<PAGE>   1
================================================================================

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

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

                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

                                       OR

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

                        COMMISSION FILE NUMBER 000-25723

                               LAUNCH MEDIA, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                  DELAWARE                                95-4465753
          (STATE OR JURISDICTION OF                     (IRS EMPLOYER
       INCORPORATION OR ORGANIZATION)               IDENTIFICATION NUMBER)

                            2700 PENNSYLVANIA AVENUE
                         SANTA MONICA, CALIFORNIA 90404
                    (Address of principal executive offices)
                            TELEPHONE: (310) 526-4300

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

    Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

    COMMON STOCK, PAR VALUE OF $0.001 PER SHARE, 12,784,871 SHARES OUTSTANDING
AS OF NOVEMBER 2, 1999.

================================================================================


<PAGE>   2
                               LAUNCH MEDIA, INC.
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
PART I.    FINANCIAL INFORMATION                                                    PAGE NO.
<S>        <C>                                                                      <C>

Item 1.    Financial Statements

           Consolidated Balance Sheets
               December 31, 1998 and September 30, 1999 (unaudited)                     1
           Consolidated Statements of Operations (unaudited)
               Nine and Three Months Ended September 30, 1998 and 1999                  2
           Consolidated Statements of Cash Flows (unaudited)
               Nine and Three Months Ended September 30, 1998 and 1999                  3
           Notes to Consolidated Financial Statements                                   5
Item 2.    Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                               11
Item 3.    Quantitative and Qualitative Disclosures about Market Risk                  18

PART II.   OTHER INFORMATION

Item 1.    Legal Proceedings                                                           18
Item 2.    Changes in Securities                                                       18
Item 3.    Defaults Upon Senior Securities                                             18
Item 4.    Submission of Matters to a Vote of Security Holders                         18
Item 5.    Other Information                                                           18
Item 6.    Exhibits and Reports on Form 8-K                                            18
           Signatures                                                                  19
Exhibit 27 Financial Data Schedule                                                     20
</TABLE>


<PAGE>   3
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                     LAUNCH MEDIA, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS

                                   ASSETS:

<TABLE>
<CAPTION>
                                                                           December 31,           September 30,
                                                                               1998                    1999
                                                                          -------------           -------------
<S>                                                                       <C>                     <C>
                                                                                                    (unaudited)
Current assets:

     Cash and cash equivalents                                            $   1,735,000           $     999,000
     Short-term investments                                                   4,993,000              68,922,000
     Securities available for sale                                                 --                 1,625,000
     Accounts receivable, net                                                   569,000               3,368,000
     Inventory                                                                  124,000                 329,000
     Prepaids and other current assets                                          590,000               3,331,000
                                                                          -------------           -------------
       Total current assets                                                   8,011,000              78,574,000

Property and equipment, net                                                   2,587,000               5,676,000
Intangible and other assets                                                   2,566,000              20,931,000
                                                                          -------------           -------------
                                                                          $  13,164,000           $ 105,181,000
                                                                          =============           =============

               LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY):

Current liabilities:

     Accounts payable                                                     $   1,619,000           $   3,683,000
     Accrued expenses                                                           784,000               2,402,000
     Deferred revenue                                                           482,000               2,859,000
     Notes payable and accrued interest                                         530,000                 443,000
     Capital lease obligations, current portion                                 230,000                 523,000
                                                                          -------------           -------------
     Total current liabilities                                                3,645,000               9,910,000

Notes payable                                                                   201,000                 206,000
Capital lease obligations, net of current portion                               438,000                 793,000
                                                                          -------------           -------------
     Total liabilities                                                        4,284,000              10,909,000
                                                                          -------------           -------------

Commitments and contingencies
Series A, B, C and D mandatory redeemable
convertible preferred stock                                                  36,707,000                    --

Stockholders' equity (deficiency):
     Common stock, $.001 par value,
     authorized 75,000,000 shares; shares
     issued and outstanding, 934,333 (1998)
     and 12,730,698 (1999)                                                        1,000                  13,000
     Additional paid-in capital                                                 986,000             144,712,000
     Unrealized gain on securities available for sale                                --                 625,000
     Unearned compensation                                                   (1,208,000)               (862,000)
     Accumulated deficit                                                    (27,606,000)            (50,216,000)
                                                                          -------------           -------------
     Total stockholders' equity (deficiency)                                (27,827,000)             94,272,000
                                                                          -------------           -------------
     Total liabilities and stockholders' equity                           $  13,164,000           $ 105,181,000
                                                                          =============           =============
</TABLE>

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


                                       1
<PAGE>   4
                       LAUNCH MEDIA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                     For The Three Months                           For The Nine Months
                                                      Ended September 30,                           Ended September 30,
                                              -----------------------------------           -----------------------------------
                                                  1998                   1999                   1998                   1999
                                              ------------           ------------           ------------           ------------
<S>                                           <C>                    <C>                    <C>                    <C>
                                               (unaudited)            (unaudited)            (unaudited)            (unaudited)

Net revenues:

    Advertising                               $  1,230,000           $  4,410,000           $  2,081,000           $  8,211,000
    Subscription                                   268,000                309,000              1,033,000                745,000
    Merchandise and other                           58,000                558,000                163,000              1,051,000
                                              ------------           ------------           ------------           ------------
                                                 1,556,000              5,277,000              3,277,000             10,007,000
Operating expenses:
    Cost of goods sold and distribution          1,112,000                965,000              2,176,000              2,442,000
    Sales and marketing                          2,723,000              6,904,000              6,457,000             15,453,000
    Content and product development              1,112,000              3,759,000              2,839,000              7,711,000
    General and administrative                     517,000              1,472,000              1,279,000              3,089,000
    Depreciation and amortization                   76,000              2,356,000                194,000              5,085,000
                                              ------------           ------------           ------------           ------------

Loss from operations                            (3,984,000)           (10,179,000)            (9,668,000)           (23,773,000)
Interest income, net                               166,000                892,000                300,000              1,177,000
                                              ------------           ------------           ------------           ------------
    Loss before provision for income taxes      (3,818,000)            (9,287,000)            (9,368,000)           (22,596,000)
Provision for income taxes                           1,000                     --                  4,000                 12,000
                                              ------------           ------------           ------------           ------------
        Net loss                                (3,819,000)            (9,287,000)            (9,372,000)           (22,608,000)
Accretion of mandatory redeemable
preferred stock                                   (615,000)                    --             (1,510,000)              (765,000)
                                              ------------           ------------           ------------           ------------
Net loss attributed to common stockholders    $ (4,434,000)          $ (9,287,000)          $(10,882,000)          $(23,373,000)
                                              ============           ============           ============           ============
Basic and diluted net loss per share          $      (4.75)          $      (0.73)          $     (11.66)          $      (2.92)
                                              ============           ============           ============           ============
Weighted average common shares used
in per share calculations                          934,000             12,672,000                933,000              8,017,000
                                              ============           ============           ============           ============
</TABLE>


