carolina. The lawsuit alleges patent infringement with respect to three patents (the “SuperGuide Patents”). After being added as a party, Gemstar Development Corporation brought claims for declaratory relief and breach of contract against SuperGuide Corporation relating to a 1993 license agreement between SuperGuide Corporation and Gemstar Development Corporation and claims against EchoStar for infringing the SuperGuide Patents within Gemstar Development Corporation’s defined fields of use. On July 25, 2002, the District Court granted the defendants’ motion for summary judgment, finding that the defendants did not infringe the SuperGuide Patents and dismissing all remaining claims in the case without prejudice. On August 23, 2002, we appealed the District Court’s decision to the Federal Circuit. On February 12, 2004, the Federal Circuit issued its decision, vacating the District Court’s summary judgment ruling and remanding the case for further proceedings. In reversing the District Court’s summary judgment ruling, the Federal Circuit found that the District Court incorrectly construed certain patent claims in reaching its decision. The defendants have filed a joint petition for rehearing and rehearing en banc of the Federal Circuit’s decision.

Other Litigation

During July and August 2000, TV Guide was served with more than 20 class action complaints filed primarily in the U.S. District Court for the Southern District of New York on behalf of magazine subscribers. These complaints, which have been consolidated into a single action, allege that TV Guide, the Magazine Publishers Association (“MPA”), and 12 other publishers of consumer magazines have violated federal antitrust laws by conspiring to limit the discounting of magazine subscription prices by means of rules adopted by the MPA and the Audit Bureau of Circulation. The plaintiffs seek injunctive relief, unspecified damages (trebled), and attorneys’ fees and costs. A hearing was held on May 27, 2003, to determine whether to certify the proposed settlement class, whether the proposed settlement is fair and reasonable and whether a final judgment should be entered dismissing the action as to class members. The parties are awaiting a final decision from the Court.

On May 3, 2000, a complaint was filed in the U.S. District Court for the Southern District of New York against Murdoch Magazines Distribution, Inc. (now TV Guide Distribution) and other parties by United Magazine Company, Inc. (“Unimag”) and related entities. The complaint alleged claims against Murdoch Magazines for violation of the Robinson-Patman Act, assorted common law tort and contract claims and violation of federal and state antitrust laws. The complaint seeks monetary damages, plus treble and punitive damages, attorneys’ fees and costs. On August 31, 2000, Unimag filed an amended complaint, (i) adding TV Guide Distribution as a named defendant, (ii) adding six other national distributors as defendants, and (iii) adding claims for unjust enrichment and violation of the New York Franchise Sales Act. On June 19, 2003, one of the plaintiffs, the Scherer Companies, withdrew its claim against Murdoch Magazines, denominated as Count VIII, alleging theft of trade secrets; however, other claims still exist. Discovery is continuing with respect to the remaining claims and counterclaims in the case and is set to conclude by April 2004.

Henry Yuen and Elsie Leung Employment Arbitration, American Arbitration Association Case Nos. 13 Y 116 01305 03 and 13 Y 116 01300 03. On May 30, 2003, our former employees, Dr. Henry Yuen and Ms. Elsie Leung, commenced arbitration proceedings against us to contest their April 18, 2003 termination for cause. On November 20, 2003, the Arbitration Panel (i) granted our motion to dismiss News Corporation as a defendant in this action; (ii) granted, in part, plaintiffs’ motion to dismiss our counterclaims; and (iii) granted plaintiffs’ motion seeking an interim payment of attorneys’ fees. In a separate proceeding, we petitioned the California Superior Court for the County of Los Angeles to consolidate the two separate arbitration proceedings on the grounds that both arbitrations arise from the same transactions and involve common issues of law and fact. On November 24, 2003, the California Superior Court issued an order granting our motion to consolidate the two proceedings for all purposes. The arbitration is currently stayed pending Dr. Yuen’s and Ms. Leung’s appeal of the California Superior Court’s order.

On June 19, 2003, our former general counsel, Jonathan Orlick, filed a demand for arbitration with a third-party mediation service for employment termination claims and related expense claims. On July 25, 2003, we answered Mr. Orlick’s demand and filed counterclaims for breach of contract, breach of fiduciary duty, disgorgement of compensation and other profits, concealment/fraudulent inducement of contract, recovery of personal property, state and federal statutory violations, and other declaratory relief. Discovery is ongoing and a hearing of all claims and counterclaims is scheduled to commence in March 2004.

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Rose et al v. Gemstar-TV Guide Int’l Inc., San Mateo County Superior Ct Case No. CIV 433187. On August 1, 2003 former employees of DIVA Systems Corporation (“DIVA”) filed a complaint against us alleging causes of action for: 1) breach of contract and 2) fraud for “failing to employ” plaintiffs in connection with our proposed acquisition of DIVA. On October 6, 2003, in response to our demurrer, the plaintiffs filed a First Amended Complaint realleging their breach of contract and fraud claims, and further alleging that we intentionally frustrated the plaintiffs’ ability to satisfy a condition precedent to their employment. On January 7, 2004, we filed our answer to the plaintiffs’ First Amended Complaint. We believe the lawsuit is meritless and intend to defend it vigorously.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our common stock is traded on the Nasdaq Stock Market under the symbol GMST. The sole market for our common stock continues to be the Nasdaq Stock Market in the United States.

The following table sets forth the range of high and low sales prices for our common stock for the periods indicated and reflects all stock splits we effected:

The reported closing sales price of our common stock on the Nasdaq Stock Market on February 13, 2004 was $7.67. As of February 13, 2004, there were 418.4 million shares of our common stock outstanding and approximately 731 holders of record.

