<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549


                                   FORM 10-Q


             [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
                  Commission File Number           00-21315


                             ON COMMAND CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)



                     DELAWARE                                  77-04535194
     ---------------------------------------------          ----------------
     (State or other jurisdiction of incorporation          (I.R.S. Employer
                  or organization)                         Identification No.)


     6331 SAN IGNACIO AVE,  SAN JOSE, CALIFORNIA                    95119
--------------------------------------------------------------------------------
        (Address of principal executive offices)                  (Zip Code)


                                 (408) 360-4500
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


                                (not applicable)
--------------------------------------------------------------------------------
      (Former name, former address and former fiscal year, if changed since
                                  last report)


        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            .
                            ------------   ------------

        The number of shares outstanding of the Registrant's Common Stock as of
June 30, 1998 was 30,159,782 shares.






<PAGE>   2

                             ON COMMAND CORPORATION

                                   FORM 10-Q
                                      INDEX


<TABLE>
<CAPTION>
                                                                                                                       Page No.
<S>         <C>                                                                                                       <C>
PART I.      FINANCIAL INFORMATION

      Item 1 - Financial Statements:

             Condensed Consolidated Balance Sheets as of June 30,1998 and December 31,1997.                               3

             Condensed Consolidated Statements of Operations for the Three Months and Six Months
             Ended June 30, 1998 and 1997.                                                                                4

             Condensed Consolidated Statements of Cash Flows for the Six months Ended
             June 30,1998 and 1997.                                                                                       5

             Notes to Condensed Consolidated Financial Statements.                                                       6-7

      Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.                    8-13


PART II.      OTHER INFORMATION

      Item 6 - Exhibits and Reports on Form 8-K                                                                           14


SIGNATURES                                                                                                                15
</TABLE>





                                       -2-


<PAGE>   3

                          PART I. FINANCIAL INFORMATION
                          ITEM I. FINANCIAL STATEMENTS

                             ON COMMAND CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                      June 30,          December 31,
                                                                                        1998                1997
                                                                                     ---------           ---------
                                                                                   ( Unaudited )
<S>                                                                                  <C>                 <C>      
                                     ASSETS

Current assets:
  Cash and cash equivalents                                                          $   4,839           $   6,287
  Accounts receivable, net                                                              38,995              26,827
  Other current assets                                                                   2,223               1,959
                                                                                     ---------           ---------
     Total current assets                                                               46,057              35,073

Video systems, net                                                                     274,399             270,531
Property and equipment, net                                                              9,208               7,850
Goodwill, net                                                                           79,862              82,049
Other assets, net                                                                        4,827               5,885
                                                                                     ---------           ---------
                                                                                     $ 414,353           $ 401,388
                                                                                     =========           =========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                                                   $  28,510           $  20,155
  Accrued compensation                                                                   5,027               5,805
  Other accrued liabilities                                                             11,591               9,763
  Taxes payable                                                                         10,406              11,115
                                                                                     ---------           ---------
    Total current liabilities                                                           55,534              46,838

Other accrued liabilities                                                                2,919               4,383
Revolving credit facility                                                              154,000             133,000
                                                                                     ---------           ---------
    Total liabilities                                                                  212,453             184,221
                                                                                     ---------           ---------


Stockholders' equity:
  Common stock, $.01 par value; shares authorized - 50,000 in 1998 and 1997
     shares issued and outstanding, 30,160 in 1998 and 29,801 in 1997;
     shares subscribed - 2 in 1998 and 315 in 1997                                         301                 301
  Additional paid-in capital                                                           249,656             249,431
  Common stock warrants                                                                 31,450              31,450
  Cumulative translation adjustments                                                    (1,540)               (964)
  Accumulated deficit                                                                  (77,967)            (63,051)
                                                                                     ---------           ---------
     Total stockholders' equity                                                        201,900             217,167
                                                                                     ---------           ---------
                                                                                       414,353             401,388
                                                                                     =========           =========
</TABLE>


The accompanying notes are an integral part of these condensed consolidated
financial statements.



                                      -3-

<PAGE>   4

                             ON COMMAND CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



<TABLE>
<CAPTION>
                                                               Three Months Ended            Six Months Ended
                                                                    June 30,                       June 30,
                                                            ------------------------      ------------------------
                                                               1998           1997          1998            1997
                                                            ---------      ---------      ---------      ---------
<S>                                                         <C>            <C>            <C>            <C>      
Revenues:
  Room revenues                                             $  58,652      $  54,580      $ 112,898      $ 104,543
  Video system sales/other                                      2,243          1,807          3,865          3,908
                                                            ---------      ---------      ---------      ---------
    Total revenues                                             60,895         56,387        116,763        108,451
                                                            ---------      ---------      ---------      ---------