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


                                       2
<PAGE>   5
                       LAUNCH MEDIA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                            For The Three Months                  For The Nine Months
                                                             Ended September 30,                  Ended September 30,
                                                      -------------------------------       -------------------------------
                                                          1998               1999               1998               1999
                                                      ------------       ------------       ------------       ------------
<S>                                                   <C>                <C>                <C>                <C>
                                                       (unaudited)        (unaudited)        (unaudited)        (unaudited)

Cash flows from operating activities:
    Net loss                                          $ (3,819,000)      $ (9,287,000)      $ (9,372,000)      $(22,608,000)
    Adjustments to reconcile net
    loss to net cash used in
    operating activities:
      Depreciation and amortization                        422,000          2,797,000          1,001,000          6,127,000
      Non-cash charges for issuance
      of equity securities                                 167,000                 --            334,000            377,000
      Allowance for sales returns                          225,000             (3,000)          (791,000)          (110,000)
      Amortization of deferred compensation                 60,000            103,000            120,000            346,000
    Changes in operating assets and liabilities:
      Decrease (increase) in accounts receivable           (50,000)          (799,000)           333,000         (2,547,000)
      Increase in inventory                                (28,000)           (22,000)          (153,000)          (205,000)
      Decrease (increase) in
      prepaids and other current assets                    154,000         (1,326,000)          (225,000)        (2,640,000)
      Increase in accounts payable                       1,080,000            213,000            970,000          1,937,000
      Increase (decrease) in accrued expenses             (234,000)           323,000            128,000          1,480,000
      Increase (decrease) in deferred revenue             (228,000)           144,000            185,000          2,378,000
                                                      ------------       ------------       ------------       ------------
Net cash used in operating activities                   (2,251,000)        (7,857,000)        (7,470,000)       (15,465,000)
                                                      ------------       ------------       ------------       ------------

Cash flows used from investing activities:
      Purchase of property and equipment                  (693,000)        (1,236,000)        (1,029,000)        (1,623,000)
      Purchases of securities                          (17,176,000)                --        (34,516,000)       (79,654,000)
      Maturities of securities                          20,341,000         10,732,000         25,372,000         15,725,000
      Purchase of security available for sale                   --         (1,000,000)                --         (1,000,000)
      Increase in security deposits                         (2,000)            (8,000)          (148,000)           (65,000)
      Acquisition of businesses                                 --           (603,000)                --           (905,000)
                                                      ------------       ------------       ------------       ------------
Net cash used in investing activities                    2,470,000          7,885,000        (10,321,000)       (67,522,000)
                                                      ------------       ------------       ------------       ------------

Cash flows from financing activities:
      Payments under capital lease obligations             (20,000)          (110,000)           (50,000)          (247,000)
      Payments under notes payable                           4,000            (10,000)          (123,000)           (20,000)
      Proceeds from notes payable                               --                 --            500,000          1,500,000
      Proceeds from issuance of mandatory
      redeemable convertible preferred stock                    --                 --         18,271,000                 --
      Proceeds from issuance of common stock                    --                 --                 --         80,816,000
      Proceeds from exercise of stock options                1,000             13,000              2,000            202,000
                                                      ------------       ------------       ------------       ------------
Net cash provided by financing activities                  (15,000)          (107,000)        18,600,000         82,251,000
                                                      ------------       ------------       ------------       ------------
</TABLE>


                                       3
<PAGE>   6
<TABLE>
<S>                                                   <C>                <C>                <C>                <C>
Increase (decrease) in cash and cash equivalents           204,000            (79,000)           809,000           (736,000)

Cash and cash equivalents, beginning of period           1,249,000          1,078,000            644,000          1,735,000
                                                      ------------       ------------       ------------       ------------
Cash and cash equivalents, end of period              $  1,453,000       $    999,000       $  1,453,000       $    999,000
                                                      ============       ============       ============       ============
</TABLE>


SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION


<TABLE>
<CAPTION>
                                                             For The Three Months                   For The Nine Months
                                                              Ended September 30,                   Ended September 30,
                                                         ------------------------------        ------------------------------
                                                             1998               1999               1998               1999
                                                         -----------        -----------        -----------        -----------
<S>                                                      <C>                <C>                <C>                <C>
Cash paid during the period for:

    Interest                                             $     4,000        $    28,000        $    15,000        $    81,000
    Taxes                                                $     1,000        $      -           $     4,000        $     6,000
Supplementary disclosure of noncash transactions:

    Equipment acquired under capital leases              $      -           $   273,000        $   260,000        $   683,000
    Issuance of Series D Stock
    through conversion of notes payable                  $      -           $      -           $ 3,500,000        $      -
    Issuance of Series D Stock
    under strategic alliances                            $      -           $      -           $ 3,500,000        $      -
    Issuance of common stock for
    acquisition of businesses                            $      -           $   900,000        $      -           $24,131,000
    Issuance of common stock
    through conversion of notes payable                  $      -           $      -           $      -           $ 1,500,000
</TABLE>


       See accompanying notes to these consolidated financial statements.


                                       4
<PAGE>   7
                       LAUNCH MEDIA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.      GENERAL

        Launch Media, Inc., was incorporated in Delaware in February 1994 as
2Way Media, Inc. and changed its name to Launch Media, Inc., in March 1998. In
February 1999, a reorganization was completed in which a new Delaware
corporation acquired all outstanding securities of Launch Media, Inc., and
changed its name to Launch Media, Inc. The old Launch Media, Inc. became a
subsidiary of this corporation and changed its name to Launch Networks, Inc.

        On February 26, 1999, Launch Media, Inc. acquired all of the partnership
interests in Musicvideos.com. In addition, on April 28, 1999, the Company issued
common stock and acquired all of the outstanding stock of SW Networks, Inc.
(subsequently renamed as Launch Radio Networks, Inc.). Launch Media, Inc.,
together with Launch Networks, Inc. and Launch Radio Networks, Inc. are referred
to collectively as the "Company" or as "Launch". Launch is a digital media
company dedicated to creating the premier Internet destination for discovering
new music. Leveraging the inherent advantages of digital media, Launch offers a
compelling music discovery experience for consumers and provides a valuable
marketing platform for record labels, artists, advertisers and merchants. The
Company delivers its product via multiple broadband and narrowband platforms,
all under the brand name Launch. Products under the Launch banner include Launch
delivered on the web at www.launch.com, via CD-ROM and broadband networks.

2.      INITIAL PUBLIC OFFERING

        On April 23, 1999 Launch effected an initial public offering ("IPO") of
3,500,000 shares of its common stock at a price of $22 per share. On May 19,
1999, the underwriters exercised their over-allotment to purchase an additional
510,000 shares of common stock. The net proceeds to the Company, after deducting
underwriting discounts and commissions and offering expenses, were $80.8
million.