We have not paid any dividends since our common stock began trading on the Nasdaq Stock Market. Our Board of Directors has no current plans to pay cash dividends. Future dividend policy will depend on our earnings, capital requirements, financial condition and other factors considered relevant by our Board of Directors. In addition, our subsidiary, TV Guide, is restricted from paying dividends under its credit facility. (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”)

Executive Officers of the Company are permitted to, and have entered into, prearranged trading plans in accordance with guidelines specified by Rule 10b5-1 of the Securities Exchange Act of 1934. Rule 10b5-1 permits officers and directors of public companies to adopt predetermined plans for selling specified amounts of stock.

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Equity Compensation Plans

The table below outlines the number of shares of our common stock that are subject to outstanding options granted under our stock compensation plans, the per share weighted-average exercise price of those options, and the number of shares of Company common stock remaining available for future awards under our stock compensation plans. The numbers in the table are as of December 31, 2003 (in thousands).

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ITEM 6. SELECTED FINANCIAL DATA.

The selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and related Notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Executive Summary

Consolidated Results of Operations

Our financial results for 2003 were reflective of the continuing challenges faced by a number of our businesses. Consolidated revenues in 2003 were $878.7 million, a decrease of $122.7 million, or 12.3%, from $1.0 billion in 2002. Declines in revenue were primarily attributable to declines in newsstand and subscription revenues at TV Guide magazine and declines in subscriber and DISH networks conversion revenues in our SNG C-band business. Our net loss decreased to $577.4 million, or $1.41 per diluted share, in 2003 from $6.4 billion, or $15.64 per diluted share, in 2002. Both periods included significant pre-tax charges for the impairment of goodwill and intangible assets of approximately $416 million in 2003 and $6.8 billion in 2002.

Publishing Segment

Revenues in our Publishing Segment decreased by 10.4% in 2003, primarily due to declines in newsstand and subscription revenues at TV Guide magazine of $15.6 million and $36.1 million, respectively. We invested $20.1 million to revitalize our TV Guide magazine and the redesigned product was introduced to consumers in September 2003. The investment in editorial content and layout, as well as marketing and promotion, was made with the hope that we could stabilize circulation declines and increase advertising revenues. In addition, with the objective of improving newsstand revenues, we announced an increase in the newsstand price to $2.49 effective with the first issue of 2004, we expect to implement a change in the second quarter of 2004 in the on-sale date of the magazine to capitalize on peak shopping days, and we entered into an alliance with Time Distribution Services, the leader in weekly magazine marketing.

Cable and Satellite Segment

Revenues in the Cable and Satellite Segment decreased by 16.5% in 2003, primarily due to continuing declines in the C-band direct-to-home satellite market, in which our SNG business operates. In March 2004, we entered into an agreement to sell substantially all of the assets of the C-band business. We also recently entered into new licensing and distribution agreements with four of the leading U.S. cable and satellite distributors pursuant to which these service providers may elect to deploy a TV Guide Interactive IPG, their own IPG or a third party IPG.

Consumer Electronics Licensing Segment

Revenues in our Consumer Electronics Licensing Segment decreased by 5.2% in 2003, primarily due to declines in VCR Plus+ revenues. We expect VCR Plus+ shipments and associated revenues to continue to decline. Revenues for our CE IPG business, which includes TV Guide On Screen and Guide Plus+, are expected to accelerate as products incorporating our technologies are introduced into various markets, although these increases in revenues are not likely to offset the VCR Plus+ declines in the short term. In the longer term, we expect the FCC’s recent approval of the “plug-and-play” accord between the cable and consumer electronics industry as well as expected growth in the digital television and DVD recorder markets to create opportunities to achieve increased licensing revenues from the use of our CE IPGs.

Corporate Segment

Operating expenses in the Corporate Segment increased 62.9%, primarily due to accrued expenses in 2003 of $75.2 million in litigation settlements and other contingent liabilities, higher insurance premiums, increased legal fees, expenses related to the resolution of legal issues with a former executive of a Company subsidiary, and various other general and administrative expenses.

Liquidity and Capital Resources

At December 31, 2003, cash, cash equivalents and marketable securities (excluding $37.5 million of restricted cash) exceeded debt and capital lease obligations by $121.4 million. In connection with the pending Comcast and EchoStar transactions, we expect to receive cash of $250 million and $238 million, respectively.

We reached an agreement with our syndicate bank group to amend the terms of our term loan and revolving credit facility in June 2003. The amendments modified certain covenants in the credit agreements to address a potential compliance issue and provide the Company with additional flexibility under the facilities. By the end of the year, we paid the outstanding balance of the term loan. Because our revolving credit facility expires in February 2005, we will explore financing alternatives to the credit facility during 2004.

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Critical Accounting Policies and Estimates

The following discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires management to make estimates and assumptions in applying certain critical accounting policies. Certain accounting estimates are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that future events affecting the estimates could differ markedly from our current expectations. We believe that the following are some of the more critical judgment areas in the application of our accounting policies that affect our financial statements.

Revenue Recognition

General

We have followed the guidance of Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”), since its effective date of December 2003, and Emerging Issues Task Force (“EITF”) 00-21, Revenue Arrangements with Multiple Deliverables, since its effective date of June 2003 for revenue recognition, and analogize to the guidance in Statement of Position 97-2, Software Revenue Recognition (“SOP 97-2”). Previously, we followed SOP 97-2 and Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101”). Under this guidance, four conditions must be met before revenue can be recognized: (i) there is persuasive evidence that an arrangement exists, (ii) delivery has occurred or service has been rendered, (iii) the price is fixed or determinable and (iv) collection is reasonably assured.