Direct costs:
  Room revenues                                                25,492         25,381         48,614         49,811
  Video system sales/other                                      1,370            957          2,168          2,023
                                                            ---------      ---------      ---------      ---------
    Total direct costs                                         26,862         26,338         50,782         51,834
                                                            ---------      ---------      ---------      ---------


Direct income                                                  34,033         30,049         65,981         56,617

Operating expenses:
  Operations                                                    8,569          7,873         16,990         17,727
  Research and development                                      2,022          1,489          3,710          3,103
  Selling, general and administrative                           6,328          4,700         12,293         10,890
  Depreciation and amortization                                21,786         19,514         43,242         38,523
                                                            ---------      ---------      ---------      ---------
    Total operating expenses                                   38,705         33,576         76,235         70,243
                                                            ---------      ---------      ---------      ---------

Operating loss                                                 (4,672)        (3,527)       (10,254)       (13,626)

Interest/other expense, net                                     2,482          1,838          4,764          3,695
                                                            ---------      ---------      ---------      ---------

Loss before income taxes                                       (7,154)        (5,365)       (15,018)       (17,321)

Income tax (benefit) expense                                      (76)           452           (102)           452
                                                            ---------      ---------      ---------      ---------
Net loss                                                       (7,078)        (5,817)       (14,916)       (17,773)
                                                            =========      =========      =========      =========

Basic and diluted net loss per share                        $   (0.23)     $   (0.19)     $   (0.50)     $   (0.59)
                                                            =========      =========      =========      =========

Shares used in basic and diluted per share computations        30,147         30,060         30,133         30,053
                                                            =========      =========      =========      =========
</TABLE>


The accompanying notes are an integral part of these condensed consolidated
financial statements.








                                      -4-


<PAGE>   5

                             ON COMMAND CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                   Six Months Ended
                                                                       June 30,
                                                                ----------------------
                                                                  1998           1997
                                                                --------      --------
<S>                                                             <C>           <C>      
Cash flows from operating activities:
  Net loss                                                      $(14,916)     $(17,773)
  Adjustments to reconcile net loss to net cash provided by
    operating activities:
      Depreciation and amortization                               43,242        38,523
      Loss on disposal of fixed assets                                74            --
      Changes in assets and liabilities:
          Accounts receivable, net                               (12,207)       (1,835)
          Other assets                                              (225)          990
          Accounts payable                                         8,363         6,865
          Accrued compensation                                      (773)         (398)
          Taxes payable                                           (1,148)        1,216
          Other accrued liabilities                                  255           446
                                                                --------      --------
           Net cash provided by operating activities              22,665        28,034

Cash flows from investing activities:
      Capital expenditures                                       (45,245)      (43,915)
      Other assets                                                    --            28
                                                                --------      --------
            Net cash used in investing activities                (45,245)      (43,887)
                                                                --------      --------

Cash flows from financing activities:
      Proceeds from revolving credit facility                     21,000        17,000
      Proceeds from issuance of common stock                         225           126
                                                                --------      --------
            Net cash provided by financing activities             21,225        17,126
                                                                --------      --------

Effect of exchange rate changes in cash                              (93)          145
                                                                --------      --------

Net increase (decrease) in cash and cash equivalents              (1,448)        1,418

Cash and cash equivalents, beginning of period                     6,287         5,733
                                                                --------      --------

Cash and cash equivalents, end of period                        $  4,839      $  7,151
                                                                ========      ========

Non-cash activity:
      Reversal of accrual made in purchase
          price allocation                                      $     --      $  3,000
                                                                ========      ========

Supplemental information:
      Cash paid for income taxes                                $     --      $    265
                                                                ========      ========
      Cash paid for interest                                    $  4,575      $  3,129
                                                                ========      ========
</TABLE>



The accompanying notes are an integral part of these condensed consolidated
financial statements.




                                      -5-


<PAGE>   6

                             ON COMMAND CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                     SIX MONTHS ENDED JUNE 30, 1998 AND 1997

1.       BASIS OF PRESENTATION

                  On Command Corporation (the "Company" or "OCC") is a Delaware
         corporation formed by Ascent Entertainment Group, Inc. ("Ascent") for
         the purpose of effecting (i) the merger (the "Merger") of On Command
         Video Corporation ("OCV"), a majority-owned subsidiary of Ascent, with
         a wholly-owned subsidiary of OCC, after which OCV became a wholly owned
         subsidiary of OCC, and (ii) the acquisition of SpectraDyne, Inc., a
         wholly owned subsidiary of SpectraVision, Inc. Following the
         Acquisition in 1996, SpectraDyne, Inc. changed its name to
         SpectraVision, Inc. ("SpectraVision"). Ascent was a majority-owned
         subsidiary of COMSAT Corporation ("COMSAT") until June 27, 1997, COMSAT
         consummated the distribution of its 80.67% ownership interest in Ascent
         to the COMSAT shareholders on a pro-rata basis in a transaction that
         was tax-free for federal income tax purposes.