        Upon the closing of the IPO all of the then outstanding shares of the
Company's Mandatory Redeemable Convertible Preferred Stock automatically
converted into shares of common stock on a one-for-one basis. In addition, on
February 15, 1999, Launch entered into a note purchase agreement in which it
agreed to issue a convertible subordinated promissory note in the amount of $1.0
million to Avalon Technology LLC, a stockholder, and a convertible subordinated
promissory note in the amount of $500,000 to Goran Enterprises Limited, a
stockholder. The notes accrued interest at 8.5% per annum from the issuance date
and were due February 29, 2000. The notes automatically converted into shares of
Launch common stock upon the Company's IPO.

        In addition, in connection with the IPO, the Company effected a
one-for-five reverse stock split. All share and per share information in the
accompanying consolidated financial statements have been retroactively restated
to reflect the effect of this stock split.

3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

        The consolidated financial statements include the accounts of Launch
Media, Inc. and its wholly owned subsidiaries. All intercompany balances and
transactions have been eliminated.


                                       5
<PAGE>   8
UNAUDITED INTERIM FINANCIAL INFORMATION

        The unaudited interim consolidated financial statements of the Company
included herein have been prepared in accordance with the instructions for Form
10-Q under the Securities Exchange Act of 1934, as amended, and Article 10 of
Regulation S-X under the Securities Act of 1933, as amended. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations relating to interim financial
statements.

        In the opinion of management, the accompanying unaudited interim
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company at September 30, 1999, and the results of its operations and cash
flows for the three and nine months ended September 30, 1998 and 1999. The
results for the three and nine months ended September 30, 1999 are not
necessarily indicative of the expected results for the full fiscal year or any
future period. These financial statements should be read in conjunction with the
consolidated financial statements and related footnotes included in the
Company's Form SB-2 registration statement, as amended, filed with the
Securities and Exchange Commission ("SEC") in connection with the Company's IPO.

USE OF ESTIMATES

        The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. On an
ongoing basis, management reviews its estimates based on currently available
information. Changes in facts and circumstances may result in revised estimates.

REVENUE RECOGNITION

        Through September 30, 1999, the Company's revenues have been derived
primarily from the sale of advertising and sponsorships, including the sale of
advertising on commercial radio broadcasts, annual subscriptions relating to
Launch on CD-ROM and single copy retail sales of Launch on CD-ROM. Revenues for
sponsorships across the Launch media properties are recognized ratably over the
sponsorship term which is typically one month. Revenues from advertisements for
Launch on CD-ROM are recognized upon the release date of the issue in which the
advertisement appears. With respect to launch.com, revenues from advertisements
are recognized ratably in the period in which the advertisement is displayed,
provided that no significant Launch obligations remain. Revenues from
advertisements on commercial radio networks are recognized, net of agency fees,
when the radio advertisement is broadcast.

        Advance payments for Launch on CD-ROM subscriptions are deferred and
recognized over the term of the related subscription, typically 12 months.

        The Company recognizes revenue from retail and other merchandise sales
upon shipment. Estimated product return reserves are provided when shipments are
made to reflect the net estimated sell-through.

        Advertising revenues also include barter revenues, which represent an
exchange by Launch of advertising space on Launch on CD-ROM for reciprocal
advertising space on third-party Web sites or other advertising media. Revenues
and expenses from barter transactions are recorded at the lower of estimated
fair value of the advertisements received or delivered based on advertising
rates currently in effect. Barter revenues are recognized when the
advertisements are run on the Launch media properties. Barter expenses are
recognized when Launch's advertisements are run on the reciprocal Web sites or
other advertising medium, which is typically in the same period as when the
advertisements are run on the Launch media properties. Revenues and expenses
recognized from barter transactions, were approximately $610,000 and $320,000
for the three months ended September 30, 1998 and 1999, respectively, or 50% and
7% of advertising revenues, respectively, and were approximately $916,000 and
$860,000 for the nine months ended September 30, 1998 and 1999, respectively, or
44% and 10% of advertising revenue, respectively.


                                       6
<PAGE>   9
RECENT ACCOUNTING PRONOUNCEMENTS

        In 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes standards for the
recognition and measurement of derivatives and hedging activities. This standard
is effective for all fiscal quarters of all fiscal years beginning after June
15, 2000. The Company does not expect the adoption of this statement to have a
significant impact on its financial statements.

COMPUTATION OF NET LOSS PER SHARE

        In accordance with SFAS No. 128, "Computation of Earnings Per Share",
basic earnings per share is computed using the weighted average number of shares
outstanding during the period and diluted earnings per share is computed using
the weighted average number of common and dilutive common equivalent shares
outstanding during the period. Common equivalent shares consist of the
incremental common shares issuable upon the conversion of the Mandatory
Redeemable Convertible Preferred Stock (using the if-converted method) and
shares issuable upon exercise of outstanding stock options and warrants, using
the treasury stock method. Common equivalent shares are excluded from the
calculation if their effect is anti-dilutive.

        Diluted net loss per share for the three and nine months ended September
30, 1998 and 1999, does not include the effect of options and warrants to
purchase 1,566,642 and 1,380,421 shares of common stock, respectively, due to
the net losses incurred.

4.      RELATED PARTY TRANSACTIONS

        In April 1999, Launch entered into a 12-month sponsorship agreement with
Intel Corporation to promote their Intel Pentium III processing chip. The total
amount payable to Launch under the sponsorship agreement was for $2,980,000.
Revenue is being recognized on a straight-line basis over the term of the
agreement. For the three months ended September 30, 1999, the total revenue
recognized was approximately $745,000. This revenue is included in advertising
and sponsorship revenues in the consolidated statement of operations. Deferred
revenue included in the consolidated balance sheet under this agreement as of
September 30, 1999 was $1,235,000.

        In November 1998, Launch entered into an architectural development and
assistance agreement with Intel Corporation. Pursuant to the terms of this
agreement, Launch agreed to develop a product which is designed to use the
capabilities of a processor developed by Intel. In consideration, Intel agreed
to pay Launch certain amounts and to provide technical assistance, and Launch
agreed to pay Intel a portion of revenues derived from the developed product.
Revenue has been recognized using the percentage of completion method on a cost
to cost basis and for the three months ended September 30, 1999 was $350,000 and
for the nine months ended September 30, 1999 was $650,000. The development
revenue is included in merchandise and other revenues in the consolidated
statement of operations.

        On February 15, 1999, Launch entered into a note purchase agreement in
which it agreed to issue a convertible subordinated promissory note in the
amount of $1.0 million to Avalon Technology LLC, a stockholder, and a
convertible subordinated promissory note in the amount of $500,000 to Goran
Enterprises Limited, a stockholder. The notes accrued interest at 8.5% per annum
and contained an original issue discount. During the three months ended March
31, 1999, the Company received $1.5 million in proceeds from the convertible
subordinated promissory notes. The notes and accrued interest were automatically
converted into 85,525 shares of common stock upon the closing of the Company's
IPO on April 28, 1999. As a result of the conversion of the promissory notes,
the Company recognized approximately $377,000 in non-cash interest expense
during the three months ended June 30, 1999 to reflect the original issue
discount between the conversion price and offering price of the common stock.