License Fees

We license our proprietary technologies to consumer electronics manufacturers and to service providers, including MSOs and other owners and operators of cable television systems, telephone networks, Internet service providers, Internet websites, direct-to-home broadcast satellite service providers, wireless systems and other multi-channel video programming distributors. It is our normal practice to enter into written agreements with our customers. We generally recognize such license fees based on a per-unit shipped model (with consumer electronics manufacturers) or a per subscriber model (with service providers). Our revenues from per-unit license fees are recognized in the period the manufacturers report the number of units shipped. Revenues from per-subscriber fees are recognized in the period services are provided by a licensee, as reported to us by the licensee. Under certain agreements, manufacturers prepay license fees for a guaranteed minimum number of unit shipments over a specified period. Revenues are recognized when the manufacturers report the number of units shipped. If any portion of the prepayment remains to be recognized as revenue at the end of the period, it is recorded as revenue in the final month of the period. Fees for shipments in excess of the minimum are recognized in the period the manufacturers report the units shipped. See “Multiple-Element Arrangements” below.

Revenues from annual and other license fees generally are recognized based on the specific terms of the license agreements. For instance, we entered into certain arrangements under which substantial flat fees were paid upfront in addition to ongoing per-unit license fees. In such cases, the prepaid fees were deferred and recognized as revenue on a straight line basis over the term of the agreement. In certain cases, we will license our technology for an unlimited number of units over a specified period of time during which we have continuing obligations. We record the fees associated with these arrangements on a straight line basis over the specified term. In addition, we have licensing arrangements with MSOs under which we share a portion of the IPG advertising revenue that we generate through the MSO. In some cases, we guarantee that a substantial portion of the MSO’s license fees paid to us will be reimbursed to the MSO through our ad-sharing obligation. To the extent the ad-sharing fees are not sufficient to meet these guarantees, we are obligated to purchase advertising on the MSO’s platform. Because the license fee is not fixed or determinable until resolution of the sharing or advertising buyback, which is typically settled quarterly, the advertising buyback guarantees and advertising revenue sharing are netted against the license fees so that only a net license fee amount is recognized.

From time to time, the license agreement between a licensee and us may expire. While a new license agreement is being negotiated, the licensee may continue to ship the same units or the same services may continue to be deployed containing our patented or proprietary technologies and the licensee may continue to report units shipped or subscriber information on a periodic basis. License and subscriber fees may continue to be received at the old contract rates and on a timely basis. In such cases, we continue to recognize license and subscriber fee revenue. However, revenue is not recognized when collection is not reasonably assured and in no case when payment is not received for greater than 90 days.

Multiple-Element Arrangements

In accounting for multiple-element arrangements, one of the key judgments to be made is the accounting value that is attributable to the different contractual elements. The appropriate allocation of value not only impacts which segment is credited with the revenue, it also impacts the amount and timing of revenue recorded in the consolidated statement of operations during a given period due to the differing methods of recognizing revenue by each of the segments, as discussed above.

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Revenue is allocated to each element based on the accounting determination of the relative fair value of that element to the aggregate fair value of all elements. The fair values must be reliable, verifiable and objectively determinable. When available, such determination is based principally on the pricing of similar cash arrangements with unrelated parties that are not part of a multiple-element arrangement. When sufficient evidence of the fair values of the individual elements does not exist, revenue is not allocated among them until that evidence exists. Instead, the revenue is recognized as earned using revenue recognition principles applicable to the entire arrangement as if it were a single-element arrangement. At this time, in all instances where IPG advertising has been part of a multiple-element transaction, no revenue has been allocated to IPG advertising for accounting purposes, and all revenue has been allocated to other elements of the transaction. For accounting purposes, we expect to record IPG advertising associated with multiple-element arrangements in this manner until such time as we conclude that we can determine the fair value of IPG advertising in a reliable, verifiable and objective manner.

Impairment of Long-Lived Assets, Long-Lived Assets to be Disposed of and Intangible Assets

We review our long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The value of our intangible assets, including goodwill, is exposed to future adverse changes if we experience declines in operating results or experience significant negative industry or economic trends or if future performance is below historical trends. We periodically review intangible assets and goodwill for impairment using the guidance of applicable accounting literature. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future operating cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

We have a significant amount of property and equipment and intangible assets. The determination as to whether events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable involves management’s judgment. In addition, should we conclude that recoverability of an asset is in question, the estimate of undiscounted future operating cash flows is used to determine whether an asset is recoverable and, if not, the final determination of the fair value of the asset is also based on the judgment of management. These judgments can be impacted by a variety of underlying assumptions, such as the general business climate, effectiveness of competition and supply and cost of resources. Accordingly, actual results can differ significantly from the assumptions made by management in making its estimates. Future changes in management’s estimates could result in indicators of impairment and actual impairment charges where none exist as of the date of this report.

Accounting standards, which became effective January 1, 2002, eliminated the impairment recoverability tests for certain other intangible assets with indefinite lives and require that such assets be valued at the lower of their carrying value or fair value. Goodwill is no longer amortized but remains subject to an annual impairment test performed at the reporting unit level. Fair value is determined primarily using the estimated future cash flows associated with the asset under review, discounted at a rate commensurate with the risk involved. Changes in estimates of future cash flows could result in a write-down of the asset in a future period. Absent any interim evidence of impairments, we will perform our annual impairment test of goodwill and other indefinite lived intangibles for all reporting units on October 31 of each year.

Income Taxes

We account for income taxes under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We record a valuation allowance, if necessary, to reduce deferred tax assets to an amount management believes is more likely than not to be realized.

We have income both from foreign and domestic sources. In the preparation of our financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate, including estimating both our actual current tax exposure and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. Assessment of our actual current tax exposure includes assessing tax strategies, the status of tax audits and open audit periods with the taxing authorities. The ultimate resolution of our current tax exposure items may result in the recognition of significant amounts of income or significant cash outlays in future periods. To the extent that we have deferred tax assets, we must assess the likelihood that our deferred tax assets will be recovered from taxable temporary differences, tax strategies or future taxable income and to the extent that we believe that recovery is not likely, we must establish a valuation allowance. As of December 31, 2003 and 2002, we have established valuation allowances of $180.1 million and $30.0 million, respectively, against our deferred tax assets. In the future, we may adjust our estimates of the amount of valuation allowance needed and such adjustment would impact our provision for income taxes in the period of such change.