                  The condensed financial statements have been prepared by the
         Company pursuant to the rules and regulations of the Securities and
         Exchange Commission ("SEC"). While the quarterly financial information
         contained in this filing is unaudited, the financial statements
         presented reflect all adjustments (consisting only of normal recurring
         adjustments) which the Company considers necessary for a fair
         presentation of the financial position at June 30, 1998 and December
         31, 1997, and the results of operations and cash flows for the six
         months ended June 30, 1998 and 1997. The results for interim periods
         are not necessarily indicative of the results to be expected for the
         entire year.

2.       NET LOSS PER SHARE

                  Basic and diluted net loss per share are computed by dividing
         net loss (numerator) by the weighted-average number of common shares
         outstanding (denominator) for the period. Common equivalent shares
         include common stock options and warrants and at June 30, 1998 and 1997
         approximately 10.1 million and 9.9 million equivalent dilutive
         securities, respectively, have been excluded in weighted-average number
         of common shares outstanding for the diluted net loss per share
         computation as common stock equivalents because their effect is
         antidilutive.

3.       COMPREHENSIVE LOSS

                  Total comprehensive loss of $15.5 million for the six months
         ended June 30, 1998 is comprised of $ 14.9 million net loss plus $0.6
         million net change in the cumulative translation account. For the six
         months ended June 30, 1997, total comprehensive loss of $17.7 million
         is comprised of $17.8 million net loss less $0.1 million net change in
         the cumulative translation account.

4.       DEBT

                  On November 24, 1997, the Company refinanced its former credit
         facility and entered into an amended and restated agreement with its
         lender (the "Credit Facility"). Under the amended Credit Facility, the
         amount available to the Company was increased from $150 million to $200
         million, and certain other terms were amended; most notably, the
         inclusion of restrictions on the Company's ability to pay dividends or
         make other distributions until the later of January 1, 1999 or until
         certain operating ratios are attained. The Credit Facility matures in
         November 2002 and , subject to certain conditions, can be renewed for
         two additional years. At June 30, 1998, there was $46 million of
         available borrowings under the Credit Facility, subject to certain
         covenant restrictions.

5.       LITIGATION

                  The Company is a defendant, and may be a potential defendant,
         in lawsuits and claims arising in the ordinary course of its business.
         While the outcomes of such claims, lawsuits, or other proceedings
         cannot be predicted with certainty, management expects that such
         liability, to the extent not provided for by insurance or otherwise,
         will not have a material adverse effect on the financial condition of
         the Company.




                                       -6-




<PAGE>   7

6.       NEW ACCOUNTING PRONOUNCEMENTS

                  In June 1997, the Financial Accounting Standards Board issued
         Statement of Financial Accounting Standards No. 131, "Disclosures about
         Segments of an Enterprise and Related Information", (SFAS 131) which
         establishes annual and interim reporting standards for an enterprise's
         business segments and related disclosures about its products, services,
         geographic areas, and major customers. The Company has not yet
         identified its reporting segments. Adoption of this statement will not
         impact the Company's consolidated financial position, results of
         operations or cash flow. The Company is required to and will adopt SFAS
         131 for the fiscal year 1998.

                  In June 1998, the Financial Accounting Standards Board issued
         Statement of Financial Accounting Standards No. 133, "Accounting for
         Derivative Instruments and Hedging Activities", (SFAS 133) which
         defines derivatives, requires that all derivatives be carried at fair
         value, and provides for hedging accounting when certain conditions are
         met. This statement is effective for all fiscal quarters of fiscal
         years beginning after June 15, 1999. On a forward-looking basis,
         although the Company has not fully assessed the implications of this
         new statement, the Company does not believe adoption of this statement
         will have a material impact on the Company's financial position or
         results of operations.





                                       -7-


<PAGE>   8

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

      This Form 10-Q contains 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, which reflect OCC's current
expectations and assumptions on those issues. Because such statements apply to
future events, they are subject to risks and uncertainties that could cause the
actual results to differ materially. The following should be read in conjunction
with the Condensed Consolidated Financial Statements (unaudited) included
elsewhere herein, and with the Consolidated Financial Statements, notes thereto,
and Management Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's 1997 Annual Report on Form 10-K, as filed
with the Securities and Exchange Commission.

                                    OVERVIEW

      OCC is the leading provider (by number of hotel rooms served) of on-demand
in-room video entertainment for the lodging industry. The on-demand OCC system
is a patented video selection and distribution system that allows guests to
select at any time, on a pay-per-view basis, from up to 50 movies on the
television sets located in their rooms. OCC also provides in-room viewing of
free-to-guest programming of select cable channels and other interactive
services. OCC (OCV prior to October 8, 1996) has experienced rapid growth in the
past six years, increasing its base of installed rooms from approximately 37,000
rooms at the end of 1992 to approximately 916,000 rooms at June 30, 1998. OCC
provides its services under long-term contracts primarily to business and luxury
hotel chains such as Marriott, Hilton, Hyatt, Wyndham, Doubletree, Fairmont,
Four Seasons, Loews, Stouffer, Embassy Suites, Holiday Inn and Harvey Hotels,
and to other hotel management companies and individually owned and franchised
hotel properties.