        In April 1999, Launch entered into a two year content licensing and
sponsorship agreement with Sony Music, a stockholder, under which Sony Music
licensed content from Launch for use in its internet properties and purchased
advertising from Launch for its products. During the quarter ended September 30,
1999, Launch recognized $154,000 in revenue, of which $104,000 is included in
advertising revenues and $50,000 is included in


                                       7
<PAGE>   10
other revenues in the consolidated statement of operations. For the nine months
ended September 30, 1999, Launch recognized $204,000 in revenue, of which
$104,000 is included in advertising revenues and $100,000 is included in other
revenues in the consolidated statement of operations. Accounts receivable and
deferred revenues included in the consolidated balance sheet from Sony as of
September 30, 1999 were $117,000 and $219,000, respectively.

5.      INCOME TAXES

        The Company's income tax provision consists of minimum state franchise
taxes.

6.      CAPITAL LEASE LINE OF CREDIT

        The Company has a revolving capital lease line of credit for $1.0
million. The Company has borrowed approximately $1.0 million under this line of
credit as of September 30, 1999. Payments for each borrowing are made monthly
over a thirty-nine month period and include interest and principal. This
facility bears interest at the bank's prime rate (8.25% at September 30, 1999).
The leased assets collateralize any borrowings under this line of credit.

7.      SIGNIFICANT BUSINESS ACQUISITIONS

Musicvideos.com

        On February 26, 1999, the Company acquired all of the partnership
interests of Areohvee Online Partnership, d.b.a. Musicvideos.com.
Musicvideos.com is a provider of music videos over the Internet. The acquisition
was accounted for using the purchase method of accounting and, accordingly, the
purchase price has been allocated to the tangible and intangible assets acquired
and liabilities assumed on the basis of their respective fair values on the
acquisition date.

        The total purchase price of approximately $9.4 million is comprised of
875,553 shares of the Company's common stock with an estimated fair value at
issuance of approximately $8.9 million, a cash payment of approximately $300,000
and assumed liabilities and transaction costs of approximately $200,000. The
excess purchase price over net tangible assets acquired was approximately $9.2
million and is being amortized over an average useful life of 30 months.

Launch Radio Networks (formerly SW Networks, Inc.)

        On April 28 1999, concurrently with its IPO, the Company acquired all of
the outstanding shares of Launch Radio Networks, an entertainment
information/news content provider to radio stations and Internet-based
entertainment companies. The Company paid Sony Music Entertainment, Inc., the
sole stockholder of Launch Radio Networks, $12.0 million in shares of the
Company's common stock. In accordance with the purchase agreement the shares
issued to Sony Music were valued at 80% of the IPO price. Accordingly, the
Company issued 681,818 shares of common stock to Sony Music at an effective
discount of 20% from the initial public offering price. Sony Music has the right
to require registration of such shares beginning September 28, 1999. Absent
registration, Sony Music must hold such shares for a minimum of one year from
April 28, 1999. For accounting purposes, the Company computed the per share
value to equal the IPO price less 5%, due to the restrictions on resale or
$20.90 per share. Accordingly, for accounting purposes, the Company recorded the
purchase price of Launch Radio Networks of $14.3 million. The acquisition was
accounted for using the purchase method of accounting and, accordingly, the
purchase price was allocated to the tangible and intangible assets acquired on
the basis of their respective fair values on the acquisition date. The excess
purchase price over net tangible assets acquired was approximately $12.7 million
and is being amortized over an average useful life of 4 years.


                                       8
<PAGE>   11
<TABLE>
<CAPTION>
                                                 LAUNCH RADIO
                          MUSICVIDEOS.COM          NETWORKS
                          ---------------        ------------
<S>                       <C>                    <C>

Total consideration:

  Common stock              $  8,931,000         $ 14,250,000
  Cash                           302,000                   --
  Other                           36,000                   --
                            ------------         ------------
                               9,269,000           14,250,000
Less net assets                  (99,000)          (1,556,000)
                            ============         ============
Total intangibles           $  9,170,000         $ 12,694,000
                            ============         ============
</TABLE>

        The allocations of the purchase prices are as follows:

<TABLE>
<CAPTION>
                                                 LAUNCH RADIO
                          MUSICVIDEOS.COM          NETWORKS
                          ---------------        ------------
<S>                       <C>                    <C>

Membership database          $ 6,770,000          $        --
Fixed assets                          --            1,556,000
Goodwill and other             2,400,000           11,138,000
                             -----------          -----------
  Total intangibles          $ 9,170,000          $12,694,000
                             ===========          ===========
</TABLE>


        The following unaudited pro forma statement of operations gives effect
to these acquisitions as if they had occurred at the beginning of each period
presented by combining the results of operations of Musicvideos.com and Launch
Radio Networks, Inc. with the results of operations of the Company for the three
and nine months ended September 30, 1998 and 1999.

        The unaudited pro forma statement of operations is not necessarily
indicative of the operating results that would have been achieved had the
transactions been in effect as of the beginning of the periods presented and
should not be construed as being representative of future operating results.


                                       9
<PAGE>   12
PRO FORMA RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                 For The Three Months Ended                  For The Nine Months Ended
                                                         September 30,                             September 30,
                                               ---------------------------------         ---------------------------------
                                                   1998                 1999                 1998                 1999
                                               ------------         ------------         ------------         ------------
<S>                                            <C>                  <C>                  <C>                  <C>
Net revenues:
   Advertising and sponsorship                 $  2,127,000         $  4,410,000         $  4,363,000         $  9,494,000
   Subscription                                     268,000              309,000            1,033,000              745,000
   Merchandise and other                            233,000              558,000              665,000            1,288,000
                                               ------------         ------------         ------------         ------------
                                                  2,628,000            5,277,000            6,061,000           11,527,000
Operating expenses:

   Cost of goods sold and distribution            1,112,000              965,000            2,176,000            2,442,000
   Sales and marketing                            3,065,000            6,904,000            7,381,000           15,844,000
   Content and product development                2,075,000            3,759,000            5,811,000            8,833,000
   General and administrative                     1,094,000            1,472,000            2,936,000            3,614,000
   Depreciation and amortization                  2,028,000            2,356,000            6,070,000            5,249,000
                                               ------------         ------------         ------------         ------------

Loss from operations                             (6,746,000)         (10,179,000)         (18,313,000)         (24,455,000)
Interest income, net                                166,000              892,000              299,000            1,177,000
                                               ------------         ------------         ------------         ------------
Loss before provision for income taxes           (6,580,000)          (9,287,000)         (18,014,000)         (23,278,000)
 Provision for income taxes                               -                    -                3,000               12,000
                                               ------------         ------------         ------------         ------------
   Net loss                                    $ (6,580,000)        $ (9,287,000)        $(18,017,000)        $(23,290,000)
                                               ------------         ------------         ------------         ------------
   Pro forma basic and diluted net loss
   per common share                            $      (0.78)        $      (0.73)        $      (2.37)        $      (2.14)
                                               ------------         ------------         ------------         ------------
   Weighted average shares outstanding
   used in pro forma per share
   calculation (1)                                8,409,000           12,672,000            7,598,000           10,897,000
                                               ============         ============         ============         ============
</TABLE>


(1)     Pro forma weighted average shares outstanding assumes the acquisitions
        of Launch Radio Networks and Musicvideos.com as of the beginning periods
        presented. In addition, the weighted average shares outstanding assumes
        the conversion of the mandatory redeemable convertible preferred stock
        at the beginning of the periods presented or on the issue date if later.


