<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


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

                                    FORM 10-Q


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

                    For the quarter ended September 30, 1999

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

               For the transition period from          to

                        Commission file number: 000-24017


                             SFX ENTERTAINMENT, INC.
             (Exact Name Of Registrant As Specified In Its Charter)


                DELAWARE                                     13-3977880
   (State or other jurisdiction of                        (I.R.S. Employer
    incorporation or organization)                       Identification No.)


                         650 MADISON AVENUE, 16TH FLOOR
                            NEW YORK, NEW YORK 10155
                    (Address of Principal Executive Offices)

                                 (212) 838-3100
                         (Registrant's Telephone Number)


Indicate by check mark whether the registrant (1) has filed all reports required
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of November 8, 1999, the
number of shares outstanding of the registrant's Class A Common Stock, $.01 par
value, and Class B Common Stock, $.01 par value, was 63,837,106 and 2,545,555
respectively.


                                       1

<PAGE>


                    SFX ENTERTAINMENT, INC. AND SUBSIDIARIES
                     INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>

PART I      FINANCIAL INFORMATION                                                                        PAGE
<S>         <C>                                                                                          <C>
Item 1      Financial Statements

            Consolidated Balance Sheets at September 30, 1999 (unaudited) and December 31, 1998               3

            Consolidated Statements of Operations and Comprehensive Income
               for the Three Months Ended September 30, 1999 and 1998 (unaudited)                             4

            Consolidated Statements of Operations and Comprehensive Income
               for the Nine Months Ended  September 30, 1999 and 1998 (unaudited)                             5

            Consolidated Statements of Cash Flows for the Nine Months Ended
               September 30, 1999 and 1998 (unaudited)                                                        6

            Consolidated Statements of Shareholders' Equity for the Nine Months Ended
               September 30, 1999 and 1998 (unaudited)                                                        7

             Notes to Consolidated Financial Statements (unaudited)                                           8

Item 2      Management's Discussion and Analysis of Financial Condition and Results of Operations            17
Item 3      Quantitative and Qualitative Disclosures About Market Risk (included in Item 2)

PART II     OTHER INFORMATION

Item 1      Legal Proceedings                                                                                33

Item 2      Changes in Securities and Use of Proceeds                                                        33

Item 6      Exhibits and Reports on Form 8-K                                                                 33

            SIGNATURES                                                                                       34
</TABLE>

                                       2
<PAGE>


                             SFX ENTERTAINMENT, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                                                   September 30,  December 31,
                                                                                      1999            1998
                                                                                   -----------    -----------
                                                                                   (Unaudited)
<S>                                                                              <C>              <C>
ASSETS
Current assets:
    Cash and cash equivalents                                                      $   549,659    $    48,021
    Accounts receivable, net                                                           132,820         53,162
    Prepaid event expenses                                                              49,146         23,043
    Investments in and receivables from theatrical and other productions                12,785         12,222
    Other prepaid expenses                                                              16,802          4,475
    Notes receivables from related parties and employees                                 1,671            972
    Other current assets                                                                 9,485          6,838
                                                                                   -----------    -----------
Total current assets                                                                   772,368        148,733

Property and equipment, net of accumulated depreciation
    of $41,364 and $16,988 in 1999 and 1998, respectively                              638,811        292,626
Goodwill and other intangible assets, net of accumulated amortization of
    $108,605 and $44,835 in 1999 and 1998, respectively                              1,403,300        874,783
Investment in and receivables from equity investees                                     97,723         18,450
Notes receivable from related parties and employees, less current portion               28,181         12,464
Debt issuance costs                                                                     50,790         23,650
Other assets                                                                            26,704         12,746
                                                                                   -----------    -----------
TOTAL ASSETS                                                                       $ 3,017,877    $ 1,383,452
                                                                                   ===========    ===========

LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
    Accounts payable                                                               $    62,103    $    17,712
    Accrued expenses                                                                    91,009         50,887
    Accrued interest payable                                                            18,988         17,241
    Deferred revenue                                                                   126,285         60,142
    Current portion of long-term debt                                                    1,356          5,581
    Current portion of deferred purchase consideration                                  58,505         11,851
                                                                                   -----------    -----------
Total current liabilities                                                              358,246        163,414

Long-term debt, less current portion                                                 1,391,113        768,195
Deferred purchase consideration, less current portion                                   38,770          7,983
Deferred income taxes                                                                   55,640         38,826
Other liabilities                                                                        8,565          1,940
                                                                                   -----------    -----------
TOTAL LIABILITIES                                                                    1,852,334        980,358

Minority interest                                                                       10,863          8,058
Temporary equity - stock subject to redemption                                          19,920         16,500
Shareholders' equity:

Preferred Stock, $.01 par value, 25,000,000 shares authorized, none issued
 and outstanding as September 30, 1999 and December 31, 1998, respectively                  --             --

Class A common stock, $.01 par value, 100,000,000 shares authorized,
 63,223,287 and 42,919,791 shares issued and outstanding as of September 30,
 1999 and December 31, 1998, respectively                                                  632            430

Class B common stock, $.01 par value, 10,000,000 shares authorized,
     2,545,556 shares issued and outstanding as of September 30, 1999 and
     December 31, 1998, respectively                                                        25             25
Additional paid in capital                                                           1,220,028        449,484
Deferred compensation                                                                   (4,083)        (6,533)
Cumulative translation adjustment                                                          720             --
Accumulated deficit                                                                    (82,562)       (64,870)
                                                                                   -----------    -----------
Total shareholders' equity                                                           1,134,760        378,536
                                                                                   -----------    -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                         $ 3,017,877    $ 1,383,452
                                                                                   ===========    ===========

</TABLE>
                             See accompanying notes

                                       3


<PAGE>



                             SFX ENTERTAINMENT, INC.
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                 Three Months Ended September 30,
                                                                 --------------------------------
                                                                        1999           1998
                                                                   ------------    ------------
<S>                                                                <C>             <C>
Revenue                                                            $    523,320    $    388,034
Income from equity investments                                            3,865           2,139
                                                                   ------------    ------------
    Total revenue                                                       527,185         390,173
Operating expenses:
Cost of revenues                                                        371,811         290,445
Selling, general and administrative expenses                             54,944          40,515
Corporate expenses                                                        4,070           3,407
Depreciation and amortization, including
   integration costs of $931 in 1999 and $1,014 in 1998                  31,995          21,207
Non-recurring charges                                                     2,083            --
Non-cash charges                                                            919             843
                                                                   ------------    ------------
                                                                        465,822         356,417
                                                                   ------------    ------------
Income from operations                                                   61,363          33,756
Interest expense                                                        (25,741)        (13,488)
Investment income                                                         2,493             967
Minority interest                                                          (842)           (916)
                                                                   ------------    ------------
Income before income taxes and extraordinary loss                        37,273          20,319
Provision for income taxes                                              (22,028)         (1,983)
                                                                   ------------    ------------
Income before extraordinary loss                                         15,245          18,336
Extraordinary loss on early extinguishment of debt, net of taxes         (2,620)           --
                                                                   ------------    ------------
Net income                                                               12,625          18,336
Accretion on stock subject to redemption                                   (903)           (825)
                                                                   ------------    ------------
Net income applicable to common shares                                   11,722          17,511
Other comprehensive income: foreign currency translation                    720
                                                                   ------------    ------------
Comprehensive income                                               $     12,442    $     17,511
                                                                   ============    ============

NET INCOME PER BASIC COMMON SHARE
Net income per basic common share before extraordinary loss        $       0.23    $       0.38
Extraordinary loss on early extinguishment of debt
    per common share                                                      (0.04)           --
                                                                   ------------    ------------
Basic net income per common share                                  $       0.19    $       0.38
                                                                   ============    ============

NET INCOME PER DILUTIVE COMMON SHARE
Net income per dilutive common share before extraordinary loss     $       0.22    $       0.38
Extraordinary loss on early extinguishment of debt
   per common share                                                       (0.04)           --
                                                                   ------------    ------------
Net income per dilutive common share                               $       0.18    $       0.38
                                                                   ============    ============
Weighted average basic common shares outstanding                     60,183,168      45,631,325
                                                                   ============    ============
Weighted average dilutive common shares outstanding                  64,338,564      46,322,666
                                                                   ============    ============
</TABLE>



                             See accompanying notes.


                                       4
<PAGE>



                             SFX ENTERTAINMENT, INC.
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                       Nine Months Ended September 30,
                                                                       -------------------------------
                                                                             1999            1998
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
Revenue                                                                  $  1,203,220    $    680,376
Income from equity investments                                                  7,771           3,964
                                                                         ------------    ------------
    Total revenue                                                           1,210,991         684,340

Operating expenses:
Cost of revenues                                                              880,969         524,314
Selling, general and administrative expenses                                  146,860          76,306
Corporate expenses                                                             13,842           7,757
Depreciation and amortization, including integration and
   start-up costs of  $3,953 in 1999 and $ 1,264 in 1998                       91,151          40,381
Non-recurring charges                                                           2,083            --
Non-cash charges                                                                3,066          32,895
                                                                         ------------    ------------
                                                                            1,137,971         681,653
                                                                         ------------    ------------
Income from operations                                                         73,020           2,687

Interest expense                                                              (64,550)        (31,709)
Investment income                                                               4,081           3,466
Minority interest                                                              (1,336)         (1,314)
                                                                         ------------    ------------
Income (loss) before income taxes and extraordinary loss                       11,215         (26,870)

Provision for income taxes                                                    (23,647)         (3,333)
                                                                         ------------    ------------
Loss before extraordinary loss                                                (12,432)        (30,203)

Extraordinary loss on early extinguishment of debt, net of taxes               (2,620)           --
                                                                         ------------    ------------
Net loss                                                                      (15,052)        (30,203)

Accretion on stock subject to redemption                                       (2,640)         (1,925)
                                                                         ------------    ------------
Net loss applicable to common shares                                          (17,692)        (32,128)
Other comprehensive income: foreign currency translation                          720            --
                                                                         ------------    ------------
Comprehensive loss                                                       $    (16,972)   $    (32,128)
                                                                         ============    ============

Net loss per basic and dilutive common share before extraordinary loss   $      (0.27)   $      (0.92)
Extraordinary loss on early extinguishment of debt
   per common share                                                             (0.05)           --
                                                                         ------------    ------------
Net loss per basic and dilutive common share                             $      (0.32)   $      (0.92)
                                                                         ============    ============

Weighted average basic and dilutive common shares outstanding              55,501,180      34,893,183
                                                                         ============    ============
</TABLE>


                             See accompanying notes.

                                       5

<PAGE>




                             SFX ENTERTAINMENT, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                               Nine Months Ended September 30,
                                                                             ------------------------------------
                                                                                      1999               1998
                                                                             -----------------  -----------------
<S>                                                                              <C>                 <C>
Operating activities:
Net loss                                                                         $  (15,052)         $ (30,203)
Adjustment to reconcile net loss to net cash provided by
 operating activities:
   Income from equity investments, net of distributions received                      2,228              1,030
   Depreciation and amortization                                                     87,198             39,117
   Non-recurring charges                                                              2,083               --
   Non-cash charges                                                                   3,066             32,895
   Minority interest                                                                 (1,336)            (1,314)
   Extraordinary loss on early extinguishment of debt                                 4,342               --
Changes in operating assets and liabilities, net of amounts acquired:
   Accounts receivable, net                                                         (27,008)            (9,620)
   Prepaid event expenses, other prepaid expenses and other current assets          (32,468)            (8,040)
   Other assets and notes receivable from related parties and employees             (11,951)            (2,725)
   Accounts  payable, accrued expenses and other liabilities                         26,223            (13,211)
   Accrued interest payable                                                           1,747              7,595
   Deferred revenue                                                                   5,634              6,783
                                                                                 ----------          ---------
Net cash provided by operating activities                                            44,706             22,307
                                                                                 ----------          ---------
Investing activities:
   Purchases of  businesses, net of  cash acquired                                 (684,459)          (807,686)
   Purchases of property and equipment                                              (34,816)           (44,554)
                                                                                 ----------          ---------
Net cash used in investing activities                                              (719,275)          (852,240)
                                                                                 ----------          ---------

Financing activities:
   Proceeds from issuance of Senior Subordinated Notes and
      borrowings under the Senior Credit Facility                                 1,095,652            723,500
   Proceeds from sale of common stock                                               602,554            330,683
   Repayment of debt                                                               (488,623)           (33,049)
   Payments made to SFX Broadcasting pursuant to the Spin-Off                          --             (113,876)
   Other, principally debt issuance costs                                           (34,096)           (17,715)
                                                                                 ----------          ---------

Net cash provided by financing activities                                         1,175,487            889,543
Effect of exchange rate changes on cash                                                 720               --
                                                                                 ----------          ---------
Net increase in cash and cash equivalents                                           501,638             59,610
                                                                                 ----------          ---------
Cash and cash equivalents at beginning of period                                     48,021              5,979
                                                                                 ==========           =========
Cash and cash equivalents at end of period                                       $  549,659          $  65,589
                                                                                 ==========          =========
Supplemental disclosure of cash flow information:
Cash paid for interest                                                           $   62,803          $  22,807
                                                                                 ==========          =========
Cash paid for income taxes                                                       $    4,388          $  17,217
                                                                                 ==========          =========

</TABLE>

Supplemental disclosure of non-cash investing and financing activities:
o    Issuance of equity securities, including deferred equity security issuance
     and assumption of debt in connection with certain acquisitions (see Note
     2).


                             See accompanying notes.


