<PAGE>   1
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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 940404
                    (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 [ ]  No [x]

      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, 12,640,698 SHARES OUTSTANDING
      AS OF MAY 31, 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 March 31, 1999 (unaudited)                  1
            Consolidated Statements of Operations (unaudited)
                 Three months ended March 31, 1998 and 1999                        2
            Consolidated Statements of Cash Flows (unaudited)
                 Three months ended March 31, 1998 and 1999                        3
            Notes to Consolidated Financial Statements                             5
Item 2.     Management's Discussion and Analysis of Financial Condition
                 and Results of Operations                                        10
Item 3.     Quantitative and Qualitative Disclosures about Market Risk            27


PART II.    OTHER INFORMATION

Item 1.     Legal Proceedings                                                     28
Item 2.     Changes in Securities                                                 28
Item 3.     Defaults Upon Senior Securities                                       28
Item 4.     Submission of Matters to a Vote of Security Holders                   28
Item 5.     Other Information                                                     28
Item 6.     Exhibits and Reports on Form 8K                                       29
            Signatures                                                            29
Exhibit 27  Financial Data Schedule                                               30

</TABLE>



<PAGE>   3

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                        LAUNCH MEDIA, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           DECEMBER 31,      MARCH 31,      PRO FORMA
                             ASSETS:                          1998            1999        March 31, 1999
                                                          ------------    ------------    ------------
                                                                           (unaudited)     (unaudited)
<S>                                                       <C>             <C>             <C>

Current assets:
      Cash and cash equivalents                           $  1,735,000    $  4,355,000
      Short-term investments                                 4,993,000              --
      Accounts receivable, net of allowances of $322,000
       (December 31, 1998) and $229,000 (March 31, 1999)       569,000       1,071,000
      Inventory                                                124,000         177,000
      Prepaids and other current assets                        590,000       1,305,000
                                                          ------------    ------------
        Total current assets                                 8,011,000       6,908,000

Property and equipment, net                                  2,587,000       2,922,000
Intangible and other assets                                  2,566,000      11,039,000
                                                          ------------    ------------
                                                          $ 13,164,000    $ 20,869,000
                                                          ============    ============

     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY):

Current liabilities:
      Accounts payable                                    $  1,619,000    $  2,509,000
      Accrued expenses                                         784,000       1,077,000
      Deferred revenue                                         482,000         871,000
      Notes payable and accrued interest                       530,000       2,042,000
      Capital lease obligations, current portion               230,000         335,000
                                                          ------------    ------------
      Total current liabilities                              3,645,000       6,834,000

Notes payable                                                  201,000         190,000
Capital lease obligations, net of current portion              438,000         626,000
                                                          ------------    ------------
      Total liabilities                                      4,284,000       7,650,000
                                                          ------------    ------------

Commitments and contingencies
Series A, B, C and D mandatory redeemable
     convertible preferred
     stock, $.001 par value                                 36,707,000      37,322,000    $         --
Stockholders' equity (deficiency):
      Common stock, $.001 par value, authorized
        75,000,000 shares; shares issued
        and outstanding, 934,333 (1998), 1,828,609
        (1999) and 7,832,684 (pro forma)                         1,000           2,000           8,000
      Additional paid-in capital                               986,000       9,331,000      48,168,000
      Unearned compensation                                 (1,208,000)     (1,088,000)     (1,088,000)
      Accumulated deficit                                  (27,606,000)    (32,348,000)    (32,348,000)
                                                          ------------    ------------    ------------
      Total stockholders' deficiency                       (27,827,000)    (24,103,000)   $ 14,740,000
                                                          ------------    ------------    ============
      Total liabilities and stockholders' deficiency      $ 13,164,000    $ 20,869,000
                                                          ============    ============
</TABLE>

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



                                       1
<PAGE>   4

                        LAUNCH MEDIA, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                              For The Three Months Ended March 31,
                                                                              ------------------------------------
                                                                                    1998             1999
                                                                                 -----------       -----------
                                                                                         (unaudited)
<S>                                                                              <C>               <C>

Net revenues:
     Advertising                                                                 $   297,000       $   711,000
     Subscription                                                                    251,000           209,000
     Merchandise and other                                                            63,000           328,000
                                                                                 -----------       -----------
                                                                                     611,000         1,248,000
Operating expenses:
     Cost of goods sold and distribution                                             417,000           651,000
     Sales and marketing                                                           1,515,000         2,830,000
      Content and product development                                                626,000         1,315,000
      General and administrative                                                     356,000           600,000
     Depreciation and amortization                                                    48,000           603,000
                                                                                 -----------       -----------

        Loss from operations                                                      (2,351,000)       (4,751,000)
Interest income (expense), net                                                       (38,000)           19,000
                                                                                 -----------       -----------

        Loss before provision for income taxes                                    (2,389,000)       (4,732,000)
Provision for income taxes                                                            (3,000)          (10,000)
                                                                                 -----------       -----------

        Net loss                                                                  (2,392,000)       (4,742,000)
Accretion of mandatory redeemable convertible preferred stock                        (21,000)         (615,000)
                                                                                 -----------       -----------

Net loss attributable to common stockholders                                     $(2,413,000)      $(5,357,000)
                                                                                 ===========       ===========

Basic and diluted net loss per common share                                      $     (2.59)      $     (4.32)
                                                                                 ===========       ===========
Weighted average shares outstanding used in per share calculation                    932,707         1,240,525
                                                                                 ===========       ===========

Pro forma basic and diluted net loss per common share                                              $     (0.75)
                                                                                                   ===========
Weighted average shares outstanding used in pro forma per share calculation                          7,161,615
                                                                                                   ===========
</TABLE>


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



                                       2
<PAGE>   5



                        LAUNCH MEDIA, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                  For The Three Months Ended March 31,
                                                                  ------------------------------------
                                                                        1998               1999
                                                                    ------------       ------------
Cash flows from operating activities:                                         (unaudited)

<S>                                                                 <C>                <C>
    Net loss                                                        $ (2,392,000)      $ (4,742,000)
    Adjustments to reconcile net loss to net cash used in
    operating activities:
      Depreciation and amortization                                       48,000            603,000
      Non-cash charges for  issuance of equity securities                115,000            346,000
      Allowance for sales returns                                       (626,000)           (93,000)
      Amortization of deferred compensation                                3,000            120,000
      Changes in operating assets and liabilities:
        Decrease (increase) in accounts receivable                       113,000           (282,000)
        Increase in inventory                                           (154,000)           (53,000)
        Increase in prepaids and other current assets                   (397,000)          (714,000)
        Increase in accounts payable                                     294,000            762,000
        Increase in accrued expenses                                     526,000            288,000
        Increase in deferred revenue                                     284,000            390,000
                                                                    ------------       ------------
    Net cash used in operating activities                             (2,186,000)        (3,375,000)
                                                                    ------------       ------------

Cash flows used from investing activities:
    Purchase of property and equipment                                  (193,000)          (166,000)
    Purchases of securities                                          (12,897,000)                --
    Maturities of securities                                                  --          4,993,000
    Increase in security deposits                                        (13,000)            (6,000)
    Acquisition of business                                                   --           (302,000)
                                                                    ------------       ------------

    Net cash provided by (used in) investing activities              (13,103,000)         4,519,000
                                                                    ------------       ------------

Cash flows from financing activities:
    Payments under capital lease obligations                             (10,000)           (55,000)
    Payments under notes payable                                        (115,000)                --
    Proceeds from notes payable                                          500,000          1,500,000
    Proceeds from issuance of mandatory redeemable convertible
    preferred stock                                                   14,871,000                 --
    Proceeds from exercise of stock options                                1,000             31,000
                                                                    ------------       ------------

     Net cash provided by financing activities                        15,247,000          1,476,000
                                                                    ------------       ------------

    Increase (decrease) in cash and cash equivalents                     (42,000)         2,620,000

Cash and cash equivalents, beginning of period                           644,000          1,735,000
                                                                    ------------       ------------

Cash and cash equivalents, end of period                            $    602,000       $  4,355,000
                                                                    ============       ============

</TABLE>



                                       3
<PAGE>   6

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                            For The Three Months Ended March 31,
                                                            ------------------------------------
                                                                   1998            1999
                                                                ----------      ----------
<S>                                                         <C>               <C>

Cash paid during the period for:
      Interest                                                  $    4,000      $   23,000
      Taxes                                                     $    3,000      $   10,000
Supplementary disclosure of noncash transactions:
    Equipment acquired under capital leases                     $       --      $  302,000
    Issuance of common stock for partnership interests in
    Musicvideos.com                                             $       --      $8,931,000
    Issuance of Series D Stock through conversion of notes
    payable                                                     $3,400,000      $       --
    Issuance of Series D Stock under strategic alliances
                                                                $3,500,000      $       --
</TABLE>


       See accompanying notes to these consolidated financial statements.