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Legal and Other Loss Contingencies

A significant amount of management estimation is required in determining when, or if, an accrual should be recorded for a contingent matter and the amount of such accrual, if any. Due to the uncertainty of determining the likelihood of a future event occurring and the potential financial statement impact of such an event, it is possible that upon further development or resolution of a contingent matter, a charge could be recorded in a future period that would be material to our consolidated results of operations and financial position. As of December 31, 2003 and 2002, we had accrued $81.7 million and $7.3 million, respectively, for contingent matters.

Allowance for Doubtful Accounts

We have significant amounts due to us from our customers. We continuously evaluate our outstanding accounts receivable for collectibility. This evaluation involves management’s judgment in assessing the aging of the amounts due to us and in reviewing the credit-worthiness of each customer. Should a customer’s financial condition deteriorate in a manner that could decrease the customer’s ability to pay amounts due to us, we might be required to provide additional allowance for doubtful accounts, which would reduce our earnings.

Investments

Our investments include investments available-for-sale that are carried at fair value, investments accounted for using the cost method of accounting and investments accounted for using the equity method of accounting. A judgmental aspect of accounting for investments involves determining whether an other-than-temporary decline in value of the investment has been sustained. If it has been determined that an investment has sustained an other-than-temporary decline in value, the investment is written down to its fair value by a charge to earnings. Such evaluation is dependent on the specific facts and circumstances related to each investment. Factors that we consider in determining whether an other-than-temporary decline in value has occurred include: the market value of the security in relation to its cost basis; the financial condition of the subject investment; and our intent and ability to hold the investment for a sufficient period of time to allow for recovery in the market value of the investment.

For investments accounted for using the cost or equity method of accounting, management evaluates information such as budgets, business plans or financial statements in addition to quoted market price, if any, in determining whether an other-than-temporary decline in value exists. Factors indicative of an other-than-temporary decline include: recurring operating losses, credit defaults, and subsequent rounds of financings at amounts below the cost basis of the investment. This list is not all-inclusive and management weighs a number of quantitative and qualitative factors in determining whether an other-than-temporary decline in the value of an investment is deemed to have occurred.

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Consolidated Results of Operations

Year ended December 31, 2003 compared to year ended December 31, 2002

The following table sets forth certain financial information for the years ended December 31, 2003 and 2002, in thousands.

Discussion

In 2003, revenues were $878.7 million, a decrease of $122.7 million, or 12.3%, compared to 2002. The decrease in revenues was primarily due to a $51.7 million decrease in newsstand and subscription revenues at TV Guide magazine and a $70.7 million decrease in SNG C-band subscriber and DISH Network conversion revenues. TV Guide magazine underwent its first significant redesign in many years and was relaunched in September 2003. The initial result was increased interest by corporate advertisers and an upturn in subscriptions in the fourth quarter of 2003 from the preceding quarter. However, the environment for consumer magazines remains a difficult one with total industry advertising pages down in 2003 for the third consecutive year and continuing pressure on newsstand sales. Subscription revenues associated with the C-band business continued to decline as a result of competition from DSS and cable television systems. The decline has been accelerated by our marketing alliance agreement with DISH Network to convert SNG’s C-band customers to DISH Network’s DSS service.

In 2003, operating expenses were $880.4 million, a decrease of $1.3 million, or less than 1%, compared to 2002. The decrease in 2003 was primarily due to decreases of $33.7 million in programming costs for SNG, $29.4 million in termination fees paid in 2002 that were associated with the November 2002 management and corporate governance restructuring, $16.2 million related to a reserve for lease abandonment recorded by our eBook business in December 2002, $14.8 million in expenses related to our magazine wholesale distribution business, which ceased operations in 2002 and $20.1 million in bad debt expense, primarily resulting from bad debt recoveries during 2003. In addition, the cost of magazine production, primarily from reduced paper and postage expenses, decreased by $9.2 million. The decreases were substantially offset in 2003 by expenses of $80.1

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million related to litigation settlements and other contingent matters and expenditures totaling $20.1 million in 2003 for editorial improvements and enhanced marketing efforts designed to stabilize TV Guide magazine’s paid circulation and increase its advertising revenues. In addition, legal expenses for patent-related litigation and other legal matters totaled $77.4 million in 2003, an increase of $15.1 million, or 24.3%, from $62.3 million in 2002. In addition, we recorded $4.1 million in expenses to settle legal issues with a former executive of a Company subsidiary. While we expect our legal expenses to decline in 2004, such legal expenses are expected to remain significant for the foreseeable future.

Stock compensation was $33.6 million in 2003 as compared with $24.0 million for 2002. Stock compensation in 2003 included $33.7 million related to stock options held by the Company’s former chief executive officer and former chief financial officer. We terminated the former executives’ employment for cause on April 18, 2003. In 1998, the executives entered into employment agreements that provided for accelerated vesting of options granted in the period 1995 to 1998, as well as an extended post-employment exercise period to the remaining term of the options. Prior to the 1998 agreements, such options were only exercisable during the employment period with a limited post-employment exercise period. Due to the extension of the post-employment exercise period, a new measurement date occurred, at which time the intrinsic value of the modification was determined to be $33.7 million. The intrinsic value was computed as the difference between the exercise price per share and the stock price per share on the new measurement date multiplied by the number of options. Compensation expense was recognized only when we determined that these executives would benefit from the extension of the post-employment exercise period. As a result of the termination, we recognized a pre-tax stock compensation charge of $33.7 million during the three months ended March 31, 2003.