      At June 30, 1998, approximately 87% of OCC's 916,000 installed rooms were
located in the United States, with the balance located in Canada, Asia, Europe
and Mexico. Of these installed systems, approximately 87% had on-demand
capability.

GUEST PAY SERVICES

      OCC provides scheduled and on-demand in-room television viewing of major
motion pictures (including new releases) and independent non-rated motion
pictures for mature audiences for which a hotel guest pays on a per-view basis.
Depending on the type of system installed and the size of the hotel, guests can
choose among twenty (20) to fifty (50) different movies with an on-demand system
or among eight (8) to twelve (12) movies with a scheduled system.

      OCC obtains the non-exclusive rights to show recently released motion
pictures from major motion picture studios generally pursuant to a master
agreement with each studio. The license period and fee for each motion picture
are negotiated individually with each studio, which typically receives a
percentage of that picture's gross revenues generated by the pay-per-view
system. Typically, OCC obtains rights to exhibit major motion pictures during
the time frame after initial theatrical release and before release for home
video distribution or cable television exhibition. OCC also obtains independent
motion pictures, most of which are non-rated and are intended for mature
audiences, for a one-time flat fee that is nominal in relation to the licensing
fees paid for major motion pictures.

      Under OCC's standard arrangements with hotels, OCC installs its system
into the hotel and retains ownership of all its equipment used in providing the
service. Depending on the size of the hotel property and the configuration of
the system installed, the installed cost of a new on-demand system with
interactive and video game services capabilities, including the head-end
equipment, averages from approximately $300 to $700 per room. The hotels collect
movie viewing charges from their guests and retain a commission equal to a
percentage of the total pay-per-view revenue that can vary depending on the
system, the hotel, and amount of revenue generated.

      The revenues generated from the Company's pay-per-view service are
influenced by occupancy rates at the hotel property, the "buy rate" or
percentage of occupied rooms that buy movies or other services at the property,
and the price of the movie or service. Occupancy rates vary by property based on
the property's location, competitive position within its marketplace, seasonal
factors and general economic conditions. Buy rates generally reflect the hotel's
guest mix profile, the popularity of the motion pictures or services available
at the hotel, and the guests' other entertainment alternatives. Buy rates also
vary over time with general economic conditions.



                                       -8-

<PAGE>   9


FREE-TO-GUEST SERVICES

      OCC also markets a free-to-guest service pursuant to which a hotel may
elect to receive one or more satellite programming channels, such as HBO,
Showtime, CNN, ESPN, WTBS, and other cable networks. OCC provides hotels
free-to-guest services through a variety of arrangements including having the
hotel pay the Company a fixed monthly fee per room for each programming channel
selected or having the price of such programming included in the Company's other
offerings.

INTERACTIVE AND OTHER SERVICES

      In addition to entertainment services, OCC provides interactive services
to the lodging industry. These services use two-way interactive communications
capability of the Company's equipment and room availability monitoring.

      In addition to installing systems in hotels served by OCC, OCC sells
systems to certain other providers of in-room entertainment including MagiNet
Corporation (formerly Pacific Pay Video Limited), which is licensed to use OCC's
system to provide on-demand in-room entertainment in the Asia Pacific region,
and Hospitality Networks, a provider of pay-per-view services to the certain
hotels primarily in the Las Vegas, Nevada region.

                             ANALYSIS OF OPERATIONS

EFFECTS OF SATELLITE DISRUPTION

          On January 11, 1997, OCC experienced an interruption in service for
certain of its SpectraVision hotels caused by the loss of communication with a
satellite used to deliver pay-per-view programming. Approximately 950 of OCC's
approximately 3,100 hotels were affected. Of the hotels affected, approximately
410 hotels continued to provide limited pay-per-view services through alternate
disk or tape-based systems. By February 9, 1997, OCC was able to obtain
alternate satellite service and had restored full service to all the hotels
affected. The Company believes the loss of satellite service in the first
quarter of 1997 resulted in approximately $3 million of decreased EBITDA through
reduced revenues and increased expenses in that period. On July 23, 1997, the
alternate satellite service was terminated. As of that date, many of the rooms
previously receiving only satellite broadcast were installed with tape based
replacement systems. The remaining satellite-only rooms, which totaled
approximately 37,000 rooms, were either assigned to another provider or had
service discontinued.