                                       4
<PAGE>   7

                        LAUNCH MEDIA, INC. AND SUBSIDIARY
                   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.
Launch Media, Inc., together with Launch Networks, Inc., are referred to
collectively as the "Company" or as "Launch". Launch is a digital media company
focused on creating the premier destination for promoting and discovering new
music. The Company creates music content available in an interactive format that
enables music buyers to explore new music from new and established artists. The
music content is delivered on the Internet at www.launch.com and on Launch on
CD-ROM. Both launch.com and Launch on CD-ROM are advertiser supported and
include original content that takes advantage of the personal computer's
interactive multimedia technology.

2. INITIAL PUBLIC OFFERING AND UNAUDITED PRO FORMA BALANCE SHEET

        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 option to purchase an
additional 510,000 shares of common stock. The net proceeds to the Company,
after deducting underwriting discounts and commissions and estimated offering
expenses, were approximately $81 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. The conversion of
the Mandatory Redeemable Convertible Preferred Stock has been reflected in the
accompanying unaudited pro forma balance sheet as if it had occurred on March
31, 1999. 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 and have
been reflected in the accompanying unaudited pro forma balance sheet as if they
had converted on March 31, 1999.


        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 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 subsidiary. All intercompany balances and
transactions have been eliminated.

UNAUDITED INTERIM FINANCIAL INFORMATION

        The unaudited interim consolidated financial statements of the Company
for the three months ended March 31, 1998 and 1999, respectively, 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


                                       5
<PAGE>   8

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 March 31, 1999, and the results of its operations and its cash
flows for the three months ended March 31, 1998 and 1999, respectively. The
results for the three months ended March 31, 1999 are not necessarily indicative
of the expected results for the full fiscal year or any future period.


BASIS OF PRESENTATION

      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 March 31, 1999, the Company's revenues have been derived primarily
from the sale of advertising and sponsorships, 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.

      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 other Web sites. 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 $150,000 and $208,000 for the three months ended
March 31, 1998 and 1999, respectively.

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, 1999. The Company does not expect the adoption of this statement to have a
significant impact on its financial statements.


                                       6
<PAGE>   9


COMPUTATION OF NET LOSS PER SHARE AND PRO FORMA 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. Pursuant to SEC Staff Accounting
Bulletin No. 98, common stock and convertible preferred stock issued for nominal
consideration, prior to the anticipated effective date of an IPO, are required
to be included in the calculation of basic and diluted net loss per share as if
they were outstanding for all periods presented. To date, the Company has not
had any issuances or grants for nominal consideration.

      Diluted net loss per share for the three months ended March 31, 1998 and
1999, does not include the effect of options and warrants to purchase 872,705
and 1,360,972 shares of common stock, respectively and 5,918,230 shares of
Mandatory Redeemable Convertible Preferred Stock on an "as-if-converted" basis
as the effect of their inclusion is anti-dilutive during each period.

      Pro forma net loss per share for the three months ended March 31, 1999
assumes that the common stock issuable upon conversion of the outstanding
Mandatory Redeemable Convertible Preferred Stock and issuable upon conversion of
the subordinated promissory notes had been outstanding as of December 31, 1999
and from date of issuance, respectively.


4. RELATED PARTY TRANSACTIONS

      In November 1998, Launch entered into an architectural development and
assistance agreement with Intel Corporation. Pursuant to the terms of these
agreements, Launch agreed to develop a product which is able to use the
capabilities of a processor developed by Intel. In consideration, Intel has
agreed to pay Launch certain amounts and to provide technical assistance, and
Launch has 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 March 31, 1999 was
$300,000. The development revenue is included in merchandise and other revenues
in the consolidated statement of operations. At March 31, 1999, approximately
$450,000 due from Intel is included in accounts receivable.

      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. As of March 31, 1999, the
Company had received $1,500,000 under these promissory notes. The notes and
accrued interest were automatically converted into 85,525 shares of common stock
upon the consummation of the Company's IPO on April 28, 1999.


5. INCOME TAXES

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

6. CAPITAL LEASE LINE OF CREDIT

      The Company has a capital lease line of credit for $1.0 million, expiring
in November 1999. The Company has borrowed approximately $800,450 under this
line of credit as of March 31, 1999. This facility bears interest at the bank's
prime rate (7.75% at March 31, 1999). The leased assets collateralize any
borrowings under this line of credit.



                                       7
<PAGE>   10

7. BUSINESS ACQUISITIONS

Acquisition of 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 of
approximately $8.9 million, a cash payment of approximately $300,000 and assumed
liabilities and transaction costs of approximately $200,000. For purposes of the
following pro forma combined statement of operations, the excess purchased price
over net tangible assets acquired is estimated to be approximately $9.2 million
and is being amortized over an estimated average useful life of 30 months.

Acquisition of SW Networks, Inc.

           On March 26, 1999, the Company entered into an agreement to purchase
all of the outstanding shares of SW Networks Inc., an entertainment
information/news content provider to radio stations and Internet-based
entertainment companies. The acquisition closed concurrently with the completion
of the Company's IPO on April 28, 1999. The purchase agreement relating to this
acquisition required that the Company pay Sony Music Entertainment, Inc., the
sole stockholder of SW Networks, a stated consideration of $12.0 million in
shares of Company's common stock. For purposes of the agreement, the shares to
be 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 six months after April 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 has estimated the
fair value of such shares to be equal to the IPO price less 5% due to the
restrictions on resale or $20.90 per share. Accordingly, for accounting
purposes, the Company has estimated the purchase price of SW Networks to be
$14.3 million. The acquisition will be accounted for using the purchase method
of accounting and, accordingly, the purchase price will be allocated to the
tangible and intangible assets acquired and liabilities assumed on the basis of
their respective fair values on the acquisition date. For purposes of the
following pro forma combined financial information, the excess purchase price
over net tangible assets acquired is estimated to be approximately $12.7 million
and is assumed to be amortized, on a preliminary basis, over an estimated
average useful life of 48 months.

<TABLE>
<CAPTION>
                         MUSICVIDEOS.COM     SW 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 actual allocations of the purchase prices will be based on the
estimated fair values of the net tangible and intangible assets acquired at the
dates of purchase. For purposes of the unaudited pro forma statement of
operations and related amortization of intangibles, the preliminary purchase
price allocation has been estimated as follows:

<TABLE>
<CAPTION>
                       MUSICVIDEOS.COM    SW NETWORKS
                       ---------------    -----------
<S>                    <C>                <C>
Membership database      $ 6,770,000      $        --
Goodwill and other         2,400,000       12,694,000
                         -----------      -----------
  Total intangibles      $ 9,170,000      $12,694,000
                         ===========      ===========
</TABLE>



                                       8
<PAGE>   11


           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
SW Networks Inc. with the results of operations of the Company for the three
months ended March 31, 1999 and 1998.

           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 period presented and
should not be construed as being representative of future operating results.

PRO FORMA RESULTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                             For The Three Months Ended March 31,
                                                             ------------------------------------
                                                                   1998              1999
                                                               -----------       -----------
<S>                                                          <C>               <C>

Net revenues:
    Advertising                                                $   889,000       $ 1,787,000
    Subscription                                                   251,000           209,000
    Merchandise and other                                          207,000           447,000
                                                               -----------       -----------
                                                                 1,347,000         2,443,000
Operating expenses:
    Cost of goods sold and distribution                            417,000           651,000
    Sales and marketing                                          1,778,000         3,233,000
    Content and product development                              1,664,000         2,177,000
    General and administrative                                   1,092,000         1,303,000
    Amortization of intangibles                                  1,793,000         1,793,000
                                                               -----------       -----------

Loss from operations                                            (5,397,000)       (6,714,000)
Interest income (expense), net                                     (38,000)           17,000
                                                               -----------       -----------
Loss before provision for income taxes                          (5,435,000)       (6,697,000)
Provision for income taxes                                          (3,000)          (10,000)
                                                               -----------       -----------
        Net loss                                               $(5,438,000)      $(6,707,000)
                                                               ===========       ===========
    Pro forma basic and diluted net loss per common share
                                                               $     (0.86)      $     (0.79)
                                                               ===========       ===========
    Weighted average shares outstanding used in pro
    forma per share calculation                                  6,336,000         8,515,000
                                                               ===========       ===========
</TABLE>



                                       9
<PAGE>   12



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", "estimate", "project", 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 industry, (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 of 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 February 28, 1999, we 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 SW Networks
from Sony Music. SW Networks produces editorial content and news features
focused primarily on music. SW Networks distributes this content for radio
broadcast and Internet syndication. We intend to continue to distribute SW
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 April 23, 1999 Launch effected an initial public offering 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 option to purchase an
additional 510,000 shares of common stock. The net proceeds to the Company,
after deducting underwriting discounts and commissions and estimated offering
expenses, were approximately $81 million.