Stock compensation also includes amortization of the portion of the purchase price of acquired businesses assigned to unearned compensation for unvested stock options we assumed in the merger between us and TV Guide, Inc. The unearned compensation is being amortized over the remaining vesting period of the options using an accelerated method. Amortization of unearned compensation totaled $2.8 million and $8.0 million in 2003 and 2002, respectively. In addition, stock compensation for 2002 included $12.9 million of accelerated unearned compensation resulting from an executive who separated from the Company in 2002, and $200,000 arising from the issuance of options to the Company’s former chief executive officer in 1998.

Additionally, stock compensation in 2003 included a reversal of $2.9 million related to unearned compensation amortized in 2002. The amounts were related to restricted stock that was to be issued to two former executives in connection with the management restructuring in the fourth quarter of 2002. The previously recorded expense was reversed in the second quarter of 2003, since these executives were terminated in April 2003 and the restricted stock will not be issued.

Depreciation and amortization in 2003 was $172.9 million, a decrease of $183.4 million, compared to $356.4 million in 2002. The decrease in depreciation and amortization was primarily attributable to decreased amortization expense related to finite-lived intangible assets. During 2002, we recorded impairment charges of $1.3 billion to the carrying values of certain intangible assets with finite lives. Additionally, other finite-lived intangible assets became fully amortized in 2003. We expect amortization of remaining finite-lived intangible assets, assuming no change to the current group of assets, to be approximately $43 million during 2004. However, if the EchoStar transaction is consummated, amortization will decline to approximately $16 million during 2004.

Impairment of intangible assets in 2003 represents a $416.5 write-down of the carrying value of goodwill, indefinite-lived intangibles and a finite-lived intangible asset to their fair values. We recorded impairment of intangible assets of $400.4 million in connection with our annual impairment test of goodwill and indefinite-lived intangible assets as of October 31, 2003. The charge included a $209.8 million write-down of the carrying amount of goodwill, primarily at TV Guide magazine (approximately $200 million) and the SNG C-band business (approximately $10 million), and a $190.6 million write-down of TV Guide magazine’s publishing rights and trademark. The primary cause of this fourth quarter impairment charge was management’s reassessment of the outlook for the magazine business as compared with its forecasts and expectations in 2002, and continued erosion of the estimated fair value of the C-band business as its subscriber base continues to decline. This decline also led us to assess the carrying value of a finite-lived intangible asset ascribed to the C-band subscriber base, resulting in an impairment charge of $16.1 million in the fourth quarter. If we continue to operate the SNG C-band business and its subscriber base continues to decline, we expect to record impairment charges to goodwill and other intangible assets in future periods. In 2002, impairment of intangible assets was $2.4 billion. In addition to the $1.3 billion impairment charge to finite-lived intangible assets noted above, we also recorded impairment charges of $1.1 billion and $112.6 million to goodwill and trademark, respectively, based on analyses performed as of June 30, 2002 and October 31, 2002. Impairment charges in 2002 were principally the result of then-new management’s change in strategy for the U.S. cable and satellite IPG business, slower than expected growth in distribution and advertising revenue, and unexpected adverse rulings in certain legal cases.

In 2003, interest expense was $6.2 million, a decrease of $3.7 million from 2002, which was attributable to lower debt levels, together with lower interest rates during 2003.

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In 2003, other expense, net was $3.1 million, a decrease of $103.8 million, from $106.9 million in 2002. The decrease was primarily due to a $51.4 million impairment charge in 2002 to the carrying value of an equity method investee (see discussion in following paragraph) for which no comparable charges were recorded in 2003, $41.0 million associated with the abandoned DIVA acquisition in 2002 and a $5.9 million decrease in minority interest expense, primarily as a result of a decrease in net income reported by SNG.

We have an interest in three related joint ventures that are each accounted for under the equity method of accounting. In 2002, the financial condition of one of these joint ventures deteriorated significantly, including a substantial decrease in its revenues and cash shortages. Because of these facts, management determined that it was unlikely that our investment would be recovered in the future, and recorded a charge of $43.9 million during the fourth quarter of 2002 to write off the remaining carrying value of our investment. This charge was recorded as other expense, net. During the same year, this joint venture experienced an other-than temporary decline in the value of its available-for-sale equity investments. As a result of this decline, we recorded in other expense, net a charge of $7.5 million, representing our share of this decline.

The income tax benefit as a percentage of loss before income taxes and cumulative effect of an accounting change in 2003 was 9% compared to 21% for 2002. The decrease in the effective tax rate in 2003 was primarily due to an increase in the valuation allowance due to the uncertainty of whether or not we will realize the benefit associated with our deferred tax assets. The overall effective tax rate we report in any single period is impacted by, among other things, the country in which earnings or losses arise, applicable statutory tax rates and withholding tax requirements for particular countries, the availability of net operating loss carryforwards and the availability of tax credits for taxes paid in certain jurisdictions. Because of these factors, our current and future tax expense or benefit as a percentage of income or loss before income taxes may vary from period to period.

The cumulative effect of an accounting change, net of tax relates to our adoption of Statement 142 effective January 1, 2002. We were required to test goodwill and any intangible assets identified as having an indefinite useful life for impairment in accordance with the provisions of Statement 142 and report any transitional impairment loss as the cumulative effect of a change in accounting principle as of January 1, 2002 in the consolidated statement of operations. The transitional impairment loss for goodwill and indefinite lived intangible assets from application of these rules was $4.2 billion, net of tax.

Year ended December 31, 2002 compared to year ended December 31, 2001

The following table sets forth certain financial information for the years ended December 31, 2002 and 2001, in thousands.