                                       6

<PAGE>


                             SFX ENTERTAINMENT, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                       Class A     Class B    Additional     Deferred        Other        Accumulated
                                       Common      Common      Paid-In     Compensation   Comprehensive     Earnings
                                        Stock       Stock      Capital                       Income        (Deficit)       Total
                                      ---------  ----------  ------------  -------------  -------------   -----------   -----------
<S>                                    <C>          <C>       <C>            <C>              <C>           <C>         <C>
Balances, January 1, 1998              $ 204        $ 15      $    98,111    $      -         $    -        $  3,814    $   102,144

Net liabilities assumed and
   shares issued to employees in
   the Spin-Off, principally
   income taxes                           20           -         (129,257)          -              -               -       (129,237)

Sale of 12,075,000 shares of
   Class A common stock                  121           -          328,883           -              -               -        329,004

Issuance of 8,251,046 of Class A
   common stock for acquisitions          82           -           97,384           -              -               -         97,466

Issuance of Class A and B common
   stock pursuant to employment
   agreements                              3          10           34,421      (8,625)             -               -         25,809

Amortization of deferred
   compensation                            -           -                -       1,228              -               -          1,228

Accretion on stock subject
   to redemption                           -           -            1,925           -              -          (1,925)             -

Net loss                                   -           -                -           -              -         (30,203)       (30,203)
                                       -----        ----      ----------     --------        -------        --------    -----------
Balances September 30, 1998
   (unaudited)                         $ 430        $ 25      $   431,467    $ (7,397)             -        $(28,314)   $   396,211
                                       =====        ====      ==========     ========        =======        ========    ===========



Balances, January 1, 1999              $ 430        $ 25      $   449,484    $ (6,533)       $     -        $(64,870)    $  378,536

Sale of 16,048,500 shares of
   Class A common stock                  160           -          599,221           -              -               -        599,381

Issuance of 4,158,650 shares of
   Class A common stock for
   acquisitions                           42           -          165,511           -              -               -        165,553

Issuance of 96,300 shares of
   Class A common stock pursuant
   to the exercise of employee
   stock options                           -           -            3,172           -              -               -          3,172

Amortization of deferred
   compensation                            -           -                -       2,450              -               -          2,450

Accretion on stock subject
   to redemption                           -           -            2,640           -              -          (2,640)             -

Cumulative translation adjustment          -           -                -           -            720               -            720

Net loss                                   -           -                -           -              -         (15,052)       (15,052)

                                       -----        ----      ----------     --------        -------        --------    -----------
Balances September 30, 1999
(unaudited)                            $ 632        $ 25      $1,220,028     $ (4,083)       $   720        $(82,562)   $ 1,134,760
                                       =====        ====      ==========     ========        =======        ========    ===========
</TABLE>






                             See accompanying notes.


                                       7
<PAGE>




                             SFX ENTERTAINMENT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. ORGANIZATION AND BASIS OF PRESENTATION

         SFX Entertainment, Inc. ("SFX" or the "Company") is the world's largest
diversified promoter, producer and venue operator for live entertainment events.
In addition, SFX is a leading fully integrated sports marketing and management
company specializing in the representation of sports athletes and broadcasters,
integrated event management, television programming and production and marketing
consulting services. SFX owns, partially or entirely, and/or operates under
lease or exclusive booking arrangements the largest network of venues used
principally for music concerts and other live entertainment events in the United
States, with 120 venues in 31 of the top 50 markets, including 16 amphitheaters
in the top 10 markets and 31 venues principally used for theatrical
presentations, of which, 6 venues are in the United States and 25 are
international, principally in the United Kingdom. SFX operates in four business
segments within the live entertainment industry: music, theater, sports and
family entertainment & other.

         SFX was formed as a wholly-owned subsidiary of SFX Broadcasting, Inc.
("SFX Broadcasting") in December 1997 and as the parent company of SFX Concerts,
Inc ("Concerts"). Concerts was formed in January 1997 to acquire and hold SFX
Broadcasting's live entertainment operations.

         In August 1997, SFX Broadcasting agreed to the merger among SBI
Holdings, Inc. (the "Buyer"), SBI Radio Acquisition Corporation, a wholly-owned
subsidiary of the Buyer, and SFX Broadcasting (the "Broadcasting Merger") and to
the spin-off of the Company to the shareholders of SFX Broadcasting (the
"Spin-Off"). The Spin-Off was completed on April 27, 1998 and the Broadcasting
Merger was completed on May 29, 1998. Prior to the Spin-Off, SFX Broadcasting
provided various administrative services to the Company. SFX Broadcasting
allocated these expenses on the basis of direct usage. In the opinion of
management, this method of allocation was reasonable and allocated expenses
approximated what the Company would have incurred on a stand-alone basis. The
Company recorded the Spin-Off at the historical cost of the assets and
liabilities contributed by SFX Broadcasting.

         In July 1999, the Company completed a three-for-two split of SFX's
Class A and Class B Common Stock. The financial information presented herein has
been restated to reflect the effect of the stock split. Certain items in 1998
have been reclassified to conform to the 1999 presentation.

         Information as of September 30, 1999 and for the three and nine months
ended September 30,1999 and 1998 is unaudited. The accompanying unaudited
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, the unaudited
interim consolidated financial statements contain all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the consolidated
financial position, results of operations and cash flows of the Company, for the
periods presented.

2. FINANCING AND ACQUISITIONS

1999 FINANCINGS

         February 1999 Equity Offering

         In February 1999, SFX consummated an offering of 7,423,500 shares of
the Company's Class A Common Stock at an offering price of $37.00 per share and
received net proceeds of approximately $260.7 million. SFX used the net proceeds
to finance certain of the 1999 Acquisitions.

                                       8
<PAGE>

         August 1999 Equity Offering

         In August 1999, SFX consummated an offering of 8,625,000 shares of the
Company's Class A Common Stock at an offering price of $41.00 per share and
received net proceeds of approximately $338.7 million. SFX used a portion of the
net proceeds to finance certain of the 1999 Acquisitions and intends to use the
remaining portion of the net proceeds for general corporate purposes, including
potential future acquisitions.

         Senior Credit Facility

         On August 23, 1999, SFX entered into a new seven-year $1.1 billion
Senior Credit Facility which replaced SFX's existing $350 million senior credit
facility. The new Senior Credit Facility is comprised of a $250.0 million
multi-draw, multi-currency term loan maturing on December 31, 2005 (the "Term A
Loan"), a single-draw, $600 million U.S. dollar term loan maturing on June 30,
2006 (the "Term Loan B") and a $250.0 million reducing revolver having a letter
of credit sub-limit of $75.0 million maturing on December 31, 2005. The Company
recorded a $2.6 million extraordinary loss on the early extinguishment of debt,
net of taxes, related to the replaced facility.

         Consent Solicitation

         In July 1999, SFX completed a consent solicitation with respect to its
outstanding 9 1/8% Senior Subordinated Notes whereby it obtained approval from
the holders of the notes to modifications of certain covenants in the indentures
governing the notes. The modifications, among other things, provided SFX with
more flexibility to make investments and acquisitions internationally and permit
SFX's foreign subsidiaries to incur indebtedness, subject to certain
limitations. Fees associated with the transaction totaled $13.7 million and have
been recorded as debt issuance costs.

1999 ACQUISITIONS

          Cellar Door

         On February 19, 1999, SFX purchased all of the issued and outstanding
capital stock of the Cellar Door group of companies for a purchase price of
$70.0 million in cash, 519,357 shares of Class A Common Stock with an issue date
value of $20.0 million, and $8.5 million payable in five equal annual
installments beginning on the first anniversary of the closing date. In
addition, SFX agreed to issue to the seller options to purchase 150,000 shares
of Class A Common Stock in equal installments over the five-year period
following the closing date at fair market value. SFX financed the acquisition
with a portion of the net proceeds from the February 1999 Equity Offering.

         Nederlander

         On March 16, 1999, SFX acquired certain interests in seven venues and
other assets of Nederlander for an aggregate purchase price of approximately
$95.6 million in cash. The agreement relating to the Mesa del Sol Centre for the
Performing Arts provides for additional payments based on the financial
performance of this venue. In the third quarter of 1999, SFX renegotiated the
agreement with respect to the Crown Arena whereby SFX relinquished its financial
interest in the venue in exchange for a revised long-term venue management
agreement. SFX financed this acquisition with a portion of the net proceeds of
the 1999 Equity Offering and borrowings under SFX's then-existing senior credit
facility.

         Marquee

         On March 16, 1999, SFX merged with The Marquee Group, Inc.. In
connection with the merger, SFX issued approximately 2.1 million shares of SFX
Class A Common Stock with a value of approximately $81.7 million on the date of
the merger and repaid $33.5 million of Marquee's debt. SFX financed the cash
portion of the acquisition with borrowings under SFX's then-existing senior
credit facility. In the third quarter, SFX spun-off the operations of QBQ, Inc,
whose primary business is the representation of artists in the music industry as
agent. The newly formed company is an independent company in which SFX does not
have a management or ownership interest. In connection with the spin-off, as of
September 30, 1999, SFX had loaned the newly formed company $5.0 million, which
has been recorded as an other asset on the consolidated balance sheet. The newly
formed company is in the process of obtaining independent financing.


                                       9
<PAGE>

         Livent

         On August 27, 1999, the Company purchased certain assets of Livent,
Inc., and its affiliates, including three theaters and intellectual property
rights to several current and future Broadway productions, including Ragtime,
Fosse, Phantom of the Opera and Seussical. The purchase price for this
acquisition was approximately $100.8 million, consisting of $79.3 million in
cash, $18.4 million of deferred purchase consideration and $3.1 million of debt
assumed, subject to post-closing adjustments. SFX financed the cash portion of
the acquisition with a portion of the net proceeds from the August 1999 Equity
Offering.

         Apollo

         On September 17, 1999, SFX acquired Apollo Leisure Group plc, the
largest live theater operator as well as one of the largest providers of
entertainment and leisure management services in the United Kingdom. The total
purchase price for the acquisition was approximately $256.4 million, comprised
of approximately $196.4 million in cash, 979,667 shares of Class A Common Stock
with a value of approximately $37.5 million as of the issuance date and the
assumption of net liabilities of approximately $22.5 million, subject to
post-closing adjustments. Apollo operates, among other venues, three arenas and
a network of 23 theaters. In connection with the Apollo acquisition, SFX
acquired 100% of Barry Clayman Concerts, which is a leading promoter of concert
and other live entertainment events throughout in the U.K. SFX financed the cash
portion of the acquisition with borrowings under the Senior Credit Facility.

         Other Acquisitions

         During the first quarter of 1999, SFX also completed the acquisitions
of The Entertainment Group, Inc., a concert and theatrical producer and promoter
with operations in Chicago and Mexico City; Integrated Sports International,
Inc., a full-service sports marketing company; and a company involved in
business management and tour production in music and the performing arts. In
addition, SFX entered into a long-term marketing and consulting agreement with
respect to the Rosemont Horizon and Rosemont Theater in the Chicago area and
purchased a theater in Denver, Colorado. The total consideration for these
acquisitions and the long-term marketing and consulting agreement consisted of
$68.6 million in cash and 142,766 shares of Class A Common Stock valued at $5.2
million. SFX financed these transactions with the proceeds from the February
1999 Equity Offering and borrowings under SFX's then-existing senior credit
facility. In addition, SFX may be required to make additional payments of up to
$13.0 million in cash and 75,000 shares of Class A Common Stock based on the
financial performance of certain of these acquired companies.

         During the second quarter of 1999, SFX completed the acquisitions of
Hendricks Management Company, Inc., which represents and provides financial
consulting services to team sports athletes, primarily in professional baseball,
and a fifty percent interest in A.H. Enterprises, a leading promoter of urban
music. The total consideration for these acquisitions was approximately $23.2
million in cash and $4.1 in deferred purchase consideration. SFX financed these
acquisitions with borrowings under SFX's then-existing senior credit facility
and cash on hand. In addition, SFX may be required to make additional payments,
in shares of SFX Class A Common Stock, based on the cumulative financial
performance of Hendricks Management Company, Inc. through December 31, 2002. In
addition, the Company invested approximately $11.2 million in certain
entertainment and sports related Internet companies.

         In addition, during the third quarter of 1999, SFX completed the
acquisitions of (1) Candid Productions, Inc., a producer of sports
entertainment, primarily professional figure skating, (2) Tellem & Associates,
which represents team sports athletes, primarily in professional baseball and
basketball and (3) Midland Concert Promotions Group Limited, a concert promotion
and motor sports venue operator in the United Kingdom. The total consideration
for these acquisitions was approximately $59.8 million consisting of $42.6
million in cash, and 253,666 shares of Class A Common Stock valued at the date
of issuance at $10.5 million and $6.7 million in deferred purchase
consideration. SFX financed these acquisitions with a portion of the net
proceeds of the August 1999 Equity Offering and borrowings under the Senior
Credit Facility.

1998 ACQUISITIONS

         As more fully described in SFX's 1998 Annual Report on Form 10-K, the
Company completed significant acquisitions in each of its four business segments
in 1998. The total purchase price for these acquisitions was approximately $1.0
billion, including $907.0 million in cash and assumed debt and 8.25 million

                                       10
<PAGE>

shares of Class A Common Stock with a value of approximately $101.3 million. The
shares of Class A Common Stock used to consummate the 1998 Acquisitions that
occurred prior to the Spin-Off date were not issued until the Spin-Off date,
which was April 27, 1999.

         The 1998 Acquisitions were financed through the $350.0 million Senior
Subordinated Note offering in February 1998, borrowings under SFX's
then-existing senior credit facility and the 1998 Equity Offering.

         SFX's 1999 and 1998 Acquisitions were accounted for using the purchase
method of accounting. The purchase price of certain of the 1998 and 1999
Acquisitions have been preliminarily allocated to the assets acquired and
liabilities assumed and are subject to change. Operating results for the 1998
and 1999 Acquisitions are included herein from their respective acquisition
dates. The intangible assets created in the purchase transactions will generally
be amortized over periods up to 15 years. The amount of amortization will be
substantial and will continue to affect SFX's operating results in the future.

         The following unaudited pro forma summary represents the consolidated
results of operations for the nine months ended September 30,1999 and the year
ended December 31, 1998 as if the 1998 Acquisitions, the 1999 Acquisitions
completed through September 30, 1999 and the related financings had occurred as
of January 1, 1998. These pro forma results have been included for comparative
purposes only and do not purport to be indicative of what would have occurred
had the acquisitions and related financings been made as of those dates or of
the results which may occur in the future (in thousands, except per share data).