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.

           Launch commenced operations 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 March 31,
1999, launch.com had approximately 1.1 million registered members, and Launch on
CD-ROM had approximately 265,000 subscribers. Doubleclick, Inc. our third party
ad server, reported that in March 1999, there were approximately 1.1 million
unique visitors to launch.com.



                                       10
<PAGE>   13

           Launch has incurred significant net losses and negative cash flows
from operations since its inception, and as of March 31, 1999, had an
accumulated deficit of approximately $32.3 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 SW Networks' business,
Launch will obtain on-air radio advertising inventory in exchange for content.
Launch intends to sell this inventory for cash and will recognize 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
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 to significantly decrease both the dollar value and
frequency of these transactions 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, estimated to
be $9.3 million, has been allocated to net tangible and intangible assets
acquired. The excess purchase price over net tangible assets is estimated to be
$9.2 million and will be amortized over an expected estimated average useful
life of 30 months. The acquisition of SW Networks will be accounted for using
the purchase method of accounting and, accordingly, the purchase price,
estimated to be $14.3 million, will be allocated to net tangible and intangible
assets acquired. The excess purchase price over net tangible assets is estimated
to be $13.4 million and will be amortized over an expected estimated average
useful life of 48 months. The consideration for the NBC.com and NBC Interactive
Neighborhood strategic alliance and content agreement was series D 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. Because Internet business acquisitions typically involve
significant amounts of intangible assets, future operating results may be
adversely affected by amortization of the intangible assets acquired.



                                       11
<PAGE>   14

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1999 AND 1998

Net Revenues:

           Net revenues increased 104% from $611,000 for the three months ended
March 31, 1998 to $1.2 million for the three months ended March 31, 1999. The
increase in net revenues was attributable primarily to an increase in
advertising and other revenues.

           Advertising Revenues. Advertising revenues increased 139% from
$297,000, or 48.6% of net revenues, for the first three months of 1998 to
$711,000, or 57.0% of net revenues, for the first three months of 1999.
Advertising revenues increased in the first three months of 1999 due to an
increase in the number of advertisers and number of advertisements sold. During
1998 and the first three months of 1999, Launch increased its sales efforts
principally by expanding its sales force. In addition to increased sales
efforts, the inventory of impressions available on the Company's web site
increased as users to the web site increased. Launch expects advertising revenue
will continue to represent the most significant portion of its net revenues for
the foreseeable future. Included in advertising revenues are revenues recognized
from barter transactions of $150,000, or 50.5% of advertising revenues, for the
first three months of 1998 and $208,000, or 29.3% of advertising revenues, for
the first three months of 1999.

           Subscription Revenues. Subscription revenues decreased 17% from
$251,000, or 41.1% of net revenues, for the first three months of 1998 to
$209,000, or 16.7% of net revenues, for the first three months of 1999.
Subscription revenues decreased primarily as a result of a reduction in the
yearly price of a paid subscription for Launch on CD-ROM, which occurred in the
second quarter of 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.

           Merchandise and Other Revenues. Merchandise and other revenues
increased 421% from $63,000, or 10.3% of net revenues, during the first three
months of 1998 to $328,000, or 26.3% of net revenues, during the first three
months of 1999. Merchandise and other revenues increased during the first three
months of 1999 due primarily to $300,000 earned under a nonrecurring development
agreement with Intel. The total amount to be paid to Launch under the Intel
agreement is $1.0 million, of which $569,000 has been recognized through March
31, 1999. Excluding this development agreement revenue, merchandise and other
revenues were $28,000 for the first three months of 1999, reflecting a 56%
decrease from the first three months of 1998 primarily related to a decrease in
single copy retail sales of Launch on CD-ROM. This decrease was due to Launch's
focus on subscriptions rather than single copy retail. At March 31, 1999, Launch
had deferred revenues of $871,000 consisting primarily of prepaid subscriptions
for Launch on CD-ROM and development projects.

Operating Expenses

           Cost of Goods Sold and Distribution. Cost of goods sold and
distribution consists primarily of CD-ROM manufacturing and packaging costs and
CD-ROM subscription distribution costs. Cost of goods sold and distribution
increased 56% from $417,000, or 68.2% of net revenues, during the first three
months of 1998 to $651,000, or 52.2% of net revenues, during the first three
months of 1999. As a percentage of net revenues, cost of goods sold and
distribution decreased during the first three months of 1999, however cost of
goods sold increased in absolute dollars due primarily to the production and
distribution of two issues of Launch on CD-ROM versus one issue during the first
three months of 1998. We expect cost of good sold as a percentage of net
revenues 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 and advertising sales force. Sales and marketing expenses
increased 87% from $1.5 million, or 248.0% of net revenues, during the first
three months of 1998 to $2.9 million, or 226.8% of net revenues, during the
first three months of 1999. The increase in sales and marketing expenses
increased primarily due to the cost of acquiring new subscribers, the hiring of
additional sales and marketing personnel, and increased marketing to promote the
Launch brand. In addition, the Company undertook a print and outdoor advertising
campaign beginning in March 1999 in order to promote the Launch brand


                                       12
<PAGE>   15

and increase the audience on Launch's media properties. Launch expects sales and
marketing expenses to increase significantly in absolute dollars as it pursues
an aggressive marketing campaign 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, art production, bandwidth, software, and
Web development costs. Content and product development expenses increased 110%
from $626,000, or 102.5% of net revenues, during the first three months of 1998
to $1.3 million, or 105.3% of net revenues, during the first three months of
1999. As a percentage of net revenues, content and product development expenses
increased in the first three months of 1999 due to costs associated with the
Intel development agreement and costs of developing and enhancing the launch.com
Web site. Launch believes that significant investments in content and product
development are required to remain competitive. Therefore, Launch expects that
its 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 and accounting, facilities and fees for
professional services. General and administrative expenses increased 68.5% from
$356,000, or 58.3% of net revenues, during the first three months of 1998 to
$600,000, or 48.1% of net revenues, during the first three months of 1999. The
absolute dollar increase in general and administrative expenses in the first
three months of 1999 was due to an increase in the number of administrative
personnel necessary to support the growth of Launch's operations. Launch
anticipates hiring additional personnel, incurring additional costs for
integration of acquisitions, and incurring 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.

           Depreciation and amortization. Depreciation and amortization expenses
were $603,000, or 48.3% of net revenues, and $48,000, or 7.9% of net revenues
for the three months ended March 31, 1999 and 1998, respectively. The dollar
increase was primarily attributable to depreciation on a greater base of
property and equipment owned by the Company as well as increased amortization
expense resulting from the Company's acquisition of Musicvideos.com.

           Interest income (expense), net. Interest income (expense), net
consists of interest earned on cash and cash equivalents and short-term
investments, offset by interest expense on borrowings. Net interest expense was
$38,000 during the first three months of 1998 compared to net interest income of
$19,000 in during the first three months of 1999.



LIQUIDITY AND CAPITAL RESOURCES

           Since its inception, Launch has financed its operations primarily
through private placements of preferred stock and, to a lesser extent, from the
revenues generated by operations. As of March 31, 1999, Launch had approximately
$4.4 million in cash and cash equivalents. On April 23, 1999 Launch effected an
initial public offering 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
option to purchase an additional 510,000 shares of common stock. The net
proceeds to the Company, after deducting underwriting discounts and commissions
and estimated offering expenses, were approximately $81 million.

           Net cash used in operating activities increased to $3.4 million for
the first three months of 1999 from $2.2 million for the first three months of
1998. The increase in net cash used in operating activities is substantially
attributable to the increased net loss.


           Net cash provided by investing activities was $4.5 million for the
first three months of 1999, as compared to net cash used by investing activities
of $13.1 million for the first three months of 1998. The decrease in net cash
used in investing activities resulted primarily from the significant purchase of
securities which took place during the first three months of 1998 versus
maturities of securities during the first three months of 1999.


                                       13
<PAGE>   16

           Net cash provided by financing activities decreased to $1.5 million
for the first three months of 1999, from net cash provided by financing
activities of $15.2 million for the first three months of 1998, due principally
to the proceeds from the sale of Series D preferred stock in 1998.