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Discussion

Revenues in 2002 were $1.0 billion, a decrease of $157.8 million or 13.6%, compared to 2001. The decrease in revenues was primarily attributable to a $49.1 million decrease in TV Guide magazine’s newsstand and subscription revenues, a $62.7 million decrease in SNG C-band subscriber revenues, and a $24.2 million decrease in license fees from DSS set-top box manufacturers, partially offset by a $12.6 million increase in revenues at TVG.

TV Guide magazine’s rate base and circulation was reduced from 9.9 million copies to 9.0 million copies in June 2001. Subsequently, that rate base was maintained through year end 2002, although sponsored sales/bulk sold subscriptions increased from a monthly average of 1.5 million copies in December 2001 to 2.2 million copies in December 2002, causing subscription revenue to fall due to the lower margin of sponsored sales/bulk copies versus other paid circulation. The decrease in rate base and circulation, and general advertising weakness caused TV Guide magazine’s advertising revenue to decline $17.1 million, although declines during the first three quarters of 2002 were offset in the fourth quarter when advertising revenues increased 33% or $9 million, compared to advertising revenue in the fourth quarter of 2001.

Subscription revenues relating to our SNG C-band business continued to decline in 2002, as customers switched to cable or DSS services. The decline in subscribers was accelerated by our marketing alliance agreement with DISH Network to convert our C-band customers to DISH Network’s DSS service.

License fee revenues relating to the sale of proprietary IPG technology to manufacturers of set-top boxes for the US DSS market declined dramatically in 2002, due to slowing growth in the shipment of set-top boxes, lower pricing per box due to shifts in market share, and the expiration of agreements with two key manufacturers.

Revenues at TVG more than tripled due to increases in distribution and the launch of the TVG’s wagering business in California.

In 2002, operating expenses were $881.7 million, a decrease of $9.9 million, or 1.1%, compared to 2001. The decrease in operating expenses was a result of general cost controls in effect throughout the Company, reductions in TV Guide magazine production expenses for paper, printing, and postage, and reduced programming costs for SNG. These decreases were partially offset by the additional expenses attributable to SkyMall, which was acquired in July 2001, professional fees associated with the November 2002 management and corporate governance restructuring and the restatement of our historical financial statements, and termination fees totaling $29.4 million associated with this restructuring.

Stock compensation expense is primarily comprised of the amortization of the portion of the purchase price of acquired businesses assigned to unearned compensation for unvested stock options we assumed in the merger between us and TV Guide, Inc. The unearned compensation is being amortized over the remaining vesting period of the options using an accelerated method. Also included is the amortization of deferred compensation arising from the issuance of options to the Company’s former Chief Executive Officer in 1998 and amortization of deferred compensation arising from the issuance of restricted stock in connection with the 2002 management restructuring. In 2002, stock compensation expense was $24.0 million, which included $21.1 million of unearned compensation amortization and $2.9 million related to restricted stock issued in connection with our management and corporate governance restructuring in 2002. In 2001, stock compensation expenses were $46.5 million, primarily consisting of unearned compensation amortization.

Depreciation and amortization during 2002, was $356.4 million, a decrease of $584.3 million compared to 2001. The decrease in depreciation and amortization was primarily a result of the adoption of the provisions of Statement 142, which became effective January 1, 2002. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of Statement 142. Other intangible assets with finite lives acquired in transactions accounted for as purchases are still amortized and the amount of that amortization is significant.

Impairment of intangible assets in 2002 represents a write-down of the carrying amount of finite-lived intangible assets ($1.3 billion), goodwill ($1.1 billion) and indefinite-lived intangibles ($112.6 million) to their fair values based on analyses performed as of June 30, 2002 and October 31, 2002.

Interest expense was $9.8 million in 2002, a decrease of $17.5 million, or 64.1%, from 2001. The decrease in interest expense was attributable to lower debt levels, together with lower interest rates during 2002.

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Other expense, net decreased to $106.9 million in 2002 from $168.2 million for 2001. The decrease in other expense, net was primarily due to a $110.8 million decrease in write-downs of the carrying value of certain investments, as compared with the prior year. In 2002, write-downs for other-than-temporary declines in the fair value of investments aggregated $43.9 million compared to $154.7 million in 2001.

We have an interest in three related joint ventures that are each accounted for under the equity method of accounting. In 2001, one of these joint ventures experienced an other-than-temporary decline in the value of its available-for-sale equity investments. As a result of this decline, we recorded in other expense, net a charge of $7.5 million, representing our share of this decline. At December 31, 2001, our carrying value of this investment was $50.9 million. In 2002, this joint venture’s financial condition deteriorated significantly, including a substantial decrease in its revenues and cash shortages. Because of these facts, management determined that it was not likely that our investment would be recovered in the future, and recorded an additional charge of $43.9 million during the fourth quarter of 2002 to write off the remaining carrying value of our investment. This charge was recorded as other expense, net.

We have an investment in an entity engaged in developing a satellite system. The entity experienced operating difficulties and a failed initial public offering. Because of these and other pertinent circumstances, we determined that our investment experienced a decline in value that was other-than-temporary, and that the recoverability of this investment was not likely. As a result, during 2001 we recorded a charge of $107.7 million to write-off the carrying value of this investment. This charge was recorded as other expense, net.

Also, in 2001, certain other investments experienced significant declines in value and the carrying values were deemed by management to be unrecoverable, and thus were written off, resulting in charges of approximately $47.2 million recorded as other expense, net.