<TABLE>
<CAPTION>

                                                           Pro Forma
                                              Nine Months Ended       Year Ended
                                              September 30, 1999    December 31, 1998
<S>                                               <C>                  <C>
Revenue                                           $1,396,567           $  1,538,048

Net loss                                          $  (30,704)          $   (102,914)
Loss applicable to basic and dilutive
   common shares                                  $    (0.61)          $      (1.95)
</TABLE>

3. BUSINESS SEGMENTS

         SFX classifies its operations into four major business segments in the
live entertainment industry: music, theater, sports and family entertainment &
other. The music segment primarily consists of booking and promoting music
events and tours, producing music events and tours and owning and operating
concert and other entertainment venues. The theater segment owns and/or operates
theatrical venues and produces and promotes touring Broadway shows and other
theatrical productions. The sports segment is a full-service integrated
marketing and management company specializing in the representation of team
sports athletes and broadcasters, event management, television programming and
production, as well as promoting specialized motor sports events. The family
entertainment & other segment primarily consists of the promotion and marketing
of family-oriented events, marketing and consulting of local, regional and
national live marketing programs, subscription or fee based radio and music
industry data compilation and distribution, the creation and distribution of
network radio special events and live concert programming and merchandising at
live events.

         SFX's operations and revenues have been largely seasonal in nature,
with generally higher revenues generated in the second and third quarters. SFX's
outdoor venues are primarily used in the summer months and do not generate
substantial revenue in the late fall, winter and early spring. Similarly, the
musical concerts that SFX promotes largely occur in the second and third
quarters. SFX's entertainment marketing and consulting in connection with
musical concerts also predominantly generate revenues in the second and third
quarters.

          Therefore, the seasonality of SFX's business causes, and will continue
to cause, a significant variation in SFX's quarterly operating results. However,
this variation is somewhat offset with non-summer seasonal businesses such as
motor sports, which is winter-seasonal, and touring Broadway shows, which
typically tour between September and May. In addition, the acquisitions of FAME,
Marquee, Integrated Sports International, Hendricks and Tellem in the sports
segment are expected to lessen the seasonal variations associated with the music
segment, since these businesses generally earn revenue ratably over the year.
The recent acquisitions of Apollo and Livent will also lessen the seasonal
variation



                                       11
<PAGE>

since the presentation of theatrical shows at owned or operated venues generally
produces revenue ratably over the year, with the fourth quarter being the
strongest quarter.

     The Company evaluates performance based on several factors, of which the
primary financial measure is EBITDA, excluding non-cash charges and
non-recurring charges, since this measure approximates the cash flow generated
by each segment. EBITDA is defined as earnings before interest, taxes, minority
interest and depreciation and amortization. SFX also excludes non-cash and
non-recurring charges from the EBITDA measures presented herein. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies contained in SFX's 1998 Annual Report on Form
10-K.




                                       12


<PAGE>



<TABLE>
<CAPTION>

                                                 THREE MONTHS ENDED SEPTEMBER 30, 1999 (IN THOUSANDS) (UNAUDITED)
                                     ----------------------------------------------------------------------------------------
                                                                                    FAMILY
                                                                                 ENTERTAINMENT
                                        MUSIC       THEATRICAL      SPORTS          & OTHER        CORPORATE        TOTAL
                                     ------------  -------------  ------------  ---------------- -------------  -------------
<S>                                   <C>            <C>           <C>            <C>              <C>            <C>
Total revenue                         $  368,059     $  51,361     $  28,163      $  79,602        $       -      $  527,185
                                      ==========     =========     =========      =========        =========      ==========
EBITDA                                $   74,683     $   5,336     $   9,155      $  11,256        $  (4,070)     $   96,360
Depreciation, amortization and
   $931 of integration costs              15,810         3,026         4,996          6,726            1,437          31,995
Non-recurring charges                      2,083             -             -              -                -           2,083
Non-cash compensation                          -             -             -              -              919             919
                                      ----------     ---------     ---------      ---------        ---------      ----------
Income (loss) from operations         $   56,790     $   2,310     $   4,159      $   4,530        $  (6,426)     $   61,363
                                      ==========     =========     =========      =========        =========      ==========
Total assets as of September 30,
   1999                               $1,155,000     $ 610,103     $ 412,387    $ $ 261,342        $ 579,045      $3,017,877
                                      ==========     =========     =========      =========        =========      ==========


                                                 THREE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS) (UNAUDITED)
                                     ----------------------------------------------------------------------------------------
                                                                                    FAMILY
                                                                                 ENTERTAINMENT
                                        MUSIC       THEATRICAL      SPORTS          & OTHER        CORPORATE        TOTAL
                                     ------------  -------------  ------------  ---------------- -------------  -------------
Total revenue                         $   299,946    $  46,534     $   6,133      $  37,560        $       -      $  390,173
                                      ==========     =========     =========      =========        =========      ==========
EBITDA                                $    49,409    $   2,602     $   1,217      $   5,985        $  (3,407)     $   55,806
Depreciation, amortization and
   $1,014 of integration costs             12,869        2,158         2,485          1,303            2,392          21,207
Non-cash compensation                           -            -             -              -              843             843
                                      ----------     ---------     ---------      ---------        ---------      ----------
Income (loss) from operations         $   36,540     $     444     $  (1,268)     $   4,682        $  (6,642)     $   33,756
                                      ==========     =========     =========      =========        =========      ==========
Total assets as of December 31,
   1998                               $  734,042     $ 223,672     $ 188,390    $ $ 171,246        $  66,102      $1,383,452
                                      ==========     =========     =========      =========        =========      ==========


                                                 NINE MONTHS ENDED SEPTEMBER 30, 1999 (IN THOUSANDS) (UNAUDITED)
                                     ----------------------------------------------------------------------------------------
                                                                                    FAMILY
                                                                                 ENTERTAINMENT
                                        MUSIC       THEATRICAL      SPORTS          & OTHER        CORPORATE        TOTAL
                                     ------------  -------------  ------------  ---------------- -------------  -------------
Total revenue                         $  718,452     $ 192,337     $ 110,721      $ 189,481        $       -      $1,210,991
                                      ==========     =========     =========      =========        =========      ==========
EBITDA                                $  114,038     $  17,721     $  28,218      $  23,185        $ (13,842)     $  169,320
Depreciation, amortization and
   $3,953 of integration and
   start-up costs                         51,844         6,962        13,745         15,780            2,820          91,151
Non-recurring charges                      2,083             -             -              -                -           2,083
Non-cash compensation                          -             -             -              -            3,066           3,066
                                      ----------     ---------     ---------      ---------        ---------      ----------
Income (loss) from operations         $   60,111     $  10,759     $  14,473      $   7,405        $ (19,728)     $   73,020
                                      ==========     =========     =========      =========        =========      ==========


                                                 NINE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS) (UNAUDITED)
                                     ----------------------------------------------------------------------------------------
                                                                                    FAMILY
                                                                                 ENTERTAINMENT
                                        MUSIC       THEATRICAL      SPORTS          & OTHER        CORPORATE        TOTAL
                                     ------------  -------------  ------------  ---------------- -------------  -------------
Total revenue                         $  478,880     $ 114,997     $  17,919      $  72,544        $       -      $  684,340
                                      ==========     =========     =========      =========        =========      ==========
EBITDA                                $   58,700     $  10,423     $   2,009      $  12,588        $  (7,757)     $   75,963
Depreciation, amortization and
   $1,264 of integration and
   start-up costs (1)                     23,319         3,627         3,668          2,787            6,980          40,381
Non-cash compensation                          -             -             -              -           32,895          32,895
                                      ----------     ---------     ---------      ---------        ---------      ----------
Income (loss) from operations         $   35,381     $   6,796     $  (1,659)     $   9,801        $ (47,632)     $    2,687
                                      ==========     =========     =========      =========        =========      ==========

</TABLE>

----------

(1)  The Corporate segment recorded $3.2 million of amortization related to the
     Triathlon asset in 1998.

     Certain items in 1998 and 1999 have been reclassified to conform to the
presentation as of and for the nine months ended September 30, 1999.




                                       13

<PAGE>

4. EARNINGS PER DILUTIVE COMMON SHARE

         A reconciliation of the number of shares used for calculating earnings
per basic common share and dilutive earnings per common share for the three
months ended September 30, 1999 and 1998 follows:


                                                             1999          1998

 Average number of common shares outstanding           60,183,168    45,631,325
 Effect of stock options                                4,155,396       691,341
                                                       -----------   ----------
 Weighted average dilutive common shares outstanding   64,338,564    46,322,666
                                                       ==========    ==========

Options to purchase 122,466 and 1,676,499 shares of Class A Common stock at
prices ranging from $40.89 to $67.48 and $28.83 and $30.59 were outstanding at
September 30, 1999 and 1998, respectively, but were not included in the
computation of earnings per dilutive common share because the options' exercise
price was greater than the average market price of the Company's Class A Common
stock during the three months ended September 30, 1999 and 1998. In addition,
earnings per dilutive share was not adjusted for the impact of Class A Common
stock issued to the PACE sellers, which is subject to redemption by the Company,
because to do so would have been antidilutive. Outstanding stock options at
September 30, 1999 and 1998 had no dilutive effect on basic earnings per share
during the nine months ended September 30, 1999 and 1998 due to the Company's
net loss position.

5. EXECUTIVE LOANS

     In July 1999, SFX adopted an executive loan program which is intended to
incentivise certain executives to enter into new employment agreements with the
Company upon the expiration of their existing agreements. During the third
quarter of 1999, the Company loaned certain senior executives $14.1 million
pursuant to this plan. The loans, which bear interest at a rate of 6% per annum,
are included in notes receivable from related parties and employees on the
consolidated balance sheet. Under the terms of the loans, if any of the
participants in the loan program enter into new long-term employment agreements
with SFX, effective upon termination of the existing employment agreement, the
participant's loan will be forgiven ratably over the term of the new employment
agreement and recognized as an expense in the Company's statement of operations.

6. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

     While the Company is involved in several lawsuits and claims arising in the
ordinary course of business, the Company is not currently a party to any legal
proceeding that management believes would have a material adverse effect on its
business, financial position or results of operations.

7. SUBSEQUENT EVENTS

      EMA Telstar

      On October 4, 1999, the Company purchased EMA Telstar, a venue owner and a
promoter and producer of live entertainment in Sweden, for approximately $27.9
million in cash, with a portion of the net proceeds from the August 1999 Equity
Offering.

      Mojo Works

      On October 25, 1999, the Company purchased 80% of the Mojo Works group of
companies, a promoter and producer of live entertainment in the Netherlands for
approximately $39.7 million in cash, including working capital, subject to
post-closing adjustments, with a portion of the net proceeds from the August
1999 Equity Offering.

      Sale of assets

      On October 13, 1999 the Company sold SFX Network's radio show prep
services division for approximately $11.7 million.



                                       14

<PAGE>

8. GUARANTEES BY SUBSIDIARIES

         The Company is a holding company that has no operating assets or
operations of its own. Substantially all of the Company's subsidiaries are
wholly owned and have jointly and severally guaranteed the Company's Senior
Subordinated Notes (the "Guarantors"). A certain subsidiary which is not wholly
owned (the "Non-Wholly Owned Guarantor Subsidiary") guarantees such indebtedness
and certain subsidiaries (the "Non- Guarantor Subsidiaries") do not guarantee
such indebtedness.

Full financial statements of the Guarantors, the Non-Guarantor Subsidiaries or
the Non-Wholly Owned Guarantor Subsidiary have not been included because,
pursuant to their respective guarantees, the Guarantors are jointly and
severally liable with respect to the Senior Subordinated Notes and management
believes that the Non-Guarantor Subsidiaries and Non-Wholly Owned Guarantor are
not material to the Company on a consolidated basis. Accordingly, the company
does not believe that information contained in separate full financial
statements of the Guarantors, the Non-Guarantor Subsidiaries or the Non-Wholly
Owned Guarantor Subsidiary would be material to investors. The following are
summarized unaudited statements setting forth certain financial information
concerning the Guarantors, the Non-Guarantor Subsidiaries and the Non-Wholly
Owned Guarantor Subsidiary as of and for the nine months ended September 30,
1999 (in thousands).

<TABLE>
<CAPTION>

                                       SFX                                            NON-WHOLLY                          SFX
                                  ENTERTAINMENT                       NON-             OWNED                        ENTERTAINMENT
                                       INC.                         GUARANTOR         GUARANTOR                           INC.
                                    (PARENT)        GUARANTORS     SUBSIDIARIES       SUBSIDIARY     ELIMINATIONS    CONSOLIDATED
                                 ---------------  -------------- ---------------- ------------------ --------------  ---------------
<S>                              <C>              <C>             <C>                <C>              <C>                <C>
Current assets                    $   443,863     $    307,552    $    14,899      $      6,054      $          -    $   772,368
Property and equipment, net            14,611          613,827         10,274                99                 -        638,811
Goodwill and other intangible
    assets, net                             -        1,368,741         24,807             9,752                 -      1,403,300
Investment in subsidiaries          2,170,786           97,723              -                 -        (2,170,786)        97,723
Other assets                           76,882           26,725          2,068                 -                 -        105,675
                                 ---------------  -------------- ---------------- ------------------ --------------  ---------------
   Total assets                  $  2,706,142     $  2,414,568    $    52,048      $     15,905      $ (2,170,786)   $ 3,017,877
                                 ===============  ============== ================ ================== ==============  ===============

Current liabilities              $    115,829     $    239,573    $     6,059      $        916      $     (4,131)   $   358,246
Long-term debt, less current        1,363,381           27,732          7,444                 -            (7,444)     1,391,113
  portion
Other liabilities                      72,252           30,723              -                 -                 -        102,975
Minority interest                           -            8,426              -             2,437                 -         10,863
Temporary equity                       19,920                -              -                 -                 -         19,920
Shareholders' equity                1,134,760        2,108,114         38,545            12,552        (2,159,211)     1,134,760
                                 ---------------  -------------- ---------------- ------------------ --------------  ---------------
Total liabilities
    and shareholders' equity     $  2,706,142     $  2,414,568    $    52,048      $     15,905      $ (2,170,786)   $ 3,017,877
                                 ===============  ============== ================ ================== ==============  ===============


Revenue                          $            -   $  1,135,160    $    22,074      $     53,757      $          -    $ 1,210,991
Operating expenses                       13,363      1,054,642         18,986            50,980                 -      1,137,971
Interest expense, net                    59,921           (109)         1,492               (25)             (810)        60,469
Minority interest                             -          1,336              -                 -                 -          1,336
Provision for income taxes               21,968          1,679              -                 -                 -         23,647
Extraordinary loss                        2,620              -              -                 -                 -          2,620
                                 ===============  ============== ================ ================== ==============  ===============
Net (loss) income                $      (97,872)  $     77,612    $     1,596      $      2,802      $        810        (15,052)
                                 ===============  ============== ================ ================== ==============  ===============

Cash flows (used in ) provided                               -
   by operating activities        $      (80,001) $    119,898    $     1,169      $      3,640    $            -    $    44,706
Cash flows  used in investing
   activities                            (5,933)      (712,293)          (861)             (188)                -       (719,275)
Cash flows provided by (used
   in) financing activities              518,433       657,465           (411)                -                 -      1,175,487
Effect of exchange rate on
   changes in cash                             -           720              -                 -                 -            720
Cash at the beginning
     of the period                         3,685        44,132            111                93                 -         48,021
Cash at the end of the period     $      436,184  $    109,922    $         8      $      3,545    $            -    $   549,659

</TABLE>


                                       15


<PAGE>




         The following are summarized unaudited statements setting forth certain
financial information concerning the Guarantors, the Non-Guarantor Subsidiaries
and the Non-Wholly Owned Guarantor Subsidiary as of and for the three months
ended September 30,1999 (in thousands).