           Launch has a capital lease line of credit for $1.0 million. At March
31, 1999, $800,450 was outstanding under this line of credit. This facility
bears interest at the bank's prime rate, 7.75% at March 31, 1999. The leased
assets collateralize any borrowings under this line of credit.

           The Company has experienced a substantial increase in its capital
expenditures and operating lease arrangements since its inception, 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 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 plans to
complete this process prior to the end of the third quarter of 1999. Until such
testing is completed and such vendors and providers are contacted, the Company
will not be able to completely evaluate whether its systems will need to be
revised or replaced.

        COSTS

        To date, the Company has spent approximately $50,000 on Year 2000
compliance issues but expects to incur an additional $100,000 to $200,000 in
connection with identifying, evaluating and addressing Year 2000 compliance
issues. Most of the Company's expenses have related to, and are expected to
continue to relate to, the operating costs associated with time spent by
employees in the evaluation process and Year 2000 compliance matters


                                       14
<PAGE>   17

generally. Such expenses, if higher than anticipated, could have a material
adverse effect on the Company's business, results of operations and financial
condition.

        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.

        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 not yet developed any contingency plans. The results of the
Company's Year 2000 simulation testing and the responses received from
third-party vendors and service providers will be taken into account in
determining the nature and extent of any 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

WE HAVE A LIMITED OPERATING HISTORY THAT MAKES AN EVALUATION OF OUR BUSINESS
DIFFICULT

        We commenced operations in February 1994 and published the first issue
of Launch on CD-ROM in May 1995. We first made launch.com available over the
Internet in October 1997. Because we have a limited operating history, you must
consider the risks and difficulties frequently encountered by early-stage
companies such as Launch in new and rapidly evolving markets, including the
market for advertising on the Internet and other digital


                                       15
<PAGE>   18


media. Historically, Launch on CD-ROM has accounted for the majority of Launch's
audience. Accordingly, Launch has derived its revenues principally from
advertising sales against the Launch on CD-ROM audience and, to a lesser extent,
from subscriptions for Launch on CD-ROM. Any future growth in our business will
depend substantially upon our ability to increase the size of the launch.com
audience, to increase advertising sales against that audience and to meet the
challenges described in the risk factors below.

WE HAVE A HISTORY OF LOSSES. BECAUSE WE ANTICIPATE THAT OUR OPERATING EXPENSES
WILL GROW MORE QUICKLY THAN OUR REVENUES, AT LEAST IN THE SHORT TERM, WE
EXPECT INCREASED LOSSES

      We incurred net losses of $4.5 million in 1996, $6.7 million in 1997,
$13.4 million in 1998 and $5.4 million for the three months ended March 31,
1999. As of March 31, 1999, our accumulated deficit was $32.3 million. We have
not achieved profitability and expect to incur operating losses for the
foreseeable future. We expect these operating losses to increase for at least
the next year. We will need to generate significant revenues to achieve and
maintain profitability, and we cannot assure you that we will be able to do so.
Even if we do achieve profitability, we cannot assure you that we can sustain or
increase profitability on a quarterly or an annual basis in the future. If our
revenues grow more slowly than we anticipate or if our operating expenses exceed
our expectations, our financial performance will likely be adversely affected.
See "Selected Financial Data" for more detailed information regarding our
historical operating and net losses.

OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND MAY CAUSE OUR STOCK PRICE TO
FLUCTUATE

      Our future revenues and operating results are likely to vary significantly
from quarter to quarter due to a number of factors, many of which are outside of
our control. Accordingly, you should not rely on quarter-to-quarter comparisons
of our results of operations as an indication of future performance. It is
possible that in some future periods our operating results will be below the
expectations of public market analysts and investors. In this event, the price
of our common stock will likely decline. Factors which may cause our revenues
and operating results to fluctuate include the following:

        -       our ability to attract and retain advertisers;

        -       our ability to increase the registered membership of launch.com
                and the amount of time our audience members spend using
                launch.com;

        -       new Web sites, services or products introduced by us or by our
                competitors;

        -       the timing and uncertainty of sales cycles;

        -       mix of online advertisements sold;

        -       seasonal declines in advertising sales, which typically occur in
                the first and third calendar quarters;

        -       the level of Web and online services usage;

        -       our ability to successfully integrate operations and
                technologies from acquisitions or other business combinations;

        -       technical difficulties or system downtime affecting the Internet
                generally or the operation of launch.com; and

        -       general economic conditions, as well as economic conditions
                specific to digital media and the music industry.

      To attract and retain a larger audience, we plan to significantly increase
our expenditures for sales and marketing, content development, and technology
and infrastructure development. Many of these expenditures are planned or
committed in advance in anticipation of future revenues. Because advertising
orders are typically short term and subject to cancellation without penalty
until shortly before the advertisement runs, our quarterly operating results are
difficult to forecast. If our revenues in a particular quarter are lower than we
anticipate, we may be unable


                                       16
<PAGE>   19


to reduce spending in that quarter. As a result, any shortfall in revenues would
likely adversely affect our quarterly operating results.

BECAUSE WE DEPEND PRINCIPALLY UPON ADVERTISING REVENUES, IF WE DO NOT INCREASE
ADVERTISING SALES, ESPECIALLY SALES AGAINST THE LAUNCH.COM AUDIENCE, OUR
BUSINESS MAY NOT GROW OR SURVIVE

      Our revenues for the foreseeable future will depend substantially on sales
of advertising. In 1997, advertising sales accounted for 59.3% of our net
revenues, in 1998 they accounted for 60.6% of our net revenues, and during the
first three months of 1999, advertising sales accounted for 57.0% of our net
revenues. If we do not increase advertising revenues, our business may not grow
or survive. Increasing our advertising revenues depends upon many factors,
including our ability to do the following:

        -       conduct successful selling and marketing efforts aimed at
                advertisers;

        -       increase the size of the launch.com audience;

        -       increase the amount of revenues per advertisement;

        -       aggregate our target demographic group of 12 to 34 year old
                active music consumers, and, in particular, the Generation Y
                segment of this group;

        -       increase awareness of the Launch brand among advertisers;

        -       target advertisements to appropriate segments of our audience;

        -       make Launch available through evolving broadband distribution
                channels; and

        -       accurately measure the size and demographic characteristics of
                our audience.

Our failure to achieve one or more of these objectives could adversely affect
our business.

      Advertising revenues are difficult to forecast, especially because the
market for advertising on digital media has emerged relatively recently. During
the first three months of 1999, we derived 17% of our net revenues from
advertising barter transactions. We have historically entered into barter
transactions with advertisers that we do not believe would pay cash for such
advertisements. We expect to substantially reduce both the dollar volume and
frequency of such transactions in future periods. In each quarterly period, we
derive a significant portion of our revenues from sales of advertising to a
limited number of customers. Accordingly, the loss of a key advertising
relationship or the cancellation or deferral of even a limited number of orders
could adversely affect our quarterly performance.

IF WE FAIL TO INCREASE THE SIZE OF OUR AUDIENCE, WE MAY NOT BE ABLE TO ATTRACT
ADVERTISERS OR STRATEGIC ALLIANCES

      Increasing the size of our audience is critical to selling advertising and
to increasing our revenues. If we cannot increase the size of our audience, then
we may be unable to attract new or retain existing advertisers. In addition, we
may be at a relative disadvantage to other digital media companies with larger
audiences that may be able to leverage their audiences to access more
advertisers and significant strategic alliances. To attract and retain our
audience, we must do the following:

        -       continue to offer compelling music content;

        -       encourage our users to become part of our community;

        -       conduct effective marketing campaigns to acquire new members;

        -       develop new and maintain existing distribution relationships
                with other Web sites;


                                       17
<PAGE>   20

        -  update and enhance the features of launch.com;

        -  increase awareness of the Launch brand;

        -  make Launch available through broadband distribution channels as
           they achieve widespread consumer acceptance; and

        -  offer targeted, relevant products and services.

Our failure to achieve one or more of these objectives could adversely affect
our business, and we cannot assure you that we will be successful in these
efforts.

      A significant element of our strategy is to build a loyal community of
registered members on launch.com because we believe community features help
retain actively engaged users. The concept of developing such a community on the
Web is unproven, and if it is not successful, then it may be more difficult to
increase the size of our audience.

      We also depend on establishing and maintaining distribution relationships
with high-traffic Web sites to increase our audience. There is intense
competition for placements on these sites, and we may not be able to enter into
such relationships on commercially reasonable terms or at all. Even if we enter
into distribution relationships with these Web sites, they themselves may not
attract significant numbers of users. Therefore, launch.com may not obtain
additional users from these relationships. Moreover, we have paid in the past,
and may pay in the future, significant fees to establish these relationships.