                                       10
<PAGE>   13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The Company has included in this filing certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995
concerning the Company's business, operations and financial condition. The words
or phrases "can be", "expects", "may affect", "may depend", "believes",
"estimates", "projects", and similar words and phrases are intended to identify
such forward-looking statements. Such forward-looking statements are subject to
various known and unknown risks and uncertainties, and the Company cautions you
that any forward-looking information provided by or on behalf of the Company is
not a guarantee of future performance. Actual results could differ materially
from those anticipated in such forward-looking statements due to a number of
factors, some of which are beyond the Company's control, in addition to those
discussed in the Company's other public filings, press releases and statements
by the Company's management, including (i) the volatile and competitive nature
of the Internet and music industries, (ii) changes in domestic and foreign
economic and market conditions, (iii) the effect of federal, state and foreign
regulation on the Company's business, (iv) failure by the Company, its vendors
or other third parties to achieve Year 2000 compliance and (v) the effect of any
future acquisitions. All such forward-looking statements are current only as of
the date on which such statements were made. The Company does not undertake any
obligation to publicly update any forward-looking statement to reflect events or
circumstances after the date on which any such statement is made or to reflect
the occurrence of unanticipated events.

The Company's fiscal year ends on December 31 of each calendar year.

RECENT EVENTS

        On April 23, 1999, Launch effected an initial public offering ("IPO") of
3,500,000 shares of its common stock at a price of $22 per share. On May 19,
1999, the underwriters exercised their over-allotment to purchase an additional
510,000 shares of common stock. The net proceeds from to the Company, after
deducting underwriting discounts and commissions and estimated offering
expenses, were $80.8 million.

        On February 28, 1999, Launch completed the acquisition of
Musicvideos.com. As a result of this acquisition, Launch has significantly
expanded its content by offering streaming music videos on launch.com. In
addition, on April 28, 1999, Launch completed the acquisition of Launch Radio
Networks from Sony Music. Launch Radio Networks produces editorial content and
news features focused primarily on music. Launch Radio Networks distributes this
content for radio broadcast and Internet syndication. We intend to continue to
distribute Launch Radio Networks' content to traditional media and to make this
content available on launch.com. We believe that this acquisition will enhance
the content available on launch.com, and that it will increase awareness of the
Launch brand. As part of this acquisition transaction, Sony purchased shares in
the IPO with an aggregate purchase price of $1.0 million.

        On September 22, 1999, the Company completed its acquisition of
substantially all of the assets of Made In Heaven Entertainment, Inc. Made In
Heaven Entertainment, Inc. through its trade names, JBTV and SuperSpots,
produces a weekly music video show based in Chicago, IL in addition to an
ancillary business of television commercial production. We believe this
acquisition not only enhances Launch's existing music video operations, but also
adds to Launch's audio and video content base.

OVERVIEW

        Launch is a digital media company focused on music. Launch leverages the
inherent advantages of digital media to offer consumers a compelling music
discovery experience while providing record labels, artists, advertisers and
merchants a valuable marketing platform. Our content is delivered on the
Internet at www.launch.com and on the monthly Launch on CD-ROM.


                                       11
<PAGE>   14
        Launch was incorporated in February 1994, and we published the first
issue of Launch on CD-ROM in May 1995. Through July 1998, we distributed Launch
on CD-ROM bi-monthly, and since that time, we have distributed it monthly.
Launch.com was first made available in October 1997. As of September 30, 1999,
launch.com had approximately 2.1 million registered members, and Launch on
CD-ROM had approximately 265,000 subscribers. Doubleclick, Inc. our third party
ad server, reported that in September 1999, there were approximately 1.9 million
unique visitors to launch.com.

        Launch has incurred significant net losses and negative cash flows from
operations since its inception, and as of September 30, 1999, had an accumulated
deficit of approximately $50.2 million. Launch intends to continue to make
significant financial investments in marketing and promotion, content
development and technology and infrastructure development. As a result, Launch
believes that it will incur operating losses and negative cash flows from
operations for the foreseeable future, and that such losses and negative cash
flows will increase for at least the next year.

        To date, Launch's revenues have been derived primarily from the sale of
advertising, including sponsorships, and, to a lesser extent, from annual
subscriptions relating to Launch on CD-ROM. Launch derives revenue from
advertising sales against the total audience viewing content on both launch.com
and Launch on CD-ROM. Historically, Launch on CD-ROM has accounted for the
majority of Launch's audience, and, accordingly, Launch has derived the majority
of its revenues from advertising sales against the Launch on CD-ROM audience.
Launch expects that future growth, if any, in advertising revenue will largely
depend upon increasing the launch.com audience. Revenues for sponsorships across
the Launch media properties are recognized ratably over the sponsorship term,
which is typically one month. Revenues from advertisements for Launch on CD-ROM
are recognized upon the release date of the issue in which the advertisement
appears. With respect to launch.com, revenues from advertisements are recognized
ratably in the period in which the advertisement is displayed, provided that no
significant Launch obligations remain. With respect to Launch Radio Networks'
business, Launch obtains on-air radio advertising inventory in exchange for
music news content. Launch sells this inventory for cash and recognizes revenue
when the radio stations broadcast the advertisement.

        We derive subscription revenues from annual subscription fees for Launch
on CD-ROM. Advance payments for Launch on CD-ROM subscriptions are recorded as
deferred revenue and recognized as revenue ratably over the term of the
subscription.

        Advertising revenues also include barter revenues, which represent an
exchange of advertising space on Launch on CD-ROM for reciprocal advertising
space on third parties' Web sites or for rights under online distribution
agreements. Revenues from these barter transactions are recorded as advertising
revenues at the lower of estimated fair value of the advertisements received or
delivered and are recognized upon publication of the advertisements on Launch on
CD-ROM. Barter expenses are also recorded at the lower of estimated fair value
of the advertisements received or delivered and are recognized when Launch's
advertisements run on the reciprocal media property, which is typically in the
same period in which the advertisements run on Launch on CD-ROM. Although Launch
believes these barter transactions have been important in the marketing of the
Launch brand, we expect these transactions will significantly decrease as a
percentage of total net revenues in the future.