ROOM AND INVESTMENT ACTIVITY

          At June 30, 1998, the Company's installed room base was approximately
916,000, as compared to approximately 921,000 at the end of the second quarter
of 1997. In the second quarter of 1998, the Company installed its on-demand
system in approximately 29,000 rooms, of which approximately 21,000 were new
hotel installations, and approximately 8,000 were conversions of SpectraVision
properties. The decline in the installed room total at the end of the second
quarter 1998 was due primarily to the previously announced transfer of rooms to
Skylink Cinema Corporation in 1997, and room losses from the termination of
satellite broadcast movie services in SpectraVision hotels. The hotels included
in the transfer, termination, and non-renewal of service consisted primarily of
rooms that did not fit the Company's target economic profile. Capital
expenditures totaled $45.2 million during the first six months of 1998 primarily
in support of the new hotel installations, SpectraVision conversions, and
internal fixed asset purchases. Following is selected financial information for
the three and six months ended June 30, 1998 compared to the same period for
1997.




                                      -9-




<PAGE>   10

                         SELECTED FINANCIAL INFORMATION
                  (In thousands, except hotel and room amounts)



<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED                               SIX MONTHS ENDED
                                    -----------------------------------------   ------------------------------------------
                                                % OF                   % OF                    % OF                 % OF
                                    JUNE 30,    TOTAL     JUNE 30,     TOTAL    JUNE 30,      TOTAL     JUNE 30,    TOTAL
                                      1998     REVENUE     1997       REVENUE     1998       REVENUE     1997       REVENUE
                                      ----     -------     ----       -------     ----       -------     ----       -------
<S>                                 <C>       <C>        <C>         <C>       <C>          <C>       <C>          <C>  
Revenues:                                                                                                         
    Room Revenues                   $ 58,652     96.3 %  $ 54,580       96.8 %  $112,898       96.7 %  $104,543      96.4 %
    Video Systems/Other                2,243      3.7 %     1,807        3.2 %     3,865        3.3 %     3,908       3.6 %
                                    --------     ----    --------       ----    --------       ----    --------      ---- 
Total Revenues                        60,895    100.0 %    56,387      100.0 %   116,763      100.0 %   108,451     100.0 %
                                                                                                                  
Direct Costs:                                                                                                     
    Room Revenues                     25,492     41.9 %    25,381       45.0 %    48,614       41.6 %    49,811      45.9 %
    Video Systems/Other                1,370      2.2 %       957        1.7 %     2,168        1.9 %     2,023       1.9 %
                                    --------     ----    --------       ----    --------       ----    --------      ---- 
Total Direct Costs                    26,862     44.1 %    26,338       46.7 %    50,782       43.5 %    51,834      47.8 %
                                                                                                                  
                                    --------     ----    --------       ----    --------       ----    --------      ---- 
Direct Profit                         34,033     55.9 %    30,049       53.3 %    65,981       56.5 %    56,617      52.2 %
                                                                                                                  
Operations                             8,569     14.1 %     7,873       14.0 %    16,990       14.6 %    17,727      16.3 %
Research & Development                 2,022      3.3 %     1,489        2.6 %     3,710        3.2 %     3,103       2.9 %
Selling, General & Administrative      6,328     10.4 %     4,700        8.3 %    12,293       10.5 %    10,890      10.0 %
                                    --------     ----    --------       ----    --------       ----    --------      ---- 
                                      16,919     27.8 %    14,062       24.9 %    32,993       28.3 %    31,720      29.2 %
                                                                                                                  
                                    --------     ----    --------       ----    --------       ----    --------      ---- 
EBITDA(1)                             17,114     28.1 %    15,987       28.4 %    32,988       28.3 %    24,897      23.0 %
                                                                                                                  
Depreciation & Amortization           21,786     35.8 %    19,514       34.6 %    43,242       37.0 %    38,523      35.5 %
Interest/other exp, net                2,482      4.1 %     1,838        3.3 %     4,764        4.1 %     3,695       3.4 %
Taxes                                    (76)    (0.1)%       452        0.8 %      (102)      (0.1)%       452       0.4 %
                                    --------     ----    --------       ----    --------       ----    --------      ---- 
                                      24,192     39.7 %    21,804       38.7 %    47,904       41.0 %    42,670      39.3 %

                                    -----------------    -------------------    -------------------    ------------------ 
Net Loss                            $ (7,078)   (11.6)%  $ (5,817)     (10.3)%  $(14,916)     (12.8)%  $(17,773)    (16.4)%
                                    =================    ===================    ===================    ================== 
                                                                                                                  
CAPITAL EXPENDITURES                 $22,043              $24,462               $ 45,245               $ 43,915
</TABLE>


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


<TABLE>
<CAPTION>
                               AS OF         % OF            AS OF          % OF
                              JUNE 30,       TOTAL          JUNE 30,        TOTAL
                               1998          ROOMS           1997           ROOMS
                               ----          -----           ----           -----
<S>                           <C>           <C>            <C>             <C>  
TOTAL HOTELS                    3,146                         3,187
TOTAL ROOMS                   916,000                       921,000
                                                                          