      We also intend to increase our financial expenditures on marketing the
Launch brand because we believe brand awareness will be critical to increasing
our audience, especially because there are few barriers to entry for Internet
businesses. If we do not increase our revenues as a result of our branding and
other marketing efforts or if we otherwise fail to promote our brand
successfully, our business could be adversely affected.

SALES CYCLES VARY FOR ADVERTISING AND MAY CAUSE OUR OPERATING RESULTS TO
FLUCTUATE

      Our dependence on advertising subjects us to additional risks because the
sales cycles for these sales vary significantly. The time between the date of
initial contact with a potential advertiser or sponsor and receipt of a purchase
order from the advertiser may range from as little as six weeks to up to nine
months. During these sales cycles, we may expend substantial funds and
management resources but not obtain advertising revenues. Therefore, if these
sales are delayed or do not otherwise occur, our operating results for a
particular period may be adversely affected.

      Advertising sales are subject to delays over which we have little or no
control, including the following:

        -  advertisers' budgetary constraints;

        -  internal acceptance reviews by advertisers and their agencies;

        -  the timing of completion of advertisements by advertisers; and

        -  the possibility of cancellation or delay of projects by
           advertisers or sponsors.

FAILURE TO CONTINUE TO DEVELOP COMPELLING CONTENT THAT ATTRACTS OUR TARGET
AUDIENCE COULD CAUSE OUR AUDIENCE SIZE TO DECREASE OR CHANGE THE DEMOGRAPHICS OF
OUR AUDIENCE

      Our future success depends on our ability to continue to develop content
that is interesting and engaging to our target audience. If our audience
determines that our content does not reflect its tastes, then our audience size
could decrease or the demographic characteristics of our audience could change.
Either of these results would adversely


                                       18
<PAGE>   21

affect our ability to attract advertisers. Our ability to develop compelling
content depends on several factors, including the following:

        -  quality of our editorial staff;

        -  technical expertise of our production staff;

        -  access to recording artists; and

        -  access to content controlled by record labels, publishers and
           artists.

Further, consumer tastes change, particularly those of Generation Y, and we may
be unable to react to those changes effectively or in a timely manner.

LIMITATIONS ON THE AVAILABILITY OR INCREASES IN THE PRICE OF MUSIC CONTENT
DEVELOPED BY THIRD PARTIES COULD HARM OUR BUSINESS

      Because much of our content, including recording artist interviews, audio
and video performances and music, are provided to us by record labels and
artists at minimal or no charge, we depend on our good relations with record
labels and artists to offer compelling content. We have no long-term contracts
with any of the record labels or artists, and we cannot assure you that they
will continue to make their content available to us on reasonable terms or at
all. If record labels, music publishers or artists charge significant fees for
their content or discontinue their relationships with us, then our content
offering could be adversely affected.

WE NEED NEW DISTRIBUTION TECHNOLOGIES TO INCREASE ACCESSIBILITY OF OUR CONTENT,
AND FAILURE OF SUCH TECHNOLOGIES TO ACHIEVE CONSUMER ACCEPTANCE COULD LIMIT
OUR GROWTH

      To experience the full extent of our high-quality audio and full-motion
video content, consumers must access such content either from a CD-ROM, DVD-ROM
or over a high-bandwidth connection, such as cable or direct subscriber line
modem or satellite data broadcast. If such broadband distribution networks do
not achieve widespread consumer acceptance, we may be unable to effectively
distribute our audio and video content in its most compelling format. We cannot
assure you that broadband distribution networks will ever achieve consumer
acceptance, and if they do not, our growth may be limited.

WE DEPEND ON A LIMITED NUMBER OF ADVERTISERS, AND THE LOSS OF A NUMBER OF THESE
ADVERTISERS COULD ADVERSELY AFFECT OUR OPERATING RESULTS

      Historically, a limited number of advertisers has accounted for a
significant percentage of our revenues. Although no advertiser accounted for
more than 10% of total net revenues in 1998, our four largest advertisers
accounted for 23.5% of total net revenues. Although no advertiser accounted for
more than 10% of total net revenues for the three months ended March 31, 1999,
our four largest advertisers accounted for 13% of total net revenues. We
anticipate that our results of operations in any given period will continue to
depend to a significant extent upon revenues from a small number of advertisers.
In addition, particularly because few advertisers are contractually obligated to
purchase any advertising in the future, we anticipate that the mix of
advertisers in each fiscal period will continue to vary. In order to increase
our revenues, we will need to attract additional significant advertisers on an
ongoing basis. Our failure to sell a sufficient number of advertisements or to
engage a sufficient number of advertisers during a particular period could
adversely affect our results of operations.

WE MUST MAINTAIN AND ESTABLISH STRATEGIC ALLIANCES TO INCREASE OUR AUDIENCE AND
ENHANCE OUR BUSINESS

      In an attempt to increase audience, build brand recognition and enhance
content, distribution and commerce opportunities, we have entered into strategic
alliances with various media and Internet-related companies such as NBC
Multimedia, Inc., America Online, Inc., Microsoft Corporation, Snap! LLC and
Infoseek Corporation (Go Network). Our failure to maintain or renew our existing
strategic alliances or to establish and capitalize on new strategic alliances
could have an adverse affect on our business. Our future success depends to a
significant extent


                                       19
<PAGE>   22


upon the success of such alliances. Occasionally, we enter into agreements with
strategic partners that may prohibit us from entering into similar arrangements
with competitors of our strategic partners. Such exclusivity provisions may
limit our ability to enter into favorable arrangements with complementary
businesses and thereby limit our growth. We cannot assure you that we will
achieve the strategic objectives of these alliances, that any party to a
strategic alliance agreement with Launch will perform its obligations as agreed
upon or that such agreements will be specifically enforceable by Launch. In
addition, some of our strategic alliances are short term in nature and may be
terminated by either party on short notice.

COMPETITION FROM TRADITIONAL AND ONLINE MEDIA AND OTHER COMPANIES FOCUSED ON
MUSIC COULD REDUCE OUR ADVERTISING SALES OR MARKET SHARE

      Competition among media companies seeking to attract the active music
consumer is intense. Increased competition could result in advertising price
reduction, reduced margins or loss of market share, any of which could adversely
affect our business. Traditional media companies, such as television
broadcasters, magazine publishers and radio stations, are constantly refining
their content and strategies to increase their audiences and advertising
revenues. Further, the number of Web sites competing for the attention and
spending of members, users and advertisers has increased, and we expect it to
continue to increase, particularly because there are so few barriers to entry on
the Web. We compete for members, users and advertisers with the following types
of companies:

        -  publishers and distributors of traditional media, such as
           television, radio and print, including MTV, CMT, Rolling Stone
           and Spin, and their Internet affiliates;

        -  online services and Web sites, including those targeted at music
           consumers, such as SonicNet, mp3.com and UBL;

        -  Web retrieval and other Web "portal" companies, such as Excite,
           Inc., Infoseek Corporation, Lycos, Inc. and Yahoo! Inc.; and

        -  online music retailers, such as CDNow, Inc. and Amazon.com, Inc.

      Because we compete for advertisers with traditional advertising media, our
business could be adversely affected if advertisers do not view digital media as
effective for advertising. Competition is likely to increase significantly as
new companies enter the market and current competitors expand their services.
Many of these potential competitors are likely to enjoy substantial competitive
advantages, including the following:

        -  larger audiences;

        -  larger technical, production and editorial staffs;

        -  greater name recognition;

        -  better access to content;

        -  more established Internet presence;

        -  larger advertiser bases; and

        -  substantially greater financial, marketing, technical and other
           resources.

If we do not compete effectively or if we experience any pricing pressures,
reduced margins or loss of market share resulting from increased competition,
our business could be adversely affected.

THE LOSS OF OUR CHIEF EXECUTIVE OFFICER, OUR PRESIDENT OR OTHER KEY PERSONNEL
COULD ADVERSELY AFFECT OUR BUSINESS BECAUSE THESE OFFICERS ARE IMPORTANT TO
OUR CONTINUED GROWTH



                                       20
<PAGE>   23

      Our future success depends to a significant extent on the continued
services of our senior management and other key personnel, and particularly
David B. Goldberg, Launch's chief executive officer, and Robert D. Roback,
Launch's president. The loss of either of these individuals or certain other key
employees would likely have an adverse effect on our business. We have an
employment agreement with only one of our executive officers, and we do not
anticipate that other executive officers or key personnel will enter into
employment agreements. We expect that we will need to hire additional personnel
in all areas during 1999. Competition for personnel throughout our industry is
intense. We may be unable to retain our current key employees or attract,
integrate or retain other highly qualified employees in the future. We have in
the past experienced, and we expect to continue to experience, difficulty in
hiring and retaining highly skilled employees with appropriate qualifications.
If we do not succeed in attracting new personnel or retaining and motivating our
current personnel, our business could be adversely affected.