The income tax benefit as a percentage of loss before income taxes and cumulative effect of a change in accounting principle was 21% in 2002 compared to 19% in 2001. The net increase in the effective tax rate was primarily due to the change in the treatment of amortization of goodwill in accordance with Statement 142, which had no associated impact on the provision for income taxes. In addition, the overall effective tax rate we report in any single period is impacted by, among other things, the country in which earnings or losses arise, applicable statutory tax rates and withholding tax requirements for particular countries, the availability of net operating loss carryforwards and the availability of tax credits for taxes paid in certain jurisdictions. Because of these factors, it is expected that our future tax expense or benefit as a percentage of income or loss before income taxes may vary from period to period.

The cumulative effect of an accounting change relates to our adoption of Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and other Intangible Assets, (“Statement 142”), effective January 1, 2002. We were required to test goodwill and any intangible assets identified as having an indefinite useful life for impairment in accordance with the provisions of Statement 142 and report any transitional impairment loss as the cumulative effect of a change in accounting principle as of January 1, 2002 in the consolidated statement of operations. The transitional impairment loss for goodwill and indefinite-lived intangible assets from application of these new rules was $4.2 billion, net of tax.

Segment Results of Operations

Effective January 1, 2003, we restructured our businesses into four groups that also represent our reportable business segments. Segments are now organized along three industry lines in addition to a segment comprising certain corporate functions and related expenses. The Publishing Segment consists of our print and electronic publishing units and websites including TV Guide magazine and Gemstar eBook brands, as well as TV Guide Online and the SkyMall catalog business. The Publishing Segment also includes TV Guide Data Solutions, a data collection and distribution business that gathers program listings and channel lineups. The Cable and Satellite Segment offers technologies, products and services to consumers and service providers in the cable and satellite industry. The business units in this segment include TV Guide Channel, TV Guide Interactive, TVG, SNG, UVTV, SpaceCom and several other smaller related businesses. The CE Licensing Segment is responsible for the licensing of our proprietary technologies and intellectual property to the CE manufacturing industry and interactive television software providers, and for the sale of advertising carried on the IPGs deployed in CE devices. The CE Licensing Segment licenses video recording technology currently marketed under the VCR Plus+ system brand in North America and under other brands in Europe and Asia, and IPGs marketed under the TV Guide On Screen brand in North America, under the GUIDE Plus+ brand in Europe and under the G-GUIDE brand in Asia. This segment also has licensed intellectual property to manufacturers of set-top boxes for the DSS industry, and continues to license its intellectual property to interactive television software providers and program listings providers in the online, personal computer and other non-television businesses. As a result of an agreement with DirecTV, we will no longer collect one-time license fees from manufacturers of DirecTV’s set-top boxes, but instead will be paid by DirecTV on a recurring revenue model based initially on new subscribers. Revenues paid by DirecTV will be recognized by the Cable and Satellite Segment. In addition, the CE Licensing Segment incurs costs associated with patent prosecution and certain litigation. The Corporate Segment comprises various centralized functions, including corporate management, corporate legal, corporate finance and other functions, and related costs such as certain litigation and insurance costs.

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Prior to January 1, 2003, we had segmented our businesses by revenue type, which required allocation of operating results for certain business units, principally TV Guide Interactive, TVG and SkyMall, between two or more segments. By contrast, our new segments reflect full operating results of their respective business units. This change is intended to provide greater business unit accountability and improve the transparency of operating performance. Our previous reportable segments were identified as Technology and Licensing, Interactive Platform and Media and Services. Amounts for 2002 have been reclassified to conform to the 2003 presentation.

Segment information for 2003 and 2002 is presented and reconciled to consolidated loss before income taxes and cumulative effect of an accounting change in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, as follows (in thousands):

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Publishing Segment

The Publishing Segment primarily includes the operations of TV Guide magazine, Gemstar eBook, TV Guide Online and SkyMall.

In 2003, revenues for this segment were $425.9 million, a decrease of $49.3 million, or 10.4%, compared to 2002. The decrease was primarily due to decreased revenues earned by TV Guide magazine.

The following table shows the breakdown of revenues in the Publishing Segment by business unit (in thousands):

In 2003, revenues decreased at TV Guide magazine by $52.4 million compared to 2002, primarily due to declines in subscriber and newsstand circulation revenues of $51.7 million.

TV Guide magazine continues to face declines in paid circulation revenues due to a lower overall subscriber base and reduced newsstand sales. At December 31, 2003, TV Guide magazine had a rate base, including sponsored sales/bulk copy distribution, of approximately 9.0 million, which was unchanged from its rate base as of December 31, 2002. The monthly average number of sponsored sales/bulk copy distribution approximated 2.7 million copies in December 2003, an increase from a monthly average of approximately 2.2 million copies in December 2002. Sponsored sales/bulk copy distribution produce little or no circulation contribution and are of substantially lesser economic value than other sources of circulation. However, these copies generate additional advertising revenues. We invested approximately $20 million in the magazine business, primarily in the third and fourth quarters of 2003, to improve editorial content and enhance marketing efforts with the hope of stabilizing paid circulation and increasing advertising revenues at the magazine. The introduction of the enhanced product improved newsstand unit sales in the fourth quarter of 2003 compared with the second and third quarters of 2003; however, fourth quarter newsstand and subscription sales were down by approximately $13.2 million from the comparable quarter of 2002. Management continues to seek cost saving opportunities through alternative marketing techniques, operational efficiencies, downsizing the number of editions produced, and capitalizing on subscription acquisition synergies with TV Guide Online, as described below.

SkyMall’s net revenues are composed of commissions received on the sale of merchandise advertised in its in-flight catalog or on its website www.skymall.com, the selling price of merchandise sold through loyalty programs and placement fees paid by participating merchants to include their products in SkyMall’s catalog. In 2003, revenues increased by $1.7 million, or 3.5%, from 2002, primarily due to an increase in placement fees charged to merchants for including their products in the SkyMall catalog.