ROOM COMPOSITION:                                                         
Geographic                                                                
    Domestic                  793,000         86.6%         803,000           87.2%
    International             123,000         13.4%         118,000           12.8%
                                                                          
System Type                                                               
    Scheduled Only            115,000         12.6%         188,000           20.4%
    On-Demand                 801,000         87.4%         733,000           79.6%
</TABLE>

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

(1)  EBITDA represents earnings before interest, income taxes, depreciation and
     amortization. The most significant difference between EBITDA and cash
     provided from operations is changes in working capital and interest
     expense. EBITDA is presented because it is a widely accepted financial
     indicator used by certain investors and analysts to analyze and compare
     companies on the basis of operating performance. In addition, management
     believes EBITDA provides an important additional perspective on the
     Company's operating results and the Company's ability to service its
     long-term debt and fund the Company's continuing growth. EBITDA is not
     intended to represent cash flows for the period, or to depict funds
     available for dividends, reinvestment or other discretionary uses. EBITDA
     has not been presented as an alternative to operating income or as an
     indicator of operating performance and should not be considered in
     isolation or as a substitute for measures of performance prepared in
     accordance with generally accepted accounting principles, which are
     presented in the financial statements in Item 1 and discussed in Item 2
     under Liquidity and Capital Resources.





                                      -10-

<PAGE>   11

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30,1997

         Total revenues for the second quarter of 1998 increased $4.5 million or
8.0% to $60.9 million, as compared to $56.4 million for the comparable period
of 1997. Room revenues increased $4.1 million or 7.5% in the second quarter of
1998 to $58.7 million, as compared to $54.6 million in the second quarter of
1997. The increase was primarily due to stronger buy rates for movies during
the second quarter of 1998, and a higher percentage of total rooms being served
by OCV on-demand equipment in the second quarter of 1998 as compared to the
same period of 1997. However, these increases were somewhat offset by lower
revenue from SpectraVision rooms which was the result of the weak Asian economy
and reduced number of movies available on the SpectraVision tape-based systems.
Video system sales and other revenues increased $0.4 million or 24.1% to $2.2
million in the second quarter of 1998, as compared to $1.8 million in the
second quarter of 1997, reflecting an increase in ordering of video systems
from a licensee and an increase in revenue associated with wiring the hotels.

         Total direct costs of revenues for the second quarter of 1998 increased
$0.5 million or 2.0% to $26.9 million, as compared to $26.3 million for the
second quarter of 1997. Direct costs associated with room revenue in the second
quarter of 1998 increased $0.1 million or 0.4% to $25.5 million, as compared to
$25.4 million for the same period of 1997, and as a percentage of room revenue
decreased to 43.5% for the quarter ended June 30, 1998 from 46.5% for the
quarter ended June 30, 1997. The improvement is principally attributed to
termination of satellite movie service related to SpectraVision rooms. The
decrease was partially offset by an increase in hotel commission and
free-to-guest expenses in relation to the increase in room revenue. Direct costs
from video system sales and other revenues increased $0.4 million or 43.2% to
$1.4 million in the second quarter of 1998, as compared to $1.0 million in the
same period of 1997, primarily as a result of increased video systems and
pre-wire sales. Direct costs as a percentage of video system sales and other
revenues increased to 61.1% for the second quarter of 1998 from 53.0% for the
same period of 1997, primarily attributable to an increase in pre-wire revenue
which have lower margins than video system sales.

         Operations expenses, which consists primarily of technical field
support for the hotels, for the second quarter of 1998 increased $0.7 million or
8.8% to $8.6 million, as compared to $7.9 million in the second quarter of 1997,
and as a percentage of total revenue increased to 14.1% from 14.0% for the same
period of 1997. The increase is primarily due to higher spare part costs,
training costs, and TV repair costs in the second quarter of 1998 as compared to
the second quarter of 1997.

         Research and development expenses for the second quarter of 1998
increased $0.5 million or 35.8% to $2.0 million from $1.5 million for the second
quarter of 1997. The higher expenses are due to increasing efforts in the
development of the Company's new digital platforms and programming support.

         Selling, general and administrative expenses for the second quarter of
1998 increased $1.6 million or 34.6% to $6.3 million, as compared to $4.7
million in the second quarter of 1997, and as a percentage of total revenue
increased to 10.4% from 8.3% in the second quarter of 1997. The increase is
principally due to higher expenses in the area of program management and
marketing in order to support new products and initiatives, and litigation
expense.