GROWTH IN OUR OPERATIONS, PARTICULARLY OUR SALES, MARKETING, FINANCIAL AND
ADMINISTRATIVE ORGANIZATIONS, IS PLACING A STRAIN ON OUR RESOURCES, AND FAILURE
TO MANAGE GROWTH EFFECTIVELY COULD HARM OUR BUSINESS

      We have experienced and are currently experiencing a period of significant
growth in our operations. This growth has placed, and our anticipated future
growth in our operations will continue to place, a significant strain on our
resources. As part of this growth, we will have to implement new operational
systems and procedures and controls to expand, train and manage our employee
base and to maintain close coordination among our technical, accounting,
finance, marketing, sales and production staffs. We will also need to continue
to attract, retain and integrate personnel in all aspects of our operations. To
the extent we acquire new businesses, we will also need to integrate new
operations, technologies and personnel. Failure to manage our growth effectively
could adversely affect our business.

ACCEPTANCE AND EFFECTIVENESS OF DIGITAL MEDIA FOR ADVERTISING ARE UNPROVEN,
WHICH DISCOURAGES SOME ADVERTISERS FROM ADVERTISING ON LAUNCH

      Our future is highly dependent on an increase in the use of the Internet
and other forms of digital media for advertising. If the Internet advertising
market fails to develop or develops more slowly than we expect, then our
business could be adversely affected. Moreover, the market for advertising on
other forms of digital media, such as broadband distribution, is even less
developed than Internet advertising, and if that market does not develop, then
our growth may be limited.

      The Internet advertising market is new and rapidly evolving, and we cannot
yet gauge the effectiveness of advertising on the Internet as compared to
traditional media. As a result, demand for Internet advertising is uncertain.
Many advertisers have little or no experience using the Internet for advertising
purposes. The adoption of Internet advertising, particularly by companies that
have historically relied upon traditional media for advertising, requires the
acceptance of a new way of conducting business, exchanging information and
advertising products and services. Such customers may find advertising on the
Internet to be undesirable or less effective for promoting their products and
services relative to traditional advertising media.

      Different pricing models are used to sell Internet advertising. It is
difficult to predict which, if any, will emerge as the industry standard. This
uncertainty makes it difficult to project our future advertising rates and
revenues. Any failure to adapt to pricing models that develop or respond to
competitive pressures could adversely affect our advertising revenues. Moreover,
"filter" software programs that limit or prevent advertising from being
delivered to an Internet user's computer are available. Widespread adoption of
this software could adversely affect the commercial viability of Internet
advertising.

TRACKING AND MEASUREMENT STANDARDS FOR ADVERTISING ARE EVOLVING AND CREATE
UNCERTAINTY ABOUT THE VIABILITY OF OUR BUSINESS MODEL


      There are currently no standards for the measurement of the effectiveness
of advertising on the Internet and other digital media, and the industry may
need to develop standard measurements. The absence or insufficiency of these
standards could adversely impact our ability to attract and retain advertisers.
We cannot assure you that such standard measurements will develop. In addition,
currently available software programs that track Internet usage and other
tracking methodologies are rapidly evolving. We cannot assure you that the
development of such software or


                                       21
<PAGE>   24

other methodologies will keep pace with our information needs, particularly to
support the growing needs of our internal business requirements and advertising
clients. For instance, MediaMetrix, Inc. has reported that, in December 1998,
launch.com reached approximately 849,000 unique users, while it reached
approximately 621,000 unique users in February 1999 and approximately 789,000
unique users in March 1999. Each unique user represents one unduplicated person
or household that accessed launch.com during the relevant period. MediaMetrix
determines the number of unique users reached by a Website by extrapolating from
a panel of users who report their usage to MediaMetrix. We believe that the
sampling method used by MediaMetrix to determine these numbers may cause
significant variations to occur on a month-to-month basis and may cause the
numbers to be potentially inaccurate. However, our advertisers may rely on
MediaMetrix data or other similar data to determine whether to advertise on
Launch, and adverse data from such sources in any particular period may cause
advertisers not to advertise on Launch.

      It is important to our advertisers that we accurately measure the
demographics of our user base and the delivery of advertisements on our Web
site. We depend on third parties to provide certain of these measurement
services. If they are unable to provide these services in the future, we would
need to perform them ourselves or obtain them from another provider, if
available. This could cause us to incur additional costs or cause interruptions
in our business during the time we are replacing these services. Companies may
choose to not advertise on Launch or may pay less for advertising if they do not
perceive our measurements or measurements made by third parties to be reliable.

WE MAY HAVE LIABILITY FOR NEGLIGENCE, DEFAMATION OR OTHER MATTERS FOR CONTENT
POSTED ON LAUNCH.COM OR TO CONSUMERS FOR PRODUCTS SOLD THROUGH LAUNCH.COM

      Because users of our Web site may distribute our content to others, third
parties might sue us for defamation, negligence, copyright or trademark
infringement or other matters. These types of claims have been brought,
sometimes successfully, against online services in the past. Others could also
sue us for the content that is accessible from our Web sites through links to
other Web sites or through content and materials that may be posted by
launch.com members. Such claims might include, among others, that by directly or
indirectly hosting the personal Web sites of third parties, we are liable for
copyright or trademark infringement or other wrongful actions by such third
parties through such Web sites. It is also possible that if any third-party
content information provided on launch.com contains errors, third parties could
make claims against us for losses incurred in reliance on such information.

      We may also enter into agreements that entitle us to receive a share of
revenue from the purchase of goods and services through direct links from our
Web sites to their Web sites. Such arrangements may subject us to additional
claims, including potential liabilities to consumers of such products and
services, based on the access we provide to such products or services, even if
we do not provide such products or services ourselves. While our agreements with
these parties may provide that we will be indemnified against such liabilities,
such indemnification, if available, may not be adequate. Our insurance may not
adequately protect us against these types of claims and, even if such claims do
not result in liability, we could incur significant costs in investigating and
defending against such claims.

WE EXPECT TO MAKE ACQUISITIONS THAT MAY DILUTE OUR STOCKHOLDERS' INTERESTS IN
LAUNCH OR RESULT IN AMORTIZATION OF SIGNIFICANT AMOUNTS OF INTANGIBLE ASSETS

      As part of our business strategy, we expect to review acquisition
prospects that would complement our current content offerings, increase our
market share or otherwise offer growth opportunities. Such acquisitions could
cause our operating results or the price of our common stock to decline. To
date, we have had limited experience in these types of transactions. While we
have no current agreements or commitments with respect to any such acquisitions,
other than the pending acquisition of SW Networks, we may acquire businesses,
products or technologies in the future. Because business acquisitions typically
involve significant amounts of intangible assets, future operating results may
be adversely affected by amortization of intangible assets acquired. In the
event of such future acquisitions or business combinations, we could do the
following:

        -  issue equity securities that would dilute current stockholders'
           percentage ownership in us;

        -  incur substantial debt; or



                                       22
<PAGE>   25

        -  assume contingent liabilities.

WE MAY BE UNABLE TO EFFECTIVELY INTEGRATE MUSICVIDEOS.COM, SW NETWORKS OR OTHER
BUSINESSES WE MAY ACQUIRE IN THE FUTURE, AND ANY SUCH FAILURE COULD DIMINISH THE
VALUE OF AN ACQUIRED BUSINESS OR CAUSE DISRUPTIONS IN OUR ONGOING OPERATIONS

      Acquisitions and business combinations entail numerous operational risks,
including the following:

        -  difficulties in the assimilation of acquired operations,
           technologies or products;

        -  diversion of management's attention from other business
           concerns;

        -  risks of entering markets in which we have no or limited
           experience; and

        -  potential loss of key employees of acquired organizations.

We cannot assure you that we will be able to successfully integrate any
businesses, products, technologies or personnel that we might acquire in the
future, and our failure to do so could damage our business.