<TABLE>
<CAPTION>

                                       SFX                                            NON-WHOLLY                          SFX
                                  ENTERTAINMENT                       NON-             OWNED                        ENTERTAINMENT
                                       INC.                         GUARANTOR         GUARANTOR                           INC.
                                    (PARENT)        GUARANTORS     SUBSIDIARIES       SUBSIDIARY     ELIMINATIONS    CONSOLIDATED
                                 ---------------  -------------- ---------------- ------------------ --------------  ---------------
<S>                              <C>              <C>             <C>                <C>              <C>                <C>
Revenue                          $           -    $     469,724  $        14,192  $         43,269   $         -     $   527,185
Operating expenses                       3,369          409,165           11,909            41,379             -         465,822
Interest expense, net                   22,431              689              498               (25)         (345)         23,248
Minority interest                            -              849                -                (7)            -             842
Provision for income taxes              22,728             (700)               -                 -             -          22,028
Extraordinary loss                       2,620                -                -                 -             -           2,620
                                 ---------------  -------------- ---------------- ------------------ --------------  ---------------
Net (loss) income                $     (51,148)   $      59,721  $         1,785  $          1,922   $       345      $   12,625
                                 ===============  ============== ================ ================== ==============  ===============
</TABLE>

     The following are summarized unaudited statements setting forth certain
financial information concerning the Guarantors, the Non-Guarantor Subsidiaries
and the Non-Wholly Owned Guarantor Subsidiary as of and for the nine months
ended September 30, 1998 (in thousands).

<TABLE>
<CAPTION>

                                       SFX                                            NON-WHOLLY                          SFX
                                  ENTERTAINMENT                       NON-             OWNED                        ENTERTAINMENT
                                       INC.                         GUARANTOR         GUARANTOR                           INC.
                                    (PARENT)        GUARANTORS     SUBSIDIARIES       SUBSIDIARY     ELIMINATIONS    CONSOLIDATED
                                 ---------------  -------------- ---------------- ------------------ --------------  ---------------
<S>                              <C>              <C>             <C>                <C>              <C>                <C>

Current assets                    $        8,910   $   144,927     $      8,295        $    3,595       $        -    $    165,727
Property and equipment, net                8,905       256,182            9,913                 -                -         275,000
Goodwill and other intangible
   assets, net                            29,972       843,100           21,297            10,560                -         904,929
Investment in subsidiaries             1,111,914        22,406                -                 -       (1,111,914)         22,406
Other assets                               3,648        16,768            3,070                 -                -          23,486
                                 ---------------  -------------- ---------------- ------------------ --------------  ---------------
   Total assets                   $    1,163,349   $ 1,283,383     $     42,575        $   14,155       (1,111,914)      1,391,548
                                 ===============  ============== ================ ================== ==============  ===============

Current liabilities               $       42,455   $   126,531     $      3,632        $    1,147      $         -     $   173,765
Long-term debt, less current
   portion                               697,753        29,379           12,767                 -          (12,767)        727,132
Other liabilities                         10,430        62,986              463               193                -          74,072
Minority interest                              -           454            1,289             2,125                -           3,868
Temporary equity                          16,500             -                -                                  -          16,500
Shareholders' equity                     396,211     1,064,033           24,424            10,690       (1,099,147)        396,211
                                 ---------------  -------------- ---------------- ------------------ --------------  ---------------
Total liabilities
    and shareholders' equity      $    1,163,349   $ 1,283,383     $     42,575        $   14,155      $(1,111,914)    $ 1,391,548
                                 ===============  ============== ================ ================== ==============  ===============


Revenue                           $            -   $   639,804     $     20,518        $   24,018                -     $   684,340
Operating expenses                        48,047       593,711           17,690            22,205                -         681,653
Interest expense, net                     27,669           615              507               (24)            (524)         28,243
Minority interest                              -           392              922                                  -           1,314
Provision for income taxes                     -         3,333                -                                  -           3,333
                                 ---------------  -------------- ---------------- ------------------ --------------  ---------------
Net (loss) income                 $      (75,716)  $    41,753     $      1,399        $    1,837              524         (30,203)
                                 ===============  ============== ================ ================== ==============  ===============



Cash flows (used in ) provided by
   operating activities           $      (45,994   $    55,868     $     (1,722)       $    14,155     $         -    $     22,307
Cash flows  used in investing
   activities                           (844,051)       (7,816)            (373)                 -               -        (852,240)
Cash flows provided by (used in)
   financing activities                  891,252         8,856               (5)           (10,560)              -         889,543
Cash at the beginning
     of the period                             -         2,916            3,063                  -               -           5,979
Cash at the end of the period    $         1,207   $    59,824     $        963        $     3,595 $             -    $     65,589
</TABLE>


         The following are summarized unaudited statements setting forth certain
financial information concerning the Guarantors, the Non-Guarantor Subsidiaries
and the Non-Wholly Owned Guarantor Subsidiary as of and for the three months
ended September 30, 1998 (in thousands).

                                       16
<PAGE>

<TABLE>
<CAPTION>

                                       SFX                                            NON-WHOLLY                          SFX
                                  ENTERTAINMENT                       NON-             OWNED                        ENTERTAINMENT
                                       INC.                         GUARANTOR         GUARANTOR                           INC.
                                    (PARENT)        GUARANTORS     SUBSIDIARIES       SUBSIDIARY     ELIMINATIONS    CONSOLIDATED
                                 ---------------  -------------- ---------------- ------------------ --------------  ---------------
<S>                              <C>              <C>             <C>                <C>              <C>                <C>
Revenue                             $        -     $   350,160     $     15,995        $     24,018    $        -     $   390,173
Operating expenses                       7,745         313,517           12,950              22,205             -         356,417
Interest expense, net                   12,361             143              208                 (24)         (167)         12,521
Minority interest                            -              (7)             923                   -             -             916
Provision for income taxes                   -           1,983                -                   -             -           1,983
                                 ---------------  -------------- ---------------- ------------------ --------------  ---------------
Net (loss) income                   $  (20,106)    $    34,524     $      1,914        $      1,837   $       167     $    18,336
                                 ===============  ============== ================ ================== ==============  ===============
</TABLE>

         The summarized consolidated balance sheet concerning the Guarantors,
the Non-Guarantor Subsidiary and the Non-Wholly Owned Guarantor Subsidiaries as
of December 31, 1998 is included in the Company's 1998 Annual Report on Form
10-K.

                                       17

<PAGE>



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

         The following discussion of the financial condition and results of
operations of SFX should be read in conjunction with the consolidated financial
statements and related notes thereto included in this report and SFX's 1998
Annual Report on Form 10-K. The following discussion contains certain
forward-looking statements that involve risks and uncertainties. SFX's actual
results could differ materially from those discussed herein. Certain of the
factors that could cause or contribute to the differences are discussed under "-
Safe Harbor for Forward Looking Statements". SFX undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements made to reflect any future events or circumstances.

GENERAL

         SFX operates primarily in four major business segments within the live
entertainment industry:

o the music segment, which includes booking and promoting music events and
tours, producing music events and tours, and owning and operating concert and
other entertainment venues;

o the theater segment, which includes owning and/or operating theatrical venues
and the promotion and production of theatrical events, particularly touring
Broadway shows;

o the sports segment, which includes talent representation and marketing of
professional athletes and broadcasters, event management, television programming
and production and the production and promotion of motor sports events; and

o the family entertainment & other segment, which includes the production and
promotion of family-oriented events, marketing and consulting services,
publishing of music related trade magazines and the production and distribution
of network radio special events and concert programming.

SFX sells corporate sponsorships and advertising in each of its segments.

         Music

         SFX's concert promotion and venue operation business consists primarily
of the promotion of concerts and operation of venues primarily for use in the
presentation of musical events. SFX's primary source of revenues from its
concert promotion activities is from ticket sales at events promoted by SFX. As
a venue operator, SFX's primary sources of revenue are sponsorships,
concessions, parking and other ancillary services, derived principally from
events promoted by SFX.

         Revenue from ticket sales is affected primarily by the number of events
SFX promotes, the average ticket price and the number of tickets sold. The
average ticket price depends on the popularity of the artist whom SFX is
promoting, the size and type of venue and the general economic conditions and
consumer tastes in the market where the event is being held. Generally, the
promoter or producer will agree to pay the artist the greater of a minimum
guarantee or a profit sharing payment based on ticket revenue, less certain show
expenses. The promoter or producer generally assumes the financial risk of
ticket sales and is responsible for local production and advertising of the
event. When the promoter or producer assumes the financial risk, all revenue and
expenses associated with the event are recorded. Revenue received before the
event date is initially recorded on the balance sheet as deferred revenue; after
the event occurs, it is recorded on the statement of operations as gross
revenue.

         SFX's most significant operating expenses are talent fees, production
costs and venue operating expenses, including rent, advertising costs and
insurance expense. The booking of talent in the concert promotion business
generally involves contracts for limited engagements, often involving a small
number of performances. As a producer, SFX is generally responsible for the
booking of talent for a larger number of events, often an artist's entire tour.
Talent fees depend primarily on the popularity of the artist, the ticket price
that the artist can command at a particular venue and the expected level of
ticket sales. Production costs and venue operating expenses have substantial
fixed cost components and variable costs primarily related to expected
attendance. Expenses are deferred on the balance sheet as prepaid event expenses
until the event occurs.


                                       18
<PAGE>


         Theater

         SFX's theatrical operations are directed mainly towards the
presentation of Broadway shows at owned and/or operated venues and the
production and promotion of touring Broadway shows, which generate revenues
primarily from ticket sales and sponsorships. The principal source of revenue at
owned and/or operated venues is rental income from production companies,
merchandise sales and concession sales. Touring Broadway shows are typically
revivals of previous commercial successes or reproductions of established
theatrical shows currently playing on Broadway in New York City. SFX may also
participate in ancillary revenues, such as concessions and merchandise sales,
depending on its agreement with a particular local promoter/venue operator.
Revenue from ticket sales is primarily affected by the popularity of the
production and the general economic conditions and consumer tastes in the
particular market and venue where the production is presented. To reduce its
dependency on the success of any single touring production, SFX sells advance
annual subscriptions that provide the purchaser with tickets for all of the
shows that SFX intends to tour in the particular market during the touring
season. Historically, approximately 28% of ticket sales for touring Broadway
shows presented by SFX were sold through advance annual subscriptions.
Subscription related revenues received before the event date and other advanced
ticket sales are initially recorded on the balance sheet as deferred revenue;
after the event occurs, they are recorded on the statement of operations as
gross revenue. Promotion expenses are capitalized during the year on the balance
sheet as prepaid event expenses until the event occurs. Production expenses are
capitalized on the balance sheet as prepaid event expenses until the tour
begins, at which time all costs are amortized over the expected life of the
tour, which is generally less than one year. Subscriptions for touring Broadway
shows typically cover approximately two-thirds of SFX's break-even cost point
for those shows.

                  Principal operating expenses related to touring shows include
talent, rent, advertising and royalties. Talent costs are generally fixed once a
production is cast. Rent and advertising expense may be either fixed or variable
based on the arrangement with the particular local promoter/venue operator.
Royalties are generally paid as a percentage of gross ticket sales.

         SFX also makes equity investments in original Broadway productions,
principally as a means to obtain the touring rights for such shows. These
investments are generally accounted for using either the equity method or the
cost method of accounting, based on the percentage of ownership. SFX monitors
the recoverability of these investments on a regular basis, and SFX may be
required to take write-offs if the original production closes or if SFX
determines that the production will not recoup the investment. The timing of any
write-off could materially adversely affect the operating results of the
theatrical segment in a particular period.

         Sports

         SFX is a leading fully integrated sports marketing and management
company specializing in the representation of sports athletes and broadcasters,
integrated event management, television programming and production and marketing
consulting services. SFX's talent representation and marketing activities
consist principally of the representation of sports athletes and broadcasters in
contract and endorsement negotiations. SFX also provides certain investment
advisory services to its clients. SFX typically receives a percentage of monies
earned by its clients and a percentage of the endorsement deals negotiated by
SFX. Revenue from these sources is recognized ratably over the period of the
negotiated agreement. Revenue from these sources is dependent upon a number of
variables, many of which are outside SFX's control, including a player's skill,
health, public appeal and the appeal of the sport in which the player
participates. Principal operating expenses include salaries, wages and travel
and entertainment expenses.