        We have entered into various license arrangements, strategic alliances
and business acquisitions in order to build our audience, provide music-specific
content, generate additional online traffic, increase subscriptions and
memberships and establish additional sources of revenue. These acquisitions,
arrangements and alliances have resulted in a variety of non-cash charges that
will affect our operating results over the next several fiscal periods. The
acquisition of Musicvideos.com has been accounted for using the purchase method
of accounting and, accordingly, the purchase price of $9.4 million, has been
allocated to net tangible and intangible assets acquired. The excess purchase
price over net tangible assets was $9.2 million and is being amortized over an
average useful life of 30 months. The acquisition of Launch Radio Networks has
been accounted for using the purchase method of accounting and, accordingly, the
purchase price of $14.3 million, has been allocated to net tangible and
intangible assets acquired. The excess purchase price over net tangible assets
was $12.7 million and will be amortized over an average useful life of 4 years.
The consideration for the NBC.com and NBC Interactive Neighborhood strategic
alliance and content agreement was series D mandatory redeemable convertible
preferred stock valued at $3.0 million. This non-cash amount is being amortized
over the 26-month term of the agreement. We expect that we will continue to
enter into such arrangements.


                                       12
<PAGE>   15
RESULTS OF OPERATIONS

Net Revenues:

        Net revenues increased 239% from $1.6 million for the three months ended
September 30, 1998 to $5.3 million for the three months ended September 30,
1999. For the nine-month period ended September 30, 1999, net revenues increased
205% from $3.3 million to $10.0 million. The increase in net revenues was
attributable primarily to an increase in advertising revenues.

        Advertising Revenues. Advertising revenues increased 259% from $1.2
million, or 79% of net revenues, for the three months ended September 30, 1998
to $4.4 million, or 84% of net revenues, for the three months ended September
30, 1999. Advertising revenues increased 295% from $2.1 million, or 64% of net
revenues, for the first nine months of 1998 to $8.2 million, or 82% of net
revenues, for the first nine months of 1999. Advertising revenues increased
primarily as a result of an increased number of advertisers and sponsors on
Launch's media properties, revenue from Sony and Intel's advertising
sponsorship, as well as the addition of revenues from the sale of radio
advertising time from Launch Radio Networks. During 1998 and the first nine
months of 1999, Launch continued to expand its advertising sales force, in
particular focusing its sales efforts on sponsorships or advertisements that
covered all of Launch's media properties. In addition, the inventory of
impressions available on our web site increased as registered and unique users
on launch.com increased. Advertising revenues have also increased as a result of
the recent rise in demand for radio advertising time. Launch expects advertising
revenue will continue to represent a significant portion of its net revenues for
the foreseeable future. Included in advertising revenues are revenues recognized
from barter transactions of $610,000, or 50% of advertising revenues, for the
three months ended September 30, 1998 and $320,000, or 7% of advertising
revenues, for the three months ended September 30, 1999. For the nine months
ended September 30, 1998, $916,000 or 44% of advertising revenues were
recognized as barter transactions, compared to $860,000 or 10% of advertising
revenues, for the nine months ended September 30, 1999.

        Subscription Revenues. Subscription revenues increased 15% from
$268,000, or 17% of net revenues, for the three months ended September 30, 1998
to $309,000, or 6% of net revenues, for the three months ended September 30,
1999. Subscription revenue decreased 28% from $1.0 million, or 32% of revenues
for the first nine months of 1998 to $745,000, or 7% of revenues during the
first nine months of 1999 primarily due to a reduced annual subscription rate.
Subscription revenues increased primarily as a result of the distribution of
three issues of Launch on CD-ROM during the quarter ended September 30, 1999
versus two in the quarter ended September 30, 1998. We intend to phase out
Launch on CD-ROM, as more efficient broadband distribution systems achieve
widespread consumer acceptance. As a result, Launch anticipates that
subscription revenues from Launch on CD-ROM will decline substantially over
time.

        Other Revenues. Other revenues increased 862% from $58,000, or 4% of net
revenues, during the three months ended September 30, 1998 to $558,000, or 11%
of net revenues, during the three months ended September 30, 1999. Other revenue
for the three months ended September 30, 1999 increased primarily as a result of
$350,000 earned under a nonrecurring development agreement with Intel, which was
completed as of September 30, 1999. Excluding this development agreement
revenue, merchandise and other revenues were $208,000 for the three months ended
September 30, 1999, reflecting a 258% increase from the first three months of
1998. The majority of this increase can be attributed to additional revenues
from the licensing of Launch Radio Networks and Launch.com content, which was
partially offset by a decrease in single copy retail sales of Launch on CD-ROM.
This decrease was due to our focus on maintaining circulation of Launch on
CD-ROM through subscriptions and the de-emphasis of single copy retail sales.
Other revenue increased 545% from $163,000, or 5% of revenues for the first nine
months of 1998 to $1.1 million, or 11% of revenues during the first nine months
of 1999. During the first nine months of 1999, $650,000 of other revenues was
earned under a nonrecurring development agreement with Intel. At September 30,
1999, Launch had deferred revenues of $2.9 million, consisting primarily of
prepaid content and advertising sponsorships, development projects and prepaid
subscriptions for Launch on CD-ROM.


                                       13
<PAGE>   16
Operating Expenses

        Cost of Goods Sold and Distribution. Cost of goods sold and distribution
consists primarily of Launch on CD-ROM manufacturing and packaging costs and
related subscription distribution costs. Cost of goods sold and distribution
decreased 13% from $1.1 million, or 71% of net revenues, during the three months
ended September 30, 1998 to $965,000, or 18% of net revenues, during the three
months ended September 30, 1999. For the first nine months of 1999, cost of
goods sold and distribution increased 12%, from $2.2 million, or 66% of revenues
in the first nine months of 1998, to $2.4 million, or 24% of revenue. The
decrease in cost of goods sold and distribution during the three months ended
September 30, 1999 was primarily the result of the release of an additional
issue of Launch on CD-ROM, which was customized for college students during the
same period in 1998. The increase in absolute dollars for the nine months ended
September 30, 1999 is due primarily to the production and distribution of eight
issues of Launch on CD-ROM versus seven issues during the first nine months of
1998. We expect cost of good sold as a percentage of net revenues and in
absolute dollars to decrease as Launch on CD-ROM is phased out.

        Sales and Marketing Expenses. Sales and marketing expenses consist
primarily of advertising and marketing costs, promotional costs and the cost of
the direct marketing, commissions paid to the media representative firms, radio
affiliate sales and advertising sales force. Sales and marketing expenses
increased 154% from $2.7 million, or 175% of net revenues, during the three
months ended September 30, 1998 to $6.9 million, or 131% of net revenues, during
the three months ended September 30, 1999. For the first nine months of 1999,
sales and marketing expenses increased 172%, from $6.5 million, or 197% of
revenues, to $15.4 million, or 154% of revenues. The increase in sales and
marketing expenses occurred primarily due to the cost of acquiring new
registered users on launch.com including distribution agreements and promotions,
advertising for Launch on other websites, the hiring of additional sales and
marketing personnel, increased sponsorships of music events, and increased
marketing to promote the Launch brand. In addition, we undertook a significant
outdoor advertising campaign beginning in August 1999 in order to promote the
Launch brand and increase the audience on Launch's media properties. We expect
sales and marketing expenses to increase significantly in absolute dollars as we
pursue an aggressive marketing campaign and enter into additional distribution
agreements to increase the audience on launch.com, expand marketing of the
Launch brand and hire additional sales and marketing personnel.