      We may not be able to effectively integrate the operations of acquired
businesses with our ongoing operations. Such failure could harm our business by
diverting management and other resources. Further, the personnel of acquired
businesses may elect not to continue with Launch after completion of any
acquisition, which could diminish the value of any acquisition. In that regard,
we cannot assure you that the personnel of Musicvideos.com or of SW Networks
will continue as employees of Launch. The acquisition of SW Networks from Sony
Music poses risks because continuation of the SW Networks business requires us
to integrate our content development operations with those of SW Networks.
Content developed by SW Networks after the acquisition will be sold, in part, to
radio stations throughout the United States, and we have not previously sold
content to traditional media. As compensation for providing content to radio
stations, we will typically receive either on-air inventory of radio
advertisements or direct cash payments. To the extent that radio stations pay
for our content with radio advertisement inventory, we intend to continue SW
Networks' practice of selling the majority of this inventory to traditional
radio advertisers. Selling radio advertising is highly competitive. We will
depend on Global Media, a third-party advertising agency, to sell a majority of
its radio advertisement inventory. We will compete for traditional media
advertising sales with national radio networks and syndicators. National radio
networks typically have larger and more established sales organizations as
compared to Launch. We cannot assure you that Global Media will effectively sell
our inventory of radio advertisements. In addition, the competitive pressures of
traditional media advertising sales may adversely affect our business.

WE MAY NEED ADDITIONAL FINANCING TO ACHIEVE OUR BUSINESS OBJECTIVES, AND SUCH
FINANCING MAY NOT BE AVAILABLE BECAUSE OF THE CONDITION OF OUR BUSINESS OR THE
UNCERTAIN NATURE OF THE FINANCIAL MARKETS

      We currently anticipate that our available cash resources, combined with
the net proceeds from this offering, will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least the 12 months
following the date of this prospectus.

      If we raise additional funds by issuing equity or convertible debt
securities, the percentage ownership of our then-current stockholders will be
reduced, and such securities may have rights, preferences or privileges senior
to those of such stockholders. We cannot assure you that additional financing
will be available on terms favorable to us, or at all. If adequate funds are not
available or are not available on acceptable terms, our ability to fund our
expansion, take advantage of unanticipated opportunities, develop or enhance
services or products or otherwise respond to competitive pressures would be
significantly limited.
This limitation could adversely affect our business.

      We may need to raise additional funds in order to do the following:

        -  fund more rapid expansion;



                                       23
<PAGE>   26

        -       develop new or enhance existing services or products;

        -       fund distribution relationships;

        -       respond to competitive pressures; or

        -       acquire complementary products, businesses or technologies.

      See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" for a discussion of
our working capital and capital expenditures.

IF THE USE OF DIGITAL MEDIA, INCLUDING THE INTERNET, DOES NOT CONTINUE TO GROW,
OUR MARKET MAY NOT DEVELOP ADEQUATELY

      Our market is new and rapidly evolving. If usage of digital media, and in
particular the Internet, does not continue to grow, our business will be
adversely affected. A number of factors may inhibit such usage, including, but
not limited to the following:

        -       inadequate network infrastructure;

        -       security concerns;

        -       inconsistent quality of service; and

        -       limited availability of cost-effective, high-speed access.

      Even if digital media usage grows, the infrastructure necessary for such
growth may not be able to support the demands placed on it by this growth, and
its performance and reliability may decline. In addition, Web sites have
experienced interruptions in their service as a result of outages and other
delays occurring throughout the Internet network infrastructure. If these
outages or delays frequently occur in the future, digital media and, in
particular, Internet usage, as well as the usage of launch.com, could grow more
slowly than we expect or even decline.

WE NEED TO ADAPT TO RAPID TECHNOLOGICAL CHANGE IN SOFTWARE AND DISTRIBUTION
SYSTEMS TO REMAIN COMPETITIVE

      Our market is characterized by rapidly changing technologies, frequent new
product and service introductions and evolving industry standards. The recent
growth of digital media, and in particular, the Internet, and intense
competition in our industry exacerbate these market characteristics. To achieve
our goals, we need to effectively integrate the various software programs and
tools required to enhance and improve our product offerings and manage our
business. Our future success will depend on our ability to adapt to rapidly
changing technologies by continually improving the performance features and
reliability of our products and services. We may experience difficulties that
could delay or prevent the successful development, introduction or marketing of
new products and services. In addition, new enhancements must meet the
requirements of our current and prospective users and must achieve significant
market acceptance. We could also incur substantial costs if we need to modify
our service or infrastructures or adapt our technology to respond to these
changes.

GOVERNMENTAL REGULATION OF THE WEB RELATED TO COMMUNICATION, COMMERCE AND OTHER
ISSUES MAY LIMIT THE GROWTH OF OUR BUSINESS AND DECREASE OUR MARKET OPPORTUNITY

      There are currently few laws or regulations that specifically regulate
communications or commerce on the Web. Laws and regulations may be adopted in
the future, however, that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act sought to prohibit transmitting certain types of
information and content over the Web. Several telecommunications companies have
petitioned the Federal Communications Commission to regulate Internet service
providers and online services providers in a manner similar to long distance
telephone carriers and to impose access fees on these companies. Any imposition
of access fees could increase the cost of transmitting data over the Internet.
Moreover, it may take years


                                       24
<PAGE>   27

to determine the extent to which existing laws relating to issues such as
property ownership, libel and personal privacy are applicable to the Web. Any
new laws or regulations relating to the Web could adversely affect our business.

WE RELY ON THIRD PARTIES FOR OUR WEB SITE OPERATIONS. IF THESE SYSTEMS FAIL,
THEY COULD DISRUPT OR DELAY USER TRAFFIC, WHICH COULD IMPAIR OUR BUSINESS

      Substantially all of our launch.com communications hardware and computer
hardware operations are located at Exodus Communications, Inc.'s facilities in
Irvine, California. Exodus provides Web site hosting services. Fire, floods,
earthquakes, power loss, telecommunications failures, break-ins and similar
events could damage these systems and cause interruptions in our services.
Computer viruses, electronic break-ins or other similar disruptive problems
could result in reductions or termination of our services by our customers or
otherwise adversely affect our Web site. Our business could be adversely
affected if our systems were affected by any of these occurrences. Our insurance
policies may not adequately compensate us for any losses that may occur due to
any failures or interruptions in our systems. We do not presently have any
backup systems or a formal disaster recovery plan.

      Our Web site must be able to accommodate a high volume of traffic and
deliver frequently updated information. Our Web site has experienced in the past
and may in the future experience slower response times or decreased traffic for
a variety of reasons. In addition, our users depend on Internet service
providers, online service providers and other Web site operators for access to
our Web site. Many of them have experienced significant outages in the past, and
could experience outages, delays and other difficulties due to system failures
unrelated to our systems. Moreover, the Internet network infrastructure may not
be able to support continued growth. Any of these problems could adversely
affect our business.

BECAUSE OUR USERS PROVIDE US WITH PRIVATE INFORMATION, WE MAY BE SUBJECT TO
LIABILITY IF THIS INFORMATION WERE MISUSED

      Our privacy policy provides that we will not willfully disclose any
individually identifiable information about any user to a third party without
the user's consent unless required by law. This policy is displayed to users of
our personalized services when they initially register and is easily accessible
on launch.com. Despite this policy, however, if third persons were able to
penetrate our network security or otherwise misappropriate our users' personal
information or credit card information, we could be subject to liability. We
also rely on a third-party provider for our e-commerce services. If we
experience service problems with our e-commerce transactions, we could also be
subject to liability. This liability could include claims for unauthorized
purchases with credit card information, impersonation or other similar fraud
claims. It could also include claims for other misuses of personal information,
such as for unauthorized marketing purposes. These claims could result in
litigation. In addition, the Federal Trade Commission, the European Union and
certain state and local authorities have been investigating certain Internet
companies regarding their use of personal information. We could incur additional
expenses if new regulations regarding the use of personal information are
introduced or if these authorities choose to investigate our privacy practices.

      Like most Web sites, we typically place certain information commonly
referred to as cookies on a user's hard drive without the user's knowledge or
consent. We use cookies for a variety of reasons, including enabling us to limit
the frequency with which a user is shown a particular advertisement. Certain
currently available Internet browsers allow users to modify their browser
settings to remove cookies at anytime or to prevent cookies from being stored on
their hard drives. In addition, some Internet commentators, privacy advocates
and governmental bodies have suggested limiting or eliminating the use of
cookies. Any reduction or limitation in the use of cookies could limit the
effectiveness of this technology.