         Depreciation and amortization expenses for the second quarter of 1998
increased $2.3 million or 11.6% to $21.8 million, as compared to $19.5 million
for the second quarter of 1997, and as a percentage of total revenue increased
to 35.8% for the quarter ended June 30, 1998 from 34.6% for the quarter ended
June 30, 1997. These expenses are primarily attributable to depreciable video
systems that generate movie revenue. The dollar increase is mainly due to
capital investments associated with the growing OCV room base. The percentage
increase is attributable to conversion of SpectraVision hotels to OCV equipment
which have a higher cost basis.

         Interest/other expense, net for the second quarter of 1998 increased
$0.6 million or 35.0% to $2.5 million, as compared to $1.8 million in the second
quarter of 1997. The increase is due to the Company's greater reliance on debt
financing to continue the expansion of its installed customer base and
replacement of SpectraVision systems with OCV systems.

         Provision for income taxes for the second quarter of 1998 represents
tax benefits on losses in certain foreign jurisdictions.



                                      -11-


<PAGE>   12

         EBITDA for the second quarter of 1998 increased $1.1 million or 7.0% to
$17.1 million as compared to $16.0 million in the second quarter of 1997. EBITDA
as a percentage of total revenue decreased slightly to 28.1% in the second
quarter of 1998 from 28.4% in the same period of 1997. The improved EBITDA
amount is primarily attributable to the increase in revenue for the second
quarter of 1998 as compared to the same period of 1997.

         Net loss increased to $7.1 million for the second quarter of 1998 from
$5.8 million for the second quarter of 1997 due to the factors described above.


SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30,1997

         Total revenues for the six months ended June 30, 1998 increased $8.3
million or 7.7% to $116.8 million, as compared to $108.5 million for the
comparable period of 1997. Room revenues increased $8.4 million or 8.0% in the
first six months of 1998 to $112.9 million, as compared to $104.5 million in the
first six months of 1997. The increase was primarily due to the satellite outage
in the first quarter of 1997, stronger buy rates for movies during the first six
months of 1998, and a higher percentage of total rooms being served by OCV
equipment in 1998 as compared to the same period of 1997. Video system sales and
other revenues remained flat for the six months ended June 30, 1998, as compared
to the six months ended June 30, 1997.

         Total direct costs of revenues for the six months ended June 30, 1998
decreased $1.0 million or 2.0% to $50.8 million, as compared to $51.8 million
for the six months ended June 30, 1997. Direct costs associated with room
revenue in the first six months of 1998 decreased $1.2 million or 2.4% to $48.6
million, as compared to $49.8 million for the same period of 1997, and as a
percentage of room revenue decreased to 43.1% for the six months ended June 30,
1998 from 47.6% for the six months ended June 30, 1997. The improvement is
principally attributed to termination of satellite movie service related to
SpectraVision rooms. The decrease was partially offset by an increase in movie
royalty, hotel commission, and free-to-guest expenses in relation to the
increase in room revenue. Direct costs from video system sales and other
revenues increased $0.1 million or 7.2% to $2.1 million in the first six months
of 1998, as compared to $2.0 million in the same period of 1997, primarily as a
result of increased video systems and pre-wire sales. Direct costs as a
percentage of video system sales and other revenues increased to 56.1% for the
first six months of 1998 from 51.8% for the same period of 1997, primarily
attributable to an increase in pre-wire revenue which have lower margins than
video system sales.

         Operations expenses, which consists primarily of technical field
support for the hotels, for the six months ended June 30, 1998 decreased $0.7
million or 4.2% to $17.0 million, as compared to $17.7 million in the six months
ended June 30, 1997, and as a percentage of total revenue decreased to 14.6%
from 16.3% for the same period of 1997. The decrease is primarily due to $0.8
million of non-recurring satellite re-deployment expenses incurred in the first
quarter of 1997.

         Research and development expenses for the six months ended June 30,
1998 increased $0.6 million or 19.6% to $3.7 million from $3.1 million for the
six months ended June 30, 1997. The higher expenses are due to increasing
efforts in the development of the Company's new digital platforms and
programming support.

         Selling, general and administrative expenses for the six months ended
June 30, 1998 increased $1.4 million or 12.9% to $12.3 million, as compared to
$10.9 million in the six months ended June 30, 1997, and as a percentage of
total revenue increased to 10.5% from 10.0% in the first six months of 1997. The
increase is principally due to higher expenses in the area of program management
and marketing in order to support new products and initiatives, and litigation
expense.

         Depreciation and amortization expenses for the six months ended June
30, 1998 increased $4.7 million or 12.2% to $43.2 million, as compared to $38.5
million for the six months ended June 30, 1997, and as a percentage of total
revenue increased to 37.0% for the first six months of 1998 from 35.5% for the
same period of 1997. These expenses are primarily attributable to depreciable
video systems that generate movie revenue. The dollar increase is mainly due to
capital investments associated with the growing OCV room base. The percentage
increase is attributable to conversion of SpectraVision hotels to OCV equipment
which have a higher cost basis.