TV Guide Online derives revenues from subscriber and licensing arrangements, advertising and merchandising sales. In 2003, revenues increased by $2.0 million from 2002, primarily from increased advertising revenues in 2003. During 2003, TV Guide Online became more integrated with the Company’s other branded products, principally TV Guide magazine and, to a lesser extent, TV Guide Channel, and redesigned its website, which resulted in improved advertising sales. Since its redesign, the website has also been a source of increased subscription orders for TV Guide magazine. The site produced a 61% increase in its paid magazine subscription orders in 2003 as compared with 2002.

Gemstar eBook revenues decreased by $507,000 in 2003, as compared with 2002. Revenues are earned primarily through licensing of technology and also through the sale of eBook devices and content. The decline in revenue was primarily due to a decrease in the sale of eBook content in connection with the shutdown of the eBook operations. In June 2003, we announced that we would scale back and eventually shut down operations of our eBook subsidiaries. We expensed approximately $1.9 million of exit costs, primarily for employee severance payments, in 2003. We do not expect to record any significant revenues or expenses related to our eBook business after 2003. Although consumers can no longer purchase new devices or content, current device owners are able to access previously purchased content and add unencrypted content to their content libraries.

        Operating expenses in this segment were $417.7 million in 2003, a decrease of $32.9 million, or 7.3%, from 2002. The decrease in operating expenses was primarily due to $16.2 million incurred in December 2002 related to a reserve for lease abandonment recorded by our eBook business, $14.8 million of cost savings from exiting the magazine wholesale distribution business in 2002, a $9.2 million decrease in the cost of magazine production, primarily from reduced paper and postage expenses, and decreases in other eBook expenses totaling $8.9 million that resulted from our decision to scale back eBook operations in 2003. These decreases were partially offset by the investment of $20.1 million in the magazine during 2003, as noted above.

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Additional Publishing Segment Operating Statistics

Cable and Satellite Segment

The Cable and Satellite Segment includes the operations of SNG, TV Guide Channel, TV Guide Interactive, TVG and several other smaller related businesses. SNG delivers television programming to C-band satellite dish owners. TV Guide Channel combines original programming content with comprehensive television listings information for distribution to multichannel video providers. In 2003, revenues for this segment were $338.8 million, a decrease of $67.1 million, or 16.5%, compared to 2002. The decreases were primarily attributable to a continuing decline in C-band subscribers in our SNG business unit, along with a decline in TV Guide Interactive advertising revenues, partially offset by increased wagering and licensing revenues generated by TVG and increased advertising revenue reported by TV Guide Channel.

The following table shows the breakdown of revenues in the Cable and Satellite Segment by business unit (in thousands):

The C-band direct-to-home satellite market, in which SNG operates, continues to decline due to the growth of the newer generation DSS systems and continued cable system expansions. Moreover, SNG’s decline has been accelerated by the success of our subscriber conversion program with DISH Network. On November 2, 1999, SNG signed an agreement with EchoStar to promote and solicit orders for its DISH Network. In exchange, SNG receives an initial commission for each current or past SNG subscriber who subscribes to DISH Network and a monthly residual commission over the life of the agreement. SNG converted approximately 69,000 subscribers in 2003 as compared with approximately 95,000 in 2002. We expect the declines in the subscriber base of the C-band industry and the DISH Network conversions, and the resulting impact on revenues in this segment, to continue. At December 31, 2003, SNG provided service to 236,000 C-band subscribers, a decrease of 34.6% from the 361,000 subscribers served by SNG at December 31, 2002. In March 2004, we entered into an agreement with EchoStar that, among other things, includes the sale of substantially all of the assets of SNG. In February 2004, we also agreed to purchase from Wisdom Media Group the minority interest in SNG that we do not already own.

In 2003, TV Guide Channel revenues increased by $6.0 million, or 6.2%, compared to 2002. The increase was primarily attributable to increased advertising revenue, principally from program promotion and conventional ad sales. During 2003, TV Guide Channel focused on expanding its distribution through new multi-year carriage agreements with cable and DSS system operators, including DirecTV. Additionally, TV Guide Channel debuted an expanded original programming format in January 2004 designed to attract more viewers and advertisers. Despite an increase in distribution in 2004, affiliate revenue is projected to decline as a result of decreased rates paid by cable operators under the terms of their agreements. However, advertising revenues are expected to increase in parallel with anticipated growth in distribution and expected higher ratings from improved programming content.

In 2003, TV Guide Interactive revenues decreased by $9.3 million from 2002. The decrease was primarily attributable to lower advertising revenue and decreased licensing revenues caused by lower net effective rates. Distribution of TV Guide

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Interactive reached 11.5 million subscribers as of December 31, 2003, an increase of approximately 14% from December 31, 2002. The Company’s ability to increase advertising revenue in future periods will largely depend on the development of an advertising platform that gains acceptance from cable affiliates and advertisers.

This segment also includes revenues derived from licensing TVG’s intellectual property and content to third parties and from interactive wagering activities in certain markets. In 2003, TVG’s revenues increased by $10.7 million, or 60.7%, as compared with 2002. The increase reflects the addition of a licensee in May 2002 and increased wagering volumes due to new distribution and market launches, including certain DirecTV subscribers as of April 2003. As of December 31, 2003, TVG was available in approximately 12.3 million domestic satellite and cable homes, an increase of 46.4%, from 8.4 million homes at December 31, 2002.

Operating expenses in this segment were $219.1 million in 2003, a decrease of $18.4 million, or 7.8%, compared to 2002. The decrease in expenses was primarily due to reduced programming fees at SNG associated with the decrease in the number of C-band subscribers, partially offset by increased expenses at TV Guide Channel and TV Guide Interactive where increased headcount resulted in higher personnel costs. Personnel costs also increased due to certain severance costs.

Additional Cable and Satellite Segment Operating Statistics