SECURITY CONCERNS REGARDING CREDIT CARD OR OTHER CONFIDENTIAL INFORMATION
TRANSMITTED OVER THE WEB COULD LIMIT OUR GROWTH

      A significant barrier to e-commerce and communications over the Internet
has been the need for secure transmission of confidential information. Internet
usage may not increase at the rate we expect unless some of these concerns are
adequately addressed and found acceptable by the market. Internet usage could
also decline if any well-publicized compromise of security occurred. We may
incur significant costs to protect against the threat of security breaches or to
alleviate problems caused by such breaches. Any such protections may not be
available at a


                                       25
<PAGE>   28

reasonable price or at all. If a third party were able to misappropriate our
users' personal information, users could sue us or bring claims against us.

WE DEPEND UPON LICENSED MUSIC CONTENT THAT MAY NOT CONTINUE TO BE AVAILABLE TO
US ON REASONABLE TERMS

      A significant portion of the music content available on Launch is licensed
from publishers, record labels and artists. We frequently either do not have
written contracts or have short-term contracts with copyright owners, and,
accordingly, our access to copyrighted content depends upon the willingness of
such parties to continue to make their content available. Further, the parties
who license material to us may face increasing costs to develop or acquire that
material as a result of evolving laws regarding intellectual property, and these
licensors may pass any such additional costs on to us. If the fees for music
content increase substantially or if significant music content becomes
unavailable, our ability to offer music content could be materially limited. We
currently use certain content without first obtaining a license because we
believe that a license is not required under existing law. However, this area of
law remains uncertain and may not be resolved for a number of years. When this
area of law is resolved, we may be required to obtain licenses for such content.
Licenses may not be available on reasonable terms, if at all. Any limit on our
content offering could adversely affect our business.

WE MAY EXPEND SIGNIFICANT RESOURCES TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS
OR TO DEFEND CLAIMS OF INFRINGEMENT BY THIRD PARTIES, AND IF WE ARE NOT
SUCCESSFUL WE MAY LOSE RIGHTS TO USE SIGNIFICANT MATERIAL OR BE REQUIRED TO PAY
SIGNIFICANT FEES

      Copyrighted material that Launch develops internally, as well as
trademarks relating to the Launch brand and other proprietary rights, are
important to our success and our competitive position. We seek to protect our
copyrights, trademarks and other proprietary rights, but these actions may be
inadequate. Launch has trademark applications pending in several jurisdictions,
but we cannot guarantee that we will be able to register our trademarks in all
jurisdictions in which we intend to do business. We generally enter into
confidentiality or license agreements with our employees, consultants and
corporate partners, and generally control access to and distribution of our
proprietary information. We cannot assure you that the steps we have taken will
prevent misappropriation of our proprietary rights, particularly in foreign
countries where laws or law enforcement practices may not protect our
proprietary rights as fully as in the United States. If third parties were to
use or otherwise misappropriate our copyrighted materials, trademarks or other
proprietary rights without our consent or approval, our competitive position
could be harmed, or we could become involved in litigation to enforce our
rights.

      In addition, we rely on a third party to provide services enabling our
e-commerce transactions. We could become subject to infringement actions by
third parties based upon our use of intellectual property provided by our
third-party provider. There is no provision for indemnification of Launch by the
third-party provider. It is also possible that we could become subject to
infringement actions based upon the content licensed from third parties. Any
such claims or disputes could subject us to costly litigation and the diversion
of our financial resources and technical and management personnel. Further, if
our efforts to enforce our intellectual property rights are unsuccessful or if
claims by third parties against Launch are successful, we may be required to
change our trademarks, alter the content and pay financial damages. We cannot
assure you that such changes of trademarks, alteration of content or payment of
financial damages will not adversely affect our business.

IMPOSITION OF SALES AND OTHER TAXES ON E-COMMERCE TRANSACTIONS MAY IMPAIR OUR
ABILITY TO DERIVE FINANCIAL BENEFITS FROM E-COMMERCE

      Launch generally does not collect sales or other taxes in respect of goods
sold to users on launch.com. However, one or more states may seek to impose
sales tax collection obligations on out-of-state companies, such as Launch,
which engage in or facilitate online commerce. A number of proposals have been
made at the state and local level that would impose additional taxes on the sale
of goods and services through the Internet. Such proposals, if adopted, could
substantially impair the growth of electronic commerce and could adversely
affect our opportunity to derive financial benefit from electronic commerce.
Moreover, if any state or foreign country were to successfully assert that
Launch should collect sales or other taxes on the exchange of merchandise on its
system, our results of operations could be adversely affected.



                                       26
<PAGE>   29

      Legislation limiting the ability of states to impose taxes on
Internet-based transactions has been proposed in the U.S. Congress. We cannot
assure you that this legislation will ultimately become law or that the tax
moratorium in the final version of this legislation will be ongoing. Failure to
enact or renew this legislation, once enacted, could allow various states to
impose taxes on Internet-based commerce, which could adversely affect our
business.


IF WE, OR THIRD PARTIES ON WHICH WE RELY, FAIL TO ACHIEVE YEAR 2000 COMPLIANCE,
OUR BUSINESS COULD BE IMPAIRED


      Launch may discover Year 2000 compliance problems in its systems that will
require substantial revision. The failure of Launch to fix or replace its
systems on a timely basis could have a material adverse effect on Launch's
business. In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside of Launch's control
may not be Year 2000 compliant. Failure of third parties to be Year 2000
compliant could also prevent Launch from publishing its content, decrease the
use of the Internet or prevent users from accessing launch.com, which could have
a material adverse effect on Launch's business. The failure by Launch's
advertisers to be Year 2000 compliant could cause them to defer or cancel
advertisements scheduled to appear in the Launch media properties, which could
adversely affect Launch's operating results.


OUR CHARTER DOCUMENTS CONTAIN CERTAIN ANTI-TAKEOVER PROVISIONS WHICH MAY
DISCOURAGE TAKEOVER ATTEMPTS THAT COULD INVOLVE A PREMIUM STOCK PRICE OR OTHER
BENEFITS TO OUR STOCKHOLDERS

      Certain provisions of our certificate of incorporation and our bylaws will
specify certain procedures for nominating directors and submitting proposals for
consideration at stockholder meetings. These provisions and Delaware General
Corporation Law could discourage or delay potential acquisition or other change
of control proposals that could involve a premium stock price or other benefits
to our stockholders. These provisions may also prevent changes in the management
of Launch. See "Description of Capital Stock" for a more complete description of
our charter documents and the Delaware General Corporation Law.

ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company has a limited operating history and its prospects are
subject to the risks, expenses and uncertainties frequently encountered by
companies in the new and rapidly evolving markets for Internet products and
services. These risks include the failure to develop and extend the Company's
online service brands, the rejection of the Company's services by Web consumers,
vendors and/or advertisers, the inability of the Company to maintain the
increased levels of traffic on its web site, as well as other risks and
uncertainties. In the event that the Company does not successfully implement its
business plan, certain assets may not be recoverable.



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<PAGE>   30

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 option on May 18, 1999, were
approximately $81,000,000 after deducting underwriting discounts and commissions
and other offering expenses. During the period covered by this report, the
Company used none of the proceeds from the initial public offering.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

"Not applicable."

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

On March 16, 1999, the Company solicited, by written consent, the approval of
its stockholders on the following matters:

        1.      To approve an amendment to the Company's Amended and Restated
                Certificate of Incorporation in which, (i) the Company's name
                was changed to Launch Media, Inc., (ii) a one-for-five reverse
                split of the Company's outstanding Common Stock was effectuated,
                (iii) various takeover defenses were implemented, and (iv) the
                price at which Preferred Stock automatically converted to Common
                Stock was lowered;

        2.      To amend and restate the Company's By-laws;

        3.      To approve the amendment to the Company's 1998 Stock Option
                Plan; and

        4.      To approve the Company's 1999 Employee Stock Purchase Plan.


Each of the foregoing was approved by holders of 7,417,120 shares of Common
Stock then outstanding, calculated on an as converted basis.

Stockholder Proposals. Proposals of stockholders intended to be presented at the
next Annual Meeting of the Stockholders of the company (other than proposals
made under Rule 14a-8 of the Securities Exchange Act of 1934, as amended) must
be received by the Company at its principal executive offices at 2700
Pennsylvania Avenue, Santa Monica, California by December 15, 1999.

ITEM 5. OTHER INFORMATION

 "Not applicable."



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<PAGE>   31

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


(a)     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.


                                   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  June 4, 1999
                                         -------------------

                                   LAUNCH MEDIA, INC.
                                   (Registrant)

                                   /s/ JEFFREY M. MICKEAL
                                   --------------------------------------------
                                   Jeffrey M. Mickeal
                                   Chief Financial Officer and Secretary
                                   (Principal Financial and Accounting Officer)



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