        Content and Product Development Expenses. Content and product
development expenses consist primarily of editorial expenses, which includes
video production and editorial writers, programming costs for Launch Radio
Networks, art production, hosting and bandwidth, software licenses, and Web
development costs. Content and product development expenses increased 238% from
$1.1 million, or 71% of net revenues, during the three months ended September
30, 1998 to $3.8 million, or 71% of net revenues, during the three months ended
September 30, 1999. For the first nine months of 1999, content and product
development expenses increased 172%, from $2.8 million, or 87% of revenues, to
$7.7 million, or 77% of revenues. Content and product development expenses
increased in the three months ending September 30, 1999 due to costs of further
developing and enhancing the launch.com Web site, including product development
costs, significant additions to personnel, and software license costs. We
believe that significant investments in content and product development are
required to remain competitive. Therefore, we expect that content and product
development expenses will continue to increase in absolute dollars for the
foreseeable future.

        General and Administrative Expenses. General and administrative expenses
consist primarily of salaries and related costs for general corporate functions,
including finance, legal, human resources and accounting. Also included are
facilities costs and fees for professional services. General and administrative
expenses increased 185% from $517,000, or 33% of net revenues, during the three
months ended September 30, 1998 to $1.5 million, or 28% of net revenues, during
the three months ended September 30, 1999. For the first nine months of 1999,
general and administrative expenses increased 142%, from $1.3 million or 39% of
revenues, to $3.1 million, or 31% of revenues. The absolute dollar increase in
general and administrative expenses in the three months ending September 30,
1999 was primarily attributable to salary and related expenses for additional
personnel and increases in facilities costs. Launch anticipates hiring
additional personnel, expanding facilities and additional costs related to being
a public company, including costs related to investor relations programs and
professional service fees. Accordingly, Launch anticipates that general and
administrative expenses will continue to increase in absolute dollars.


                                       14
<PAGE>   17
        Depreciation and Amortization. Depreciation and amortization was $2.4
million during the three months ended September 30, 1999 and primarily consisted
of $996,000 of amortization of excess purchase price over tangible net assets
acquired arising from its acquisition of Musicvideos.com and $882,000 of
amortization of excess purchase price over tangible net assets acquired arising
from its acquisition of Launch Radio Networks. For the first nine months of
1999, depreciation and amortization was $5.1 million.

        Interest Income, net. Interest income, net, consists of interest earned
on cash and cash equivalents and short-term investments, offset by interest
expense on borrowings. Net interest income was $166,000 during the three months
ended September 30, 1998 compared to net interest income of $892,000 during the
three months ended September 30, 1999 and is a result of investing net proceeds
from the Company's IPO. For the nine months ended September 30, 1998, net
interest income was $300,000 compared to net interest income of $1.2 million
during the nine months ended September 30, 1999.

               On February 15, 1999, Launch entered into a note purchase
agreement in which it agreed to issue a convertible subordinated promissory note
in the amount of $1.0 million to Avalon Technology LLC, a stockholder, and a
convertible subordinated promissory note in the amount of $500,000 to Goran
Enterprises Limited, a stockholder. The notes accrued interest at 8.5% per annum
and contained an original issue discount. During the three months ended March
31, 1999, the Company received $1.5 million in proceeds from the convertible
subordinated promissory notes. The notes and accrued interest were automatically
converted into 85,525 shares of common stock upon the closing of the Company's
IPO on April 28, 1999. As a result of the conversion of the promissory notes,
the Company recognized approximately $378,000 in non-cash interest expense
during the nine months ended September 30, 1999 to reflect the original issue
discount between the conversion price and offering price of the common stock.

LIQUIDITY AND CAPITAL RESOURCES

        Since its inception, Launch has financed its operations primarily
through a public issuance of common stock, private placements of preferred stock
and, to a lesser extent, from the revenues generated by operations. As of
September 30, 1999, Launch had approximately $70 million in cash and cash
equivalents and short term investments.

        Net cash used in operating activities increased to $15.5 million for the
first nine months of 1999 from $7.5 million for the first nine months of 1998.
The increase in net cash used in operating activities is substantially
attributable to the increased net loss, excluding non-cash charges.

        Net cash used in investing activities was $67.5 million for the first
nine months of 1999, as compared to net cash used by investing activities of
$10.3 million for the first nine months of 1998. The increase in net cash used
in investing activities resulted primarily from the significant purchase of
securities which took place during the first nine months of 1999 as a result of
investing the cash raised in our IPO. This cash is predominantly invested in
instruments that are highly liquid, are of high quality investment grade, and
predominantly have maturities of less than one year with the intent to make such
funds readily available for operating purposes.

        Net cash provided by financing activities increased to $82.3 million for
the first nine months of 1999, from $18.6 million for the first nine months of
1998, due principally to the proceeds from the sale of common stock through our
IPO in 1999.

        Launch has a revolving capital lease line of credit for $1.0 million. At
September 30, 1999, $1.0 million was outstanding under this line of credit. This
facility bears interest at the bank's prime rate, 8.25% at September 30, 1999.
The leased assets collateralize any borrowings under this line of credit.

        We have experienced a substantial increase in its capital expenditures
and operating lease arrangements since its inception, which is consistent with
the growth in Launch's operations and staffing, and anticipates that this will
continue for the foreseeable future. Additionally, Launch will continue to
evaluate possible investments in businesses, products and technologies, and
plans to expand its sales and marketing programs and conduct more aggressive
brand promotions. Launch currently expects that the net proceeds from its IPO,
together with its existing


                                       15
<PAGE>   18
capital lease line of credit and available funds, will be sufficient to meet its
anticipated needs for working capital and capital expenditures for at least the
next 12 months. There can be no assurance, however, that the underlying assumed
levels of revenues and expenses will prove to be accurate. Launch may seek
additional funding through public or private financings or other arrangements
prior to such time. Adequate funds may not be available when needed or may not
be available on terms favorable to Launch. If additional funds are raised
through the issuance of equity securities, dilution to existing stockholders may
result. If funding is insufficient at any time in the future, Launch may be
unable to develop or enhance its products or services, take advantage of
business opportunities or respond to competitive pressures, any of which could
have a material adverse effect on Launch's business, financial condition and
results of operations.

YEAR 2000 COMPLIANCE

        Many currently installed computer systems and software products are
coded to accept or recognize only two digit entries in the date code field.
These systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.