         Interest/other expense, net for the six months ended June 30, 1998
increased $1.1 million or 28.9% to $4.8 million, as compared to $3.7 million in
the six months ended 1997. The increase is due to the Company's greater reliance
on debt financing to continue the expansion of its installed customer base and
replacement of SpectraVision systems with OCV systems.


                                     - 12 -


<PAGE>   13
         Provision for income taxes for the six months ended June 30, 1998
represents tax benefits on losses in certain foreign jurisdictions. The income
tax expense for the six months ended June 30, 1997 represents tax on income in
foreign jurisdictions.

         EBITDA for the six months ended June 30, 1998 increased $8.1 million or
32.5% to $33.0 million as compared to $24.9 million for the six months ended
June 30, 1997. EBITDA as a percentage of total revenue increased to 28.3% in the
first six months of 1998 from 23.0% in the same period of 1997. The improved
EBITDA amount is primarily attributable to the increase in revenue for the six
months ended June 30, 1998 as compared to the same period of 1997.

         Net loss decreased to $14.9 million for the six months ended June 30,
1998 from $17.8 million for the same period of 1997 due to the factors described
above.

SEASONALITY

         The Company's business is expected to be seasonal where revenues are
influenced principally by hotel occupancy rates and the "buy rate" or percentage
of occupied rooms at hotels that buy movies or other services at the property.
Higher revenues are generally realized during the summer months and lower
revenues realized during the winter months due to business and vacation travel
patterns which impact the lodging industry's occupancy rates. Buy rates
generally reflect the hotel's guest demographic mix, the popularity of the
motion picture or services available at the hotel and the guests' other
entertainment alternatives.

LIQUIDITY AND CAPITAL RESOURCES

         The primary sources of cash during the six months ended June 30, 1998
were cash from operations of $22.9 million, and borrowings of $21.0 million from
its Credit Facility with NationsBank of Texas, N.A. ("NationsBank") (see note 4
of Notes to Condensed Consolidated Financial Statements). Cash was expended
primarily for capital expenditures which totaled $45.2 million for the first six
months of the year, primarily for the conversion of SpectraVision rooms, the
installation of new hotels with OCV's on-demand system, increased inventory, and
internal fixed asset purchases.

         The limit of the Company's Credit Facility is $200 million. At June 30,
1998, the Company had $154.0 million outstanding under its Credit Facility and
has access to an additional $46.0 million of long-term financing. The Company
expects that the available cash, cash flows from operations and funds available
under the Credit Facility will be sufficient to finance its expected investment
in in-room video systems for at least the next twelve months.

RESTRICTIONS ON DEBT FINANCINGS

         Pursuant to the Corporate Agreement entered into between Ascent and
OCC, the Company has agreed, among other things, not to incur any indebtedness
without Ascent's prior written consent, other than indebtedness under the OCC
Credit Facility and indebtedness incurred in the ordinary course of operations,
as limited by Ascent. Ascent's limitation on such OCC indebtedness currently
stands at $157 million through December 31, 1998.

YEAR 2000

         The Company has developed plans to address the possible exposure
related to the impact on its computer systems of the Year 2000. Key financial
information and operational and product systems have been assessed and plans
have been developed to address systems modifications required by December 31,
1999. The financial impact of making the required systems changes is not
expected to be material to the Company's consolidated financial position,
results of operations, or cash flow. In addition, the Company will be
communicating with others with whom it does significant business, including but
not limited to its suppliers and hotel customers, to determine their Year 2000
compliance readiness and the extent to which the Company is vulnerable to any
third party Year 2000 issues. However, there can be no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted, or that a failure to convert by another company, or a conversion
that is incompatible with the Company's systems, would not have a material
adverse effect on the Company.

                                      -13-


<PAGE>   14

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS:

         From time to time the Company has been, or may become, involved in
legal proceedings incidental to the conduct of its business. While the outcome
of such proceedings cannot be predicted with certainty, the Company does not
believe any such proceedings presently pending will have a material adverse
effect on the Company's financial position or its result of operations.

ITEM 2.  CHANGES IN SECURITIES:
         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES:
         None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         None.

ITEM 6.  EXHIBITS AND REPORTS OF FORM 8-K:
         None



EXHIBIT NO.                DESCRIPTION

27.0            Financial Data Schedule

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






                                      -14-



<PAGE>   15

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of San
Jose, State of California on August 12, 1998.


                                               On Command Corporation



                                               /s/ PAUL J. MILLEY
                                               ------------------------------
                                               Paul J. Milley
                                               Senior Vice President, Finance
                                               (Principal Accounting Officer)





                                      -15-


<PAGE>   16


                               INDEX TO EXHIBITS




Exhibit                DESCRIPTION
Number                 -----------
------
27.0            Financial Data Schedule