         The owners of the teams in the NBA locked out their players from
participation in league activities which caused cancellation of some of the
games for the 1998-99 basketball season. The suspension of the NBA season ended
on January 6, 1999, and the NBA season began February 5, 1999 with a reduced
game schedule. The cancellation of over 30 games per team for the 1998-1999 NBA
season had a negative impact on the sports segment's revenues and EBITDA in the
fourth quarter of 1998 and the first quarte of 1999.

         SFX's motor sports activities consist principally of the production and
promotion of specialized motor sports, which generate revenues primarily from
ticket sales and sponsorships, as well as merchandising and video rights
associated with producing motor sports events. Ticket prices for these events
are generally lower than for theatrical or music concert events. Revenue from
these sources is primarily affected by the type of event and the general
economic conditions and consumer tastes in the particular markets and venues
where the events are presented. Event-related


                                       19
<PAGE>

revenues received before the event date are initially recorded on the balance
sheet as deferred revenue. After the event occurs, they are recorded on the
statement of operations as gross revenue.

         Operating expenses associated with motor sports activities include
talent, rent, track preparation costs, security and advertising. These operating
expenses are generally fixed costs that vary based on the type of event and
venue where the event is held. Expenses are deferred on the balance sheet as
prepaid event expenses until the event occurs.

         Under certain circumstances, SFX may be required to sell either its
motor sports or theatrical lines of business, as described below.

         Family Entertainment & Other

         The family entertainment segment produces and presents family-oriented
entertainment such as children's theatrical shows, dance shows, ice-skating,
gymnastic shows and Titanic exhibits worldwide. SFX's other principal businesses
include the production and distribution of radio industry trade magazines, the
production of radio programming content and the provision of radio airplay and
music retail research services. The primary sources of revenues from these
activities include the sale of advertising space in its publications and the
sale of advertising time on radio stations that carry its syndicated shows,
subscription fees for its trade publications and subscription fees for access to
its database of radio play lists and audience data. Revenues generally vary
based on the overall advertising environment and competition.

         SFX also provides marketing and consulting services pursuant to
contracts with individual clients for specific projects. Revenues from and costs
related to these services vary based on the type of service being provided and
the incremental associated costs.

1998 ACQUISITIONS

         During 1998, SFX completed the following acquisitions (in thousands):

<TABLE>
<CAPTION>

                                       Cash
                                   Consideration     Value of     Number
                         Date       And Assumed       Stock     Of Shares                    Business
Company                Acquired         Debt          Issued      Issued                     Segment
---------------------  --------    -------------    ----------  ----------   ------------------------------------------------------
<S>                    <C>           <C>            <C>                <C>   <C>
Bill Graham Presents   2/24/98       $     72,827   $    7,500         845   Music and Family Entertainment & other
PACE and Pavilion      2/25/98            220,683       20,000       2,250   Music, Theatrical and Sports
Contemporary           2/27/98             82,702       16,834       1,895   Music  and Family Entertainment & other
Network                2/27/98             56,784       10,000       1,125   Other
Concert/Southern        3/4/98             16,908            -           -   Music
FAME                    6/4/98             82,241       35,960       1,500   Sports
Don Law                 7/2/98             92,195            -           -   Music
Magicworks             9/11/98            115,740            -           -   Theatrical and Family Entertainment & other
                                                                             Music, Theatrical, Sports, Family Entertainment
Other acquisitions     Various            166,961       11,000         563   and Other
                                  ---------------   ----------  ----------
Total                                 $   907,041     $101,294       8,178
                                  ===============   ==========  ==========
</TABLE>

         The above table is a summary of the 1998 Acquisitions. The funds
required to finance the 1998 Acquisitions were obtained from the $350.0 million
Senior Subordinated Note offering in February 1998, SFX's then-existing senior
credit facility and SFX's May 1998 equity offering. A detailed description of
the 1998 Acquisitions is also included in the Company's 1998 Annual Report on
Form 10-K.

         Pursuant to the agreements related to the 1998 Acquisitions, SFX:

o under certain circumstances, may be required to repurchase shares of its Class
A Common Stock or make additional payments in connection therewith (see
"--Liquidity and Capital Resources--Future Contingent Payments");

o has granted certain rights of first refusal, certain of which are exercisable
at 95% of the proposed purchase price; and

                                       20
<PAGE>

o in connection with the PACE acquisition, has granted Brian Becker, an
Executive Vice President, a Member of the Office of the Chairman and a director
of SFX, the option to acquire, after February 25, 2000, SFX's then existing
motor sports line of business or, if that business has previously been sold,
SFX's then existing theatrical line of business, in each case at its then fair
market value.

1999 ACQUISITIONS

<TABLE>
<CAPTION>

                                       Cash
                                   Consideration     Value of     Number
                         Date       And Assumed       Stock     Of Shares                    Business
Company                Acquired         Debt          Issued      Issued                     Segment
---------------------  --------    -------------    ----------  ----------   ------------------------------------------------------
<S>                    <C>           <C>            <C>                <C>   <C>
Cellar Door            2/19/99     $    76,788       $  20,000         519      Music
Marquee                3/16/99          33,546          81,669       2,103      Sports
Nederlander            3/16/99          95,625           -              -       Music
Livent                 8/27/99         100,809           -              -       Theatrical
Apollo                 9/17/99         218,942          37,472         980      Theatrical and Family Entertainment & Other
Other acquisitions     Various         149,961          15,745         397      Music, Theatrical, Sports, Family Entertainment
                                                                                and Other
                                   ---------------    ---------    ----------
Total                              $   675,671        $154,886       3,999
                                   ===============    ==========   ==========
</TABLE>

         Cellar Door

         On February 19, 1999, SFX purchased all of the issued and outstanding
capital stock of the Cellar Door Group of companies for a purchase price of
$70.0 million in cash, 519,357 shares of Class A Common Stock with an issue date
value of $20.0 million, and $8.5 million payable in five equal annual
installments beginning on the first anniversary of the closing date. In
addition, SFX has agreed to issue to the seller options to purchase 150,000
shares of Class A Common Stock in equal installments ove the five-year period
following the closing date. SFX financed this acquisition with a portion of the
net proceeds of the February 1999 Equity Offering.

         Nederlander

         On March 16, 1999, SFX acquired certain interests in seven venues and
other assets of Nederlander for an aggregate purchase price of approximately
$95.6 million in cash. The agreement relating to the Mesa del Sol Centre for the
Performing Arts provides for additional payments based on the financial
performance of this venue. In the third quarter of 1999, SFX renegotiated the
agreement with respect to the Crown Arena whereby SFX relinquished its financial
interest in exchange for a revised long- term venue management agreement. SFX
financed this acquisition with a portion of the net proceeds of the 1999 Equity
Offering and borrowings under its then-existing senior credit facility.

         Marquee

         On March 16, 1999, SFX merged with The Marquee Group, Inc. In
connection with the merger, SFX issued approximately 2.1 million shares of SFX
Class A Common Stock with a value of approximately $81.7 million on the date of
the merger and repaid $33.5 million of Marquee's debt. SFX financed the cash
portion of the acquisition with borrowings under SFX's then-existing senior
credit facility. In the third quarter, SFX spun-off the operations of QBQ, Inc,
whose primary business is the representation of artists in the music industry as
agent. The newly formed company is an independent company in which SFX does not
have a management or ownership interest. In connection with the spin-off, as of
September 30, 1999, SFX has loaned the newly formed company $5.0 million, which
has been recorded as an other asset on the consolidated balance sheet. The newly
formed company is in the process of obtaining independent financing.

         Livent

         On August 27, 1999, the Company purchased certain assets of Livent,
Inc., and its affiliates, including three theaters and intellectual property
rights to several current and future Broadway productions, including Ragtime,
Fosse, Phantom of the Opera and Seussical. The purchase price for this
acquisition was approximately $100.8 million, consisting of $79.3 million in
cash, $18.4 million of deferred purchase consideration and $3.1 million of debt
assumed,



                                       21
<PAGE>

subject to post-closing adjustments. SFX financed the cash portion of the
acquisition with a portion of the net proceeds from the August 1999 Equity
Offering.

         Apollo

         In September 17, 1999, SFX acquired Apollo Leisure Group plc, the
largest live theater operator as well as one of the largest providers of
entertainment and leisure management services in the U.K. The total purchase
price for the acquisition was approximately $256.4 million, comprised of
approximately $196.4 million in cash, 979,667 shares of Class A common stock
with a value of approximately $37.5 million and the assumption of net
liabilities of approximately $22.5 million, subject to post-closing adjustments.
Apollo operates, among other venues, three arenas and a network of 23 theaters.
In connection with the Apollo acquisition, SFX acquired 100% of Barry Clayman
Concerts, which is a leading promoter of concert and other live entertainment
events throughout in the U.K. SFX financed the cash portion of the purchase
price with borrowings under the Senior Credit Facility.

         Other Acquisitions

         During the first quarter of 1999, SFX also completed the acquisitions
of The Entertainment Group, Inc., a concert and theatrical producer and promoter
with operations in Chicago and Mexico City; Integrated Sports International,
Inc., a full-service sports marketing company; and a company involved in
business management and tour production in music and the performing arts. In
addition, SFX entered into a long-term marketing and consulting agreement with
respect to the Rosemont Horizon and Rosemon Theater in the Chicago area and
purchased a theater in Denver, Colorado. The total consideration for these
acquisitions and the long-term marketing and consulting agreement consisted of
$68.6 million in cash and 142,766 shares of Class A Common Stock valued at $5.2
million. SFX financed these acquisitions with the proceeds from the February
1999 Equity Offering and borrowings under SFX's then-existing senior credit
facility. In addition, SFX may be required to make additional payments of up to
$13.0 million in cash and 75,000 shares of Class A Common Stock based on the
financial performance of certain of these acquired companies.

         During the second quarter of 1999, SFX completed the acquisitions of
Hendricks Management Company, Inc. which represents and provides financial
consulting services to team sports athletes, primarily in professional baseball,
and a fifty percent interest in A.H. Enterprises, a leading promoter of urban
music. The total consideration for these acquisitions was approximately $23.2
million in cash and $4.1 million in deferred purchase consideration. SFX
financed these acquisitions with borrowings under SFX's then-existing senior
credit facility and cash on hand. In addition, SFX may be required to make
additional payments, in shares of SFX Class A Common Stock, based on the
cumulative financial performance of Hendricks Management Company, Inc. through
December 31, 2002. In addition, the Company invested $8.7 million in certain
entertainment and sports related Internet companies.

         In addition, during the third quarter of 1999, SFX completed the
acquisitions of (1) Candid Productions, Inc., a producer of sports
entertainment, primarily professional figure skating, (2) Tellem & Associates,
which represents team sports athletes, primarily in professional baseball and
basketball and (3) Midland Concert Promotions Group Limited, a concert promotion
and motor sports venue operator in the United Kingdom. The total consideration
for these acquisitions was approximately $59.8 million consisting of $42.6
million in cash, and 253,666 shares of Class A Common Stock valued at $10.5
million and $6.7 million in deferred purchase consideration. SFX financed these
acquisitions with cash on hand, the portion of the net proceeds of the August
1999 Equity Offering and borrowings under the Senior Credit Facility.

         SFX's 1998 and 1999 Acquisitions were accounted for using the purchase
method of accounting. The purchase price of certain of the 1998 and 1999
Acquisitions has been preliminarily allocated to the assets acquired and the
liabilities assumed and are subject to change. Operating results of the 1998 and
1999 Acquisitions are included herein from their respective acquisition dates.
The intangible assets created in the purchase transactions will generally be
amortized against future earnings, if any over periods up to 15 years. The
amount of amortization will be substantial and will continue to affect SFX's
operating results in the future. These expenses, however, do not result in an
outflow of cash by SFX and do not impact EBITDA.



                                       22
<PAGE>

         Recent Acquisitions and dispositions

         EMA Telstar

         On October 4, 1999, the Company purchased EMA Telstar, a venue owner
and a promoter and producer of live entertainment in Sweden for approximately
$27.9 million in cash. The acquisition was financed with a portion of the net
proceeds from the August 1999 Equity Offering.

         Mojo Works

         On October 25, 1999, the Company purchased 80% of the Mojo Works group
of companies, a promoter and producer of live entertainment in the Netherlands
for approximately $39.7 million in cash, including working capital, subject to
post-closing adjustments. The acquisition was financed with a portion of the net
proceeds from the August 1999 Equity Offering.

         Sale of assets

         On October 13, 1999, the Company sold SFX Network's radio show prep
services division for $11.7 million.

         Pending Acquisitions

         SFX is also currently pursuing certain additional acquisitions;
however, it has not entered into any definitive agreements with respect to such
acquisitions, and there can be no assurance that it will do so. SFX's ability to
complete acquisitions in the future and successfully integrate acquired entities
are important components of its business strategy. If SFX is unable to do so,
its business and stock price may suffer. See - "Safe Harbor for Forward Looking
Statements".

1999 FINANCINGS

         February 1999 Equity Offering

         In February 1999, SFX consummated an offering of 7,423,500 shares of
the Company's Class A Common Stock at an offering price of $37.00 per share and
received net proceeds of approximately $260.7 million. SFX used the net proceeds
to finance certain of the 1999 Acquisitions.

         August 1999 Equity Offering

         In August 1999, SFX consummated an offering of 8,625,000 shares of the
Company's Class A Common Stock at an offering price of $41.00 per share and
received net proceeds of approximately $338.7 million. SFX used a portion of the
net proceeds to finance certain of the 1999 Acquisitions and intends to use the
remaining portion of the net proceeds for general corporate purposes, including
potential future acquisitions.

         Senior Credit Facility

         On August 23, 1999, SFX entered into a new seven-year $1.1 billion
Senior Credit Facility which replaced the existing $350 million Senior Credit
facility and modified certain covenants. The new Senior Credit Facility is
comprised of a $250.0 million multi-draw, multi-currency term loan maturing on
December 31, 2005 (the "Term A Loan"), a single-draw, $600 million U.S. dollar
term loan maturing on June 30, 2006 (the "Term Loan B") and a $250.0 million
reducing revolver having a letter of credit sub-limit of $75.0 million maturing
on December 31, 2005. The Company recorded a $2.6 million extraordinary loss on
the early extinguishment of debt, net of taxes, related to the replaced
facility.