STATE OF READINESS

        The Company has made an assessment of the Year 2000 readiness of its
operating, financial and administrative systems, including the hardware and
software that support the Company's systems. The Company's assessment plan
consists of: quality assurance testing of its internally developed proprietary
software; contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to the
delivery of the Company's services to its users; contacting vendors of
third-party systems; assessing repair and replacement requirements; implementing
repair or replacement; and creating contingency plans in the event of Year 2000
failures.

        The Company's Year 2000 task force has conducted an inventory of and
developed testing procedures for all software and other systems that it believes
might be affected by Year 2000 issues. Since third parties developed and
currently support many of the systems that the Company uses, a significant part
of this effort will be to ensure that these third-party systems are Year 2000
compliant. The Company plans to confirm this compliance though a combination of
the representation by these third parties of their products' Year 2000
compliance, as well as specific testing of these systems. The Company has
substantially completed this process as of September 30, 1999.

        COSTS

        To date, the Company has spent approximately $100,000 on Year 2000
compliance issues. Most of the Company's expenses have related to the operating
costs associated with time spent by employees in the evaluation process and Year
2000 compliance matters generally.

        RISKS

        The Company is not currently aware of any Year 2000 compliance problems
relating to its systems that would have a material adverse effect on the
Company's business, results of operations and financial condition, without
taking into account the Company's efforts to avoid or fix such problems. There
can be no assurance that the Company will not discover Year 2000 compliance
problems in its systems that will require substantial revision. In addition,
there can be no assurance that third-party software, hardware or services
incorporated into the Company's material systems will not need to be revised or
replaced, all of which could be time-consuming and expensive. The failure of the
Company to fix or replace its internally developed proprietary software or
third-party software, hardware or services on a timely basis could result in
lost revenues, increased operating costs, the loss of customers and other
business interruptions, any of which could have a material adverse effect on the
Company's business, results of operations and financial condition. Moreover, the
failure to adequately address Year 2000 compliance issues in its internally
developed proprietary software could result in claims of mismanagement,
misrepresentation, or breach of contract and related litigation, which could be
costly and time-consuming to defend.


                                       16
<PAGE>   19
        The Company is heavily dependent on a significant number of third-party
vendors to provide both network services and equipment. A significant Year
2000-related disruption of the network, services or equipment that third-party
vendors provide to the Company could cause the Company's registered members and
visitors to consider seeking alternate providers or cause an unmanageable burden
on its technical support, which in turn could materially and adversely affect
the Company's business, financial condition and results of operations.

        In addition, there can be no assurance that governmental agencies,
utility companies, Internet access companies, third-party service providers and
others outside of the Company's control will be Year 2000 compliant. The failure
by such entities to be Year 2000 compliant could result in a systemic failure
beyond the control of the Company, such as a prolonged Internet,
telecommunications or electrical failure, which could also prevent the Company
from delivering its services to its customers, decrease the use of the Internet
or prevent users from accessing its Web site which could have a material adverse
effect on the Company's business, results of operations and financial condition.

        CONTINGENCY PLAN

        As discussed above, the Company is engaged in an ongoing Year 2000
assessment and has contingency plans.

SEASONALITY OF BUSINESS AND QUARTERLY RESULTS

        The Company believes that advertising sales in traditional media are
generally lower in the first and third calendar quarters of each year than in
respective preceding quarters and that advertising expenditures fluctuate
significantly with economic cycles. Depending on the extent to which the
Internet is accepted as an advertising medium, seasonality and cyclicality in
the level of internet advertising expenditures could become more pronounced. The
forgoing factor could have a material adverse effect on the Company's business,
results of operations and financial condition.

RISKS THAT MAY AFFECT RESULTS

        The Company has a limiting operating history that makes an evaluation of
our business difficult. We have a history of losses, and we anticipate that, at
least in the short term our operating expenses will grow faster than our
revenues, and therefore we expect increased losses. In addition to these risks,
the Company's quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside the
Company's control. Factors that may adversely affect the Company's quarterly
operating results include the level of use of the Internet, demand for Internet
advertising, seasonal trends in both Internet use and advertising placements,
the addition or loss of advertisers, advertising budgeting cycles of individual
advertisers, the level of traffic on the Company's Internet sites, the amount
and timing of capital expenditures and other costs relating to the expansion of
the Company's Internet operations, the introduction of new sites and services by
the Company or its competitors, price competition or pricing changes in the
industry, technical difficulties or system downtime, general economic conditions
and economic conditions specific to the Internet and Internet media. In
addition, the popularity of the Company's websites may be affected by changes in
the digital music industry, including limitations on the availability or cost of
music content, failure of new technologies for distribution and increased
competition from traditional music companies entering the digital music arena.
Further, the size and demographic characteristics of the Company's audience may
be adversely affected by the popularity of competing websites.

        Due to all of the foregoing factors, our quarterly results may
fluctuate, and the Company's operating results may fall below the expectations
of the Company, securities analysts or investors in some future quarter. In such
event, the trading price of the Common Stock would likely be adversely affected.


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ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Interest rate sensitivity: We currently maintain a capital lease line of
credit which bears interest at the bank's prime rate, and can therefore
fluctuate with changes in the prime rate. In addition, the principal value of
our short term investments, which are all invested in highly liquid, highly
rated investment grade securities predominantly with maturities of one year or
less, can fluctuate with changes in the interest rate environment.

PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

 "Not applicable."

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

        The net proceeds to the Company from the sale of the 4,010,000 shares of
Common Stock in the Company's initial public offering (Registration Statement
No. 333-72433 and No. 333-76871), effective April 22, 1999, including the
underwriter's exercise of their over-allotment on May 18, 1999, were
approximately $80.8 million after deducting underwriting discounts and
commissions and other offering expenses. From the date of receipt through
September 30, 1999, approximately $10.5 million of the net proceeds were used
for promoting the Company's brand, expanding the Company's sales and marketing,
acquisition of businesses, developing and enhancing the Launch.com web site, for
capital expenditures, and for other working capital purposes with the remainder
of the proceeds invested in short-term, interest-bearing, investment-grade
securities. None of the net proceeds of the offering were paid by the Company,
directly or indirectly, to any director, officer or general partner of the
Company or any of their associates, or to any persons owning ten percent or more
of any class of the Company's equity securities, or any affiliates of the
Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

"Not applicable."

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

"Not applicable."

ITEM 5. OTHER INFORMATION

"Not applicable."

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(b)     EXHIBITS:

        (27) Financial Data Schedule

(b)     Reports on Form 8-K

        No reports were filed on form 8-K during the quarter for which this
report is filed.


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                                   SIGNATURES

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

                                       Dated November 9, 1999

                                       LAUNCH MEDIA, INC.
                                       (Registrant)

                                       /s/ JEFFREY M. MICKEAL
                                       -----------------------------------------
                                       Jeffrey M. Mickeal
                                       Chief Financial Officer and Secretary


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