                                       23
<PAGE>

         Consent Solicitation

         In July 1999, SFX completed a consent solicitation with respect to its
outstanding 9 1/8% Senior Subordinated Notes whereby it obtained approval from
the holders of the notes to modifications of certain covenants in the indentures
governing the notes. The modifications, among other things, provided SFX with
more flexibility to make investments and acquisitions internationally and permit
SFX's foreign subsidiaries to incur indebtedness, subject to certain
limitations. Fees associated with the transaction totaled $13.7 million and have
been recorded as debt issuance costs.

RESULTS OF OPERATIONS

         The operating performance of entertainment companies, such as SFX, is
measured, in part, by their ability to generate EBITDA. Further, SFX uses
EBITDA, excluding non-cash and non-recurring charges, as the primary indicator
of its operating performance and secondarily as a measure of liquidity. "EBITDA"
is defined as earnings before interest, taxes, minority interest and
d epreciation and amortization. EBITDA, as presented herein, also excludes
non-cash and non-recurring charges. Although EBITDA is not a measure of
performance calculated in accordance with GAAP, SFX believes that the
entertainment industry accepts EBITDA as a generally recognized measure of
performance and analysts who report publicly on the performance of entertainment
companies use EBITDA. Nevertheless, you should not consider this measure in
isolation or as a substitute for operating income, net income, net cash provided
by operating activities or any other measure for determining our operating
performance or liquidity that is calculated in accordance with GAAP. EBITDA, as
SFX calculates it, may not be comparable to calculations of similarly titled
measures presented by other companies.

         SFX's operations and revenues have been largely seasonal in nature,
with generally higher revenues generated in the second and third quarters. For
example, on a pro forma basis for the 1998 and 1999 Acquisitions, SFX generated
approximately 60% of its revenues in the second and third calendar quarters
during the twelve months ended September 30, 1999. SFX's outdoor venues are
primarily used in the summer months and do not generate substantial revenue in
the late fall, winter and early spring. Similarly, the musical concerts that SFX
promotes largely occur in the second and third quarters. SFX's entertainment
marketing and consulting in connection with musical concerts also generate a
large share of revenues in the second and third quarters.

         Therefore, the seasonality of SFX's business causes, and will continue
to cause, a significant variation in SFX's quarterly operating results. However,
this variation is somewhat offset with non-summer seasonal businesses such as
motor sports, which is winter-seasonal, and touring Broadway shows, which
typically tour between September and May. In addition, the acquisitions of FAME,
Marquee, Integrated Sports International, Hendricks and Tellem in the sports
segment are expected to lessen the seasonal variations associated with the music
segment, since the these businesses generally earn revenue ratably over the
year. The recent acquisitions of Apollo and Livent will also lessen the seasonal
variation since the presentation of theatrical shows at owned or operated venues
generally produces revenue relatively evenly over the year, with the fourth
quarter being the strongest quarter.

HISTORICAL RESULTS

         Three months ended September 30, 1999 as compared to the three months
ended September 30, 1998

         During 1998 and the first nine months of 1999, SFX made significant
acquisitions in each of its business segments. The 1998 and 1999 Acquisitions
were the primary reason for the third quarter of 1999 increases in revenue,
EBITDA and operating income, before corporate charges, in each of the segments,
as compared to the comparable period in 1998. The following table summarizes
each segment's operating performance for the three months ended September 30,
1999 and 1998 (in thousands):
<TABLE>
<CAPTION>

                                     Revenue                        EBITDA                            Operating income
                                1999          1998            1999            1998         1999            1998
                            -----------    ----------     ----------      ----------     ---------      ----------
<S>                         <C>            <C>            <C>             <C>            <C>            <C>
Segments:
     Music................. $   368,059    $  299,946     $   74,683      $   49,409     $  56,790      $   36,540
     Theatrical............      51,361        46,534          5,336           2,602         2,310             444
     Sports................      28,163         6,133          9,155           1,217         4,159          (1,268)
     Family entertainment
        & other............      79,602        37,560         11,256           5,985         4,530           4,682
                            -----------    ----------     ----------      ----------     ---------      ----------
Segment performance             527,185       390,173        100,430          59,213        67,789          40,398
    Corporate ............            -             -         (4,070)         (3,407)      (6,426)          (6,642)
                            -----------    ----------     ----------      ----------     ---------      ----------
Total...................... $   527,185    $  390,173     $   96,360      $   55,806     $  61,363      $   33,756
                            ===========    ==========     ==========      ==========     =========      ==========
</TABLE>


                                       24
<PAGE>

         Music Revenue increased by $68.1 million to $368.0 million for the
three months ended September 30, 1999, compared to $299.9 million for the three
months ended September 30, 1998. EBITDA increased by $25.3 million to $74.7
million from $49.4 million. Operating income increased by $20.3 million to $56.8
million from $36.5 million. Approximately $54.1 million of the increase in
revenue was the result of incremental revenues from the acquisitions of Cellar
Door and Nederlander and approximatel $14.0 million of the increase was
primarily the result of increased touring activity, including radio festivals,
and increased ticket sales, sponsorships and concessions at companies owned
during both periods. The increase in EBITDA reflected a $15.4 million
improvement at businesses owned for both periods, primarily as a result of the
increases mentioned above and $9.9 million related to the music segment
acquisitions in 1999. The increase in operating income of $20.3 million resulted
from the increase in EBITDA, partially offset by increased depreciation and
amortization expense related to the acquisitions and a non-recurring loss
related to the Company's Latin American touring activities.

         Theatrical Revenue increased by $4.9 million to $51.4 million for the
three months ended September 30, 1999, compared to $46.5 million for the three
months ended September 30, 1998. EBITDA increased by $2.7 million to $5.3
million from $2.6 million. Operating income increased by $1.9 million to $2.3
million from $444,000. SFX experienced a $17.9 million increase in revenue from
the acquisitions of Apollo and Livent which was partially offset by a $13.0
million decline in revenue resulting from decreased theatrical touring activity
in certain markets during the third quarter of 1999. The increase in EBITDA
reflected a $3.7 million contribution from the theatrical segment acquisitions
in 1999 and a $1.0 million decrease related to decreased theatrical touring
activity in certain markets. The increase in operating income of $1.9 million
resulted from the increase in EBITDA, partially offset by increased depreciation
and amortization expense related to the acquisitions.

         Sports Revenue increased by $22.1 million to $28.2 million for the
three months ended September 30, 1999, compared to $6.1 million for the three
months ended September 30, 1998. EBITDA increased by $8.0 million to $9.2
million from $1.2 million. Operating income increased by $5.5 million to $4.2
million from an operating loss of $1.3 million. Approximately $22.1 million of
the increase in revenue was the result of incremental revenue from the
acquisitions of Marquee, Integrated Sports International and Hendricks
Management Company. The increase in EBITDA reflected a $7.0 million increase
related to the sports companies acquired during 1999 and a $1.0 million
improvement at companies owned for both periods, primarily from increased sports
representation activity. The increase in operating income of $5.5 million
resulted from the increase in EBITDA, partially offset by increased depreciation
and amortization expense related to the acquisitions.

         Family Entertainment & Other Revenue increased by $42.0 million to
$79.6 million for the three months ended September 30, 1999, compared to $37.6
million for the three months ended September 30, 1998. EBITDA increased by $5.3
million to $11.3 million from $6.0 million. Operating income decreased by
$152,000 to $4.5 million from $4.7 million. Approximately $32.0 million of the
increase in revenue was the result of the increase in national sponsorship
activity, increased marketing, merchandising and events and approximately $10.0
million of the increase related to the acquisition of Magicworks. The increase
in EBITDA of $5.3 million primarily reflects the increase in national
sponsorship activity. The decrease in operating income of $153,000 resulted from
increased depreciation and amortization expense related to the acquisitions,
partially offset by the increase in EBITDA

         Corporate Corporate expenses, including non-cash charges and
depreciation and amortization, were $6.4 million for the three months ended
September 30, 1999 compared to $6.6 million for the three months ended September
30, 1998. This decrease in corporate expenses reflects decreased amortization
expense in 1999, partially offset by the additional administrative overhead
needed to support the growth of SFX's operations.

         Interest expense, net of investment income, was $23.2 million in the
three months ended September 30, 1999, compared to $12.5 million for the three
months ended September 30, 1998, primarily as a result of the additional debt
incurred to consummate the 1998 and 1999 Acquisitions.

         Minority interest was $842,000 for the three months ended September 30,
1999, compared to $916,000 for the three months ended September 30, 1998.

                                       25
<PAGE>

         SFX recorded an income tax provision of $22.0 million and $2.0 million
for the three months ended September 30, 1999 and 1998, respectively. The
current quarter provision is for federal, state and local taxes. The provision
is different from the statutory rate as a result of non-deductible goodwill
amortization. While SFX has provided for income taxes through the third quarter,
it does not expect to pay any taxes for 1999, other than federal alternative
minimum tax ("AMT") and state and local taxes, as a result of the utilization of
significant Net Operating Loss ("NOL") carryforwards that were previously
recognized for book purposes. The provision for income taxes in 1998 was
primarily related to state and local taxes. No federal tax benefit was recorded
in 1998 due to the uncertainty of realizing a tax benefit for SFX's losses.

         SFX recorded a $2.6 million extraordinary loss on the early
extinguishment of debt, net of $1.7 million of taxes, in the third quarter of
1999 related to the write-off of unamortized costs incurred to complete the $350
million prior senior credit facility which was replaced with the $1.1 billion
Senior Credit Facility in August of 1999.

         SFX's net income decreased to $12.6 million for the three months ended
September 30, 1999, as compared to $18.3 million for the three months ended
September 30, 1998, due to the factors discussed above. SFX's net income
applicable to common shares decreased to $11.7 million for the three months
ended September 30, 1999, as compared to $17.5 million for the three months
ended September 30, 1998 as a result of factors discussed above.

         Nine months ended September 30, 1999, as compared to the Nine months
ended September 30, 1998.

         During 1998 and the first nine months of 1999, SFX made significant
acquisitions in each of its business segments. The 1998 and 1999 Acquisitions
were the primary reason for the increases, during the first nine months of 1999,
in revenue, EBITDA and operating income, before corporate charges, in each of
the segments, as compared to the comparable period in 1998. The following table
summarizes each segment's operating performance for the nine months ended
September 30, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>

                                       Revenue                      EBITDA                      Operating income

                                    1999         1998            1999           1998           1999            1998
                              -----------   ----------     -----------    -----------     -----------     ------------
<S>                                 <C>          <C>             <C>            <C>            <C>             <C>
Segments:
     Music.................     $ 718,452   $  478,880     $   114,038    $    58,700     $    60,111     $     35,381
     Theatrical............       192,337      114,997          17,721         10,423          10,759            6,796
     Sports................       110,721       17,919          28,218          2,009          14,473           (1,659)
     Family entertainment
        & other............       189,481       72,544          23,185         12,588           7,405            9,801
                              -----------   ----------     -----------    -----------     -----------     ------------
 Segment performance......      1,210,991      684,340         183,162         83,720          92,748           50,319
 Corporate                              -            -         (13,842)        (7,757)        (19,728)         (47,632)
                              -----------   ----------     -----------    -----------     -----------     ------------
Total......................   $ 1,210,991   $  684,340     $   169,320    $    75,963     $    73,020     $      2,687
                              ===========   ==========     ===========    ===========     ===========     ============
</TABLE>


         Music Revenue increased by $239.6 million to $718.5 million for the
nine months ended September 30, 1999, compared to $478.9 million for the nine
months ended September 30, 1998. EBITDA increased by $55.3 million to $114.0
million from $58.7 million. Operating income increased by $24.7 million to $60.1
million from $35.4 million. Approximately $161.5 million of the increase in
revenue was the result of incremental revenue from the acquisitions of Cellar
Door, Nederlander and Don Law and approximately $78.1 million of the increase
was the result of increased touring activity, including radio festivals, and
increased ticket sales, sponsorships and concessions at businesses owned during
both periods. The increase in EBITDA reflected a $37.7 million improvement at
businesses owned for both periods, primarily as a result of the increased
activity mentioned above. and $17.6 related to the music segment acquisitions.
The increase in operating income of $24.7 million resulted from the increase in
EBITDA, partially offset by increased depreciation and amortization expense
related to the acquisitions and a non-recurring loss related to the Company's
Latin American touring activities.

         Theatrical Revenue increased by $77.3 million to $192.3 million for the
nine months ended September 30, 1999, compared to $115.0 million for the nine
months ended September 30, 1998. EBITDA increased by $7.3 million to $17.7
million from $10.4 million. Operating income increased by $4.0 million to $10.8
million from $6.8 million. Approximately $62.8 million of the increase in
revenue was the result of incremental revenue from the acquisitions of Apollo
and Livent and approximately $14.5 million of the increase was the result of
increased theatrical touring activity


                                       26
<PAGE>

during 1999. The increase in EBITDA reflected an $11.0 million contribution from
the theatrical segment acquisitions in 1999 and a $3.7 million decrease related
to a stronger theatrical touring season in 1998. The increase in operating
income of $4.0 million resulted from the increase in EBITDA, partially offset by
increased depreciation and amortization expense related to the acquisitions.

         Sports Revenue increased by $92.8 million to $110.7 million for the
nine months ended September 30, 1999, compared to $17.9 million for the nine
months ended September 30, 1998. EBITDA increased by $26.2 million to $28.2
million from $2.0 million. Operating income increased by $16.2 million to $14.5
million from an operating loss of $1.7 million. Approximately $82.9 million of
the increased revenue was the result of incremental revenue from entities
acquired by the sports segment, that were owned for the full nine months in
1998, and an increase of $9.9 million related to increased sports representation
and motor sports activity. The increase in EBITDA reflected a $22.1 million
increase related to the sports companies acquired during 1998 and 1999 and a
$4.1 million improvement at companies owned for both periods, primarily
increased sports representation activity. The increase in operating income of
$16.2 million resulted from the increase in EBITDA, partially offset by
increased depreciation and amortization expense related to the acquisitions.

         Family Entertainment & Other Revenue increased by $117.0 million to
$189.5 million for the nine months ended September 30, 1999, compared to $72.5
million for the nine months ended September 30, 1998. EBITDA increased by $10.6
million to $23.2 million from $12.6 million. Operating income decreased by $2.4
million to $7.4 million from $9.8 million. Approximately $59.7 million of the
increase in revenue was primarily the result of increased national sponsorship
activity, increased marketing, merchandising and events and $57.3 million was
the result of incremental revenues from entities acquired by the family
entertainment & other segment that were not owned for the full nine months in
1998. The increase in EBITDA of $10.6 million primarily reflects the increase in
national sponsorship activity, publishing and merchandising. The decrease in
operating income of $2.4 million resulted from increased depreciation and
amortization expense related to the acquisitions, partially offset b the
increase in EBITDA.

         Corporate Corporate segment related expenses, including non-cash
charges and depreciation and amortization, were $19.7 million for the nine
months ended September 30, 1999 compared to $47.6 million for the nine months
ended September 30, 1998. Corporate expenses related to administrative overhead
increased to $13.8 million from $7.8 million, largely as a result of the growth
of SFX's operations. Depreciation and amortization expense decreased to $2.8
million from $7.0 million primarily a a result of the accelerated amortization
of the Triathlon asset in 1998. The non-cash charges in 1999 and 1998 consisted
of: 1) $3.1 million in 1999 related to 517,500 options which vest over six years
and have an exercise price of $3.67 per share and a deferred compensation plan
for each non-employee director, adopted in January 1998, whereby each director
was credited with the right to receive 8,183 shares of Class A Common Stock
based upon a stock price of $3.67 per share and 2) $32.9 million in 1998
consisting of (a) $23.9 million of compensation related to the sale of 975,000
shares of Class B Common Stock and 285,000 shares of Class A Common Stock at a
purchase price of $1.33 per share to certain executive officers pursuant to
employment agreements, (b) $7.5 million associated issuance of 370,766 shares of
Class A Common Stock to Mr. Sillerman in connection with the Meadows Repurchase
and (c) $573,000 related to the issuance of stock options to certain executive
officers pursuant to employment agreements exercisable for an aggregate of
378,750 shares of Class A Common Stock. These options vest over six years and
have an exercise price of $3.67 per share.

         Interest expense, net of investment income, was $60.5 million in the
nine months ended September 30,1999, compared to $28.2 million for the nine
months ended September 30,1998, primarily as a result of the additional debt
incurred to consummate the 1998 and 1999 Acquisitions.

         Minority interest was $1.3 million in each of the nine months periods
ended September 30,1999 and 1998.

         The Company recorded an income tax provision of $23.6 million and $3.3
million for the nine months ended September 30, 1999 and 1998, respectively. The
current quarter provision is for federal, state and local taxes. The provision
is different from the statutory rate as a result of non-deductible goodwill
amortization. While the company has provided for income taxes through the third
quarter, it does not expect to pay any taxes for 1999 other than federal
alternative minimum tax ("AMT") and state and local taxes, as a result of the
utilization of significant Net Operating Loss ("NOL") carryforwards that were
previously recognized for book purposes. The provision for income taxes in 1998
was primarily related to state and local taxes. No federal tax benefit was
recorded in 1998 due to the uncertainty of realizing a tax benefit for SFX's
losses.

                                       27
<PAGE>

         The Company recorded a $2.6 million extraordinary loss on the early
extinguishment of debt, net of $1.7 million of taxes, in the third quarter of
1999 related to the write-off of unamortized costs incurred to complete the $350
million prior senior credit facility which was replaced with the $1.1 billion
Senior Credit Facility in August of 1999

         SFX's net loss decreased to $15.1 million for the nine months ended
September 30, 1999, as compared to net loss of $30.2 million for the nine months
ended September 30, 1998, due to the factors discussed above. SFX's net loss
applicable to common shares decreased to $17.7 million for the nine months ended
September 30, 1999, as compared to $32.1 million for the nine months ended
September 30, 1998 as a result of factors discussed above and the increased
accretion on stock subject to redemption.


LIQUIDITY AND CAPITAL RESOURCES

         SFX's principal need for funds has been for acquisitions, interest
expense, working capital needs, certain payments in connection with the SFX
spin-off and capital expenditures. SFX's principal sources of funds have been
proceeds from the two note offerings, proceeds from the three public equity
offerings, borrowings under its senior credit facilities and cash flows from
operations.

         Historical Cash Flows

         Net cash provided by operations was $44.7 million for the nine months
ended September 30, 1999, as compared to $22.3 million for the nine months ended
September 30, 1998. The increase was primarily attributable to acquisitions,
improved operating results partially offset by working capital changes.

         Net cash used in investing activities for the nine months ended
September 30, 1999 was $719.3 million as compared to $852.2 million for the nine
months ended September 30, 1998. The decrease in the use of funds was primarily
the result of less acquisition activity in the nine months of 1999 as compared
to the comparable period in 1998.

         Net cash provided by financing activities for the nine months ended
September 30, 1999 was $1.18 billion as compared to $889.5 million for the nine
months ended September 30,1998. During the first nine months of 1999, SFX
completed the 1999 February Equity Offering, resulting in net proceeds of $260.7
million, the August 1999 Equity Offering, resulting in net proceeds of $338.7
million and received net proceeds of $3.2 million related to the exercise of
employee stock options. The Company also had net borrowings under its senior
credit facilities of $615.7 million and repaid $8.7 million of other debt. The
proceeds from the issuance of stock and borrowings under its senior credit
facilities were used to complete the 1999 Acquisitions and also increased cash
on hand. In addition, the SFX paid $34.1 million in debt issuance costs. During
the nine months ended September 30, 1998, SFX completed a note offering for
$350.0 million, had borrowings of $346.0 million under its then-existing senior
credit facility, completed an equity offering in May 1998 resulting in net
proceeds of $330.7million, and repaid other debt of $5.5 million. In addition,
SFX made Spin-Off related payments of $113.9 million and incurred debt issuance
costs of $17.5 million.

Recent Acquisitions

      On October 4, 1999, the Company purchased EMA Telstar for approximately
$27.9 million in cash and on October 25, 1999, the Company purchased 80% of the
Mojo Works group of companies for approximately $39.7 million in cash, including
working capital, subject to post-closing adjustments. These acquisitions were
purchased with cash on hand.

         Potential Future Acquisitions

         Consistent with its operating strategy, SFX is currently negotiating
additional acquisitions and expects to pursue additional acquisitions in the
live entertainment business in the future. However, SFX has not entered into any
definitive agreements with respect to such acquisitions and there can be no
assurance that it will do so. The Company expects to use it cash on hand and
amounts available under its Senior Credit Facility to complete any future
acquisition. However, acquisitions may also result in SFX:

                                       28
<PAGE>

o        issuing more of its stock, which may dilute the value of the
         outstanding stock of SFX;


o        incurring a substantial amount of additional debt; and/or


o        amortizing expenses related to goodwill and other intangible assets.

         However, there can be no assurance that SFX will be able to identify
attractive acquisition opportunities in the future or obtain financing for such
acquisitions on terms acceptable to SFX or at all. In addition, there can be no
assurance that SFX would be able to successfully integrate acquired businesses.
Any or all of these factors could have a material adverse impact on SFX's
business, financial condition and results of operations. See "--Safe Harbor for
Forward-Looking Statements and--Risk Factors--If SFX is unable to complete other
acquisitions in the future, SFX's business and stock price may suffer" and "If
SFX is unable to integrate its various businesses, its overall business may
suffer" as contained in SFX's 1998 Annual Report on Form 10-K

         Interest on Notes and Borrowings under the Senior Credit Facility

         SFX has incurred and expects to continue to incur substantial amounts
of indebtedness to finance acquisitions, for capital expenditures and for other
corporate purposes. As a result, SFX is, and expects to remain in the
foreseeable future, highly leveraged. On February 11, 1998, SFX completed the
offering of $350.0 million aggregate principal amount of its 9 1/8% senior
subordinated notes. Interest of approximately $16.0 million is payable on the
notes on February 1 and August 1 of each year, and the notes mature on February
1, 2008. On November 25, 1998, SFX completed the offering of $200.0 million
aggregate principal amount of its 9 1/8% Senior Subordinated Notes. Interest of
$9.1 million is payable on these notes on June 1 and December 1 of each year,
and the notes mature on December 1, 2008. SFX's substantial leverage could
adversely affect its business.

         In July 1999, the Company completed a consent solicitation which
modified certain covenants to provide SFX greater flexibility to pursue its
operating strategy, including foreign acquisitions. The Company paid fees
related to the transaction of approximately $13.7 million.

         In August 1999, SFX completed a new seven-year $1.1 billion Senior
Credit Facility which replaced the SFX's existing $350 million senior credit
facility and modified certain covenants. The new Senior Credit Facility is
comprised of a $250.0 million multi-draw, multi-currency term loan maturing on
December 31, 2005 (the "Term A Loan"), a single-draw, $600 million U.S. dollar
term loan maturing on June 30, 2006 (the "Term Loan B") and a $250.0 million
reducing revolver, maturing on December 31, 2005, having a letter of credit
sub-limit of $75.0 million. Total fees and expenses paid were approximately
$17.5 million

        As of November 10, 1999, SFX had indebtedness of $812.0 million
outstanding under the Senior Credit Facility. Loans outstanding under the Senior
Credit Facility bear interest, at SFX's option, at 1.625 to 3.5 percentage
points over LIBOR or the greater of the Federal Funds rate plus 0.50% or The
Bank of New York's prime rate. The interest rate spreads on the term loan and
revolving portion of the Senior Credit Facility will be adjusted based on SFX's
Total Leverage Ratio, as defined in the Senior Credit Facility. As of November
10, 1999 the average interest rate for borrowings under the credit facility was
8.9%. SFX pays a per annum commitment fee on unused availability under the
revolver of 0.375% to 0.5% and a per annum letter of credit fee on any
outstanding letters of credit equal to the Applicable LIBOR Margin, as defined
in the Senior Credit Facility.

         SFX's indebtedness under the Senior Credit Facility is secured by a
pledge of the stock of its subsidiaries and by liens on substantially all of its
and its subsidiaries' tangible assets. Most of SFX's subsidiaries have also
guaranteed the notes and borrowings under the Senior Credit Facility. If SFX
were unable to repay any borrowings when due, the lenders could attempt to seize
SFX's and its subsidiaries' assets and the capital stock of SFX's subsidiaries.

         In addition, as of November 10, 1999, the Company had approximately
$30.8 million of other debt consisting of debt and capital leases assumed in
acquisitions and $95.4 million of deferred purchase consideration.


                                       29
<PAGE>



         Capital Expenditures

         Capital expenditures totaled $34.8 million for the nine months ended
September 30,1999. SFX expects total capital expenditures for 1999 to be
approximately $44.0 million, including $28.0 million for major projects. These
capital expenditures are expected to be funded by cash flows from operations.

         Future Contingent Payments

         Certain of the agreements relating to SFX's 1998 and 1999 Acquisitions
provide for purchase price adjustments and other future contingent payments
based on the financial performance of the acquired companies. See "--1998
Acquisitions" and "--1999 Acquisitions." As of September 30, 1999, SFX had
recorded $47.9 million related to such contingent cash payments. SFX will
continue to accrue additional amounts related to such contingent payments if and
when it becomes probable that the applicable financial performance targets will
be met.

         The PACE acquisition agreement provides that each PACE seller will have
an option, exercisable for 90 days after the fifth anniversary of the closing of
the PACE acquisition, to require SFX to repurchase up to 750,000 shares of the
Class A Common Stock received by that seller for $22.00 in cash per share, for
an aggregate purchase price of up to $16.5 million. Pursuant to the terms of
Brian Becker's employment agreement with SFX during the period between December
12, 1999, and December 27, 1999, Mr. Becker, an Executive Vice President, a
director and a Member of the Office of the Chairman of SFX, will have the option
to, among other things, require SFX to pay him an amount equal to the present
value of the compensation payable during the remaining term of his employment
agreement. Exercise of such option would result in termination of Mr. Becker's
employment agreement.

         SFX also incurred future payment obligations in connection with the
Oakdale, FAME, Nederlander, Marquee, Hendricks, Tellem and certain other
acquisitions.

         No assurance can be given that SFX will have sufficient cash or
other available sources of capital to make any or all of the future or
contingent payments described above.

         Sources of Liquidity

         As of September 30, 1999, SFX's cash and cash equivalents totaled
$549.7 million, and its working capital was $414.1 million. On February 18, 1999
SFX received approximately $260.7 million in net proceeds from the February 1999
Equity Offering, which it used primarily to complete the Cellar Door, ISI,
Nederlander and Marquee acquisitions and to repay a portion of the revolving
portion of the Senior Credit Facility. On August 23, 1999 SFX received
approximately $338.7 million in net proceeds from the August 1999 Equity
Offering, which it used primarily to complete the Livent, EMA Telstar and Mojo
Works acquisitions and to increase cash on hand. On August 23, 1999 SFX also
received net borrowings of approximately $584.6 million in net proceeds from the
new $1.1 billion Senior Credit Facility which represented the proceeds from Term
Loan B, less fees and expenses. The Company used the proceeds to repay $319.0
million of borrowings under the old senior credit facility and to increase cash
on hand.

         As of November 9, 1999, SFX had approximately $257.0 million in
borrowing availability under its Senior Credit Facility. Borrowing availability
under the Senior Credit Facility is subject to customary conditions.

         In October 1999, the Company received $4.0 million from the exercise of
options for 213,464 Class A Common Stock options by the Executive Chairman. In
addition, the SFX has been advised that Executive Chairman purchased an
additional 524,500 shares of SFX's Class A Common Stock on the open market.

         SFX believes that its cash on hand, cash flow from operations and
borrowing availability under the $1.1 billion Senior Credit facility will be
sufficient to satisfy existing commitments and plans, including those described
above. However, there can be no assurance that SFX will be able to make planned
borrowings, that SFX's business will generate sufficient cash flow from
operations, or that future borrowings will be available in an amount to enable
SFX to service its debt and to make necessary capital or other expenditures.

                                       30
<PAGE>

YEAR 2000 COMPLIANCE

         SFX is currently working to resolve the potential impact of the Year
2000 on the processing of date-sensitive information by SFX's computer systems.
The Year 2000 problem is the result of computer programs being written using two
digits, rather than four, to define the applicable year. Any of SFX's programs
that have time-sensitive software may recognize a date using "00" as the Year
1900 rather than the Year 2000, which could result in miscalculations or system
failures. The problem is not limited t computer systems. Year 2000 issues will
also potentially affect every non-information technology system that has an
embedded microchip, such as elevators.

         Assessment. SFX management has been conducting a review of its exposure
to the Year 2000 problem. Based on SFX's internal review and discussions with
third parties regarding the Year 2000 problem, SFX believes that its exposure to
potential Year 2000 problems exists in two general areas: (1) technological
operations, including non-information technology systems, which are in the sole
control of SFX, and (2) technological operations which are dependent in some way
on one or more third parties. Failure to achieve high levels of Year 2000
compliance in either area could have a material adverse impact on SFX.

         Remediation and Implementation. In the area of technological operations
that are under SFX's exclusive control, SFX is currently involved in the
identification and remediation of affected technological functions, including
non-information technology systems. SFX is addressing the risks associated with
Year 2000 compliance with respect to its accounting and financial reporting
systems and is in the process of installing new accounting and reporting
systems. These systems will provide improved reporting, allow for more detailed
analysis, handle SFX's 1998 and 1999 domestic acquisitions and be Year 2000
compliant. All United States and Canadian business segments are expected to have
the year 2000 compliant accounting and financial systems installed as of
December 31, 1999. SFX's recently acquired certain European operations. The most
significant European acquisitions, Apollo and EMA Telstar have assessed the year
2000 compliance of their current critical business systems and have
substantially completed the process of updating these systems. SFX is in the
process of evaluating the year 2000 compliance of the less significant European
acquisitions. SFX is in the identification and assessment phase with respect to
its non-information technology systems.

         Testing. SFX is in the final phase of updating and testing its domestic
accountinf and finacial reporting systems after their installation, and expects
that all testing and updating will be complete by the December 15, 1999. At
present, it is anticipated that SFX's action plan for addressing Year 2000
problems will be successfully completed in all material respects in advance of
January 1, 2000.

         Estimated Costs. The total financial effect that Year 2000 issues will
have on SFX cannot be predicted with any certainty at this time. In fact, in
spite of all efforts being made to rectify these problems, the success of SFX's
efforts will not be known with certainty until the year 2000 actually arrives.
SFX anticipates that the cost of implementing the new accounting and reporting
systems will be approximately $7.7 million, of which approximately $7.1 million
has been spent to date. Based on its assessment to date, SFX does not believe
that expenses related to addressing the Year 2000 problem will have a material
effect on the operations and financial condition of SFX. Year 2000 projects have
not materially deferred then implementation of other information technology
projects.

         Third Parties. In the area of technological operations dependent in
some way on one or more third parties, including vendors, suppliers, joint
venture partners or major customers, the situation is much less in SFX's ability
to predict or control. SFX has begun to assess the level of Year 2000 problems
associated with their various vendors, suppliers, joint venture partners and
major customers. SFX's significant vendors are ticketing companies, payroll
processors, utility companies and banks. SFX is communicating with some of these
third parties to assess their compliance efforts and SFX's exposure resulting
from Year 2000 issues. SFX is in the process of requesting written assurances of
Year 2000 compliance from each of its significant suppliers as a part of SFX's
contingency planning process. Although SFX is making these efforts to ensure
that the third parties on which it is heavily reliant are Year 2000 compliant,
it cannot predict the likelihood of such compliance occurring nor the direct or
indirect costs to SFX of non-compliance by those third parties or of securing
such services from compliant third parties. SFX has no control over these third
parties' compliance and cannot give assurances that these third parties'
representations to SFX are accurate. Therefore, there can be no guarantee that
Year 2000 problems originating with a third party will not occur and no
assurance that third parties will convert their systems in a timely manner.
Assuming that such third parties are not or do not become Year 2000 compliant in
a timely manner, to the extent SFX is unable to replace the goods, services or
customers with alternate sources of supply and demand on a timely and
economically equivalent basis, such failure would likely have a material adverse
effect on SFX's business and results of operations.

                                       31
<PAGE>

         Contingency Plan. SFX has not completed its implementation and testing
of Year 2000 compliant systems. However, a reasonably likely worst case scenario
is that certain of SFX's material suppliers or customers will be unable to fully
become Year 2000 compliant in a timely manner, which will disrupt SFX's ability
to provide services and generate revenues in certain areas in which it does
business. For example, disruptions in ticketing operations would significantly
reduce attendance. Disruptions in transportation could affect the provision of
concessions for sale at SFX's venues. These disruptions would continue until the
problems were resolved or alternate sources of supply and demand could be
located. Based on the results of the implementation and testing of SFX's Year
2000 affected systems and the ongoing assessment of the readiness of its
vendors, suppliers, joint venture partners and major customers, SFX will develop
appropriate contingency plans that address the most reasonably likely worst case
scenarios. SFX expects to have such contingency plans in place by the fall of
1999. A failure to address Year 2000 issues successfully could have a material
adverse effect on SFX's business, financial condition or results of operations.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

         SFX believes that certain statements contained in this report are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are considered prospective. The following
statements are or may constitute forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995:

o        statements before, after or including the words "may," "will," "could,"
         "should," "believe," "expect," "future," "potential," "anticipate,"
         "intend," "plan," "estimate" or "continue" or the negative or other
         variations of these words; and

o        other statements about matters that are not historical facts.

          SFX may be unable to achieve future results covered by the
forward-looking statements. The statements are subject to risks, uncertainties
and other factors that could cause actual results to differ materially from the
future results that the statements express or imply, including SFX's inability
to successfully integrate its various businesses; the risks associated with
doing business internationally, SFX's substantial amount of debt; complete
acquisitions in the future, secure attractive artists, events and venues;
potential environmental liabilities; Year 2000 issues; regulatory matters,
including those relating to compliance with applicable antitrust laws; future
contingent payments and re-purchase rights granted with respect to certain of
our operations and the restrictions placed on SFX's operations by its Senior
Credit Facility and indentures. Please do not put undue reliance on these
forward-looking statements, which speak only as of the date of this report. The
foregoing risk factors should be considered carefully in evaluating SFX and its
business and the forward looking statements contained herein. SFX does not
undertake to release publicly any revisions to forward looking statements that
may be made to reflect events or circumstances after the date of this report or
to reflect the occurrence of unanticipated events. See our Annual Report on Form
10-K for the year ended December 31, 1998, "Safe Harbor for Forward-Looking
Statements - Risk Factors."

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         SFX is exposed to interest rate risk and foreign currency exchange rate
risk.

         In the normal course of business, SFX is exposed to market risk
associated with fluctuations in interest rates. SFX does not enter into market
risk sensitive instruments for trading purposes. SFX's exposure to variable
interest rates relates primarily to its outstanding borrowings under the Senior
Credit Facility. The borrowings bear interest, at SFX's option, at 1.625 to 3.5
percentage points over LIBOR or the greater of the Federal Funds rate plus 0.50%
or the Bank of New York's prime rate. As of November 8, 1999, the outstanding
balance under the Senior Credit Facility was $812.0 million and the average
interest rate was 8.9%. A 15% increase or decrease in the average cost of SFX's
variable rate debt under the Senior Credit Facility would have approximately a
$10.8 million annual effect on SFX's earnings.

         As a result of SFX's international operations, SFX's financial position
and results of operations may be affected by changes in foreign currency
exchange rates. With the expansion of SFX's international operations, an
increasing portion of SFX's revenues and expenses will be denominated in foreign
currencies. Historically, SFX has


                                       32
<PAGE>

not entered into hedging or similar arrangements to manage exposure to
fluctuations in foreign currency exchange rates; however, future changes in
market conditions or i SFX operations may result in SFX entering into such
arrangements. In addition, as of November 10, 1999, SFX had $211.7 million of
foreign denominated debt outstanding under Term Loan A of the Senior Credit
Facility. A 15% increase or decrease in the exchange rate would result in
approximately a $31.7 million increase or decrease in debt.




                                       33
<PAGE>



PART II.   OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

         On November 20, 1998, a group of plaintiffs filed a complaint against
11 talent agencies and 29 promoters, including SFX and several of its
subsidiaries. According to the complaint, the plaintiffs are five individual
African-Americans and five corporations owned by such individuals. The complaint
alleges action by the defendants to exclude African-Americans from promoting
concerts and seeks injunctive relief and damages for civil rights and antitrust
violations. The focus of the action appears to be industry-wide, rather than
specifically directed at SFX. On May 25, 1999, the complaint was dismissed
without prejudice to plaintiffs' right to file an amended pleading. On August 9,
1999, the plaintiffs filed an amended complaint containing allegations that are
substantially the same as the original complaint. On October 1, 1999, the
defendants filed motions to dismiss the amended complaint. The motions to
dismiss will be before the court on January 28, 2000. SFX intends to defend the
action vigorously.

         Although SFX is involved in several suits and claims in the ordinary
course of business, it is not currently a party to any legal proceeding that it
believes would have a material adverse effect on its business, financial
condition or results of operations.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         On September 17, 1999, SFX acquired Apollo Leisure Group and issued
979,667 shares of Class A Common Stock to the sellers as partial consideration.

         On September 20, 1999, SFX acquired Midland Concert Promotions Group
Limited and issued 179,760 shares of SFX Class A Common Stock to the sellers as
partial consideration.

         On September 27, 1999, SFX acquired Tellem & Associates and issued
74,166 shares of SFX Class A Common Stock to the seller as partial
consideration.

         The sales of securities pursuant to the above acquisitions were private
transactions not involving a public offering and were exempt from the
registration provisions of the Securities Act pursuant to Section 4(2) thereof.
Each of these sales was made without the use of an underwriter.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

EXHIBIT
NUMBER   DESCRIPTION OF EXHIBIT
-------  ----------------------
10.1     Asset Purchase Agreement, dated May 28, 1999, among SFX Entertainment,
         Inc., Livent Inc., Livent (U.S.) Inc., Livent Realty (New York) Inc.,
         Livent Realty (Chicago) Inc. and Livent International Inc. and
         Amendments No. 1 and No. 2 thereto, dated June 14, 1999 and August 9,
         1999, respectively (incorporated by reference to Amendment No. 2 to
         Form S-3 (File No. 333-84371) filed with the SEC on August 17, 1999).

10.2     Amendment No. 3 to Asset Purchase Agreement, dated as of August 17,
         1999, among Livent Inc., Livent International Inc., Livent (U.S.) Inc.,
         Livent Realty (New York) Inc., Livent Realty (Chicago) Inc. and SFX
         Entertainment, Inc. (incorporated by reference to Exhibit 10.2 of the
         Current Report on Form 8-K (File No. 001-14993) filed with the SEC on
         September 9, 1999).

10.3     Amendment No. 4 to Asset Purchase Agreement, dated as of August 27,
         1999, among Livent Inc., Livent International Inc., Livent (U.S.) Inc.,
         Livent Realty (New York) Inc., Livent Realty (Chicago) Inc. and SFX
         Entertainment, Inc. (incorporated by reference to Exhibit 10.3 of the
         Current Report on Form 8-K (File No. 001-14993) filed with the SEC on
         September 9, 1999).

                                       34
<PAGE>

10.4     Share Purchase Agreement, dated August 2, 1999, among SFX
         Entertainment, Inc., Anita Gregg, Paul Gregg and certain other
         individuals set forth therein (incorporated by reference to Amendment
         No. 2 to Form S-3 (File No. 333-84371) filed with the SEC on August 17,
         1999).

10.5     Share Purchase Agreement, dated September 17, 1999, among SFX
         Entertainment, Inc., Anita Gregg, Paul Gregg and certain other
         individuals set forth therein (incorporated by reference to Exhibit No.
         10.1 to the Current Report on Form 8-K (File No. 001-14993) filed with
         the SEC on September 20, 1999).

10.6     Amended and Restated Credit and Guarantee Agreement, dated as of
         February 26, 1998 and amended and restated as of August 23, 1999, among
         SFX Entertainment, Inc., SFX U.K. Holdings Limited, the Eligible
         Subsidiaries (as defined therein), the Lenders Party thereto, the LC
         Issuing Bank (as defined therein), the Apollo LC Issuer (as defined
         therein), Lehman Commercial Paper Inc., as Syndication Agent, Societe
         Generale, as Documentation Agent and The Bank of New York, as
         Administrative Agent (incorporated by reference to Exhibit No. 10.3 to
         the Current Report on Form 8-K (File No. 001-14993) filed with the SEC
         on August 25, 1999).

27.1     *Financial Data Schedule

------------------------
         * filed herewith

(b)      Reports on Form 8-K

         On August 25, 1999, SFX filed a Form 8-K under Item 5 for the purpose
of disclosing its entry into a new senior credit facility providing for up to
$1.1 billion of borrowing capacity and the completion of its public offering of
8,625,000 shares of Class A Common Stock.

         On September 9, 1999, SFX filed a Form 8-K under Item 5 for the purpose
of disclosing the consummation of its acquisition of substantially all of the
assets of Livent Inc. and its subsidiaries (collectively "Livent"), including
Livent's theaters in New York, Chicago, and Toronto and the rights to current
and future Livent productions.

         On September 20, 1999, SFX filed a Form 8-K under Item 5 for the
purpose of disclosing the consummation of its acquisition of Apollo Leisure
Group Limited.

         On September 30, 1999, SFX filed a Form 8-K/A to amend the Form 8-K
filed on September 20, 1999, for the purpose of filing the unaudited pro forma
condensed combined financial statements of SFX for the year ended December 31,
1998 and as of and for the six months ended June 30, 1999, which give effect to
the Apollo acquisition and certain other transactions.

                                    SIGNATURE

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

                             SFX ENTERTAINMENT, INC.



Date:  November 15, 1999                 By: /s/ Thomas P. Benson
                                             -----------------------------
                                             Thomas P. Benson
                                             Chief Financial Officer and
                                             Senior Vice President






                                       35