<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C.  20549

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

                                    FORM 10-Q

(Mark One)
   /x/

                QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended December 31, 1996

                                       OR

                TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    For the transition period from ___ to ___
                         Commission file number 0-27492

               UNITED STATES SATELLITE BROADCASTING COMPANY, INC.
             (Exact name of registrant as specified in its charter)

          MINNESOTA                                         41-1407863
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)

                   3415 UNIVERSITY AVENUE, ST. PAUL, MN  55114
               (Address of principal executive offices) (zip code)

                                 (612) 642-4500
              (Registrant's telephone number, including area code)

                                       N/A
Former name, former address and former fiscal year, if changed since last report

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

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

               Class                            Outstanding at February 3, 1997
               -----                            -------------------------------
        Class A Common Stock, $.0001 par value:        15,229,151 Shares

        Common Stock, $.0001 par value:                74,581,624 Shares

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

<PAGE>

        UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARY
           REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1996


                                      INDEX


PART I.      FINANCIAL INFORMATION                                     Page
                                                                       ----

        Item 1.   Financial Statements

                  Consolidated Statements of Operations                  3

                  Consolidated Balance Sheets                            4

                  Consolidated Statements of Cash Flows                  6

                  Notes to Consolidated Interim Financial Statements     7

        Item 2.   Management's Discussion and Analysis                  12

PART II.     OTHER INFORMATION

        Item 1.   Legal Proceedings                                     20

        Item 6.   Exhibits and Reports on Form 8-K                      21


                                        2

<PAGE>

                         PART 1.  FINANCIAL INFORMATION

                          ITEM 1.  FINANCIAL STATEMENTS

        UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                    UNAUDITED
<TABLE>
<CAPTION>

                                               For the Three Months              For the Six Months
                                                 Ended December 31                Ended December 31
                                              -----------------------         ------------------------
                                                 1996           1995             1996            1995
                                             ------------    -----------     -----------     -----------
<S>                                          <C>             <C>             <C>             <C>
PROGRAMMING REVENUES                          $  92,104       $  40,001       $ 171,348       $  70,721
COST OF PROGRAMMING                              60,382          26,391         112,628          46,455
                                             -----------     -----------     -----------     -----------
GROSS MARGIN                                     31,722          13,610          58,720          24,266

OPERATING EXPENSES:
  Selling and marketing                          32,225          24,484          62,673          40,929
  Manufacturer Incentive                         17,015               -          18,387               -
  Depreciation and amortization                   4,481           5,082           8,790          10,043
  General and administrative                     10,829           5,250          21,025          16,345
  Engineering and operations                      6,223           1,426           8,383           2,664
  Commissions to dealers                          3,368           2,389           6,852           4,197
                                             -----------     -----------     -----------     -----------
     Net operating loss                         (42,419)        (25,021)        (67,390)        (49,912)

OTHER (INCOME) EXPENSE:
  Interest expense                                  -             2,564             -             4,958
  Interest (income)                              (1,314)           (385)         (2,743)           (790)
  Other                                             (30)            318             (90)            597
                                             -----------     -----------     -----------     -----------
     Loss before income taxes                   (41,075)        (27,518)        (64,557)        (54,677)

INCOME TAX PROVISION                                -               -               -               -
                                             -----------     -----------     -----------     -----------
     Net loss                                 $ (41,075)      $ (27,518)      $ (64,557)      $ (54,677)
                                             -----------     -----------     -----------     -----------
                                             -----------     -----------     -----------     -----------
     Net loss per share                       $   (0.46)      $   (0.31)      $   (0.72)      $   (0.61)
                                             -----------     -----------     -----------     -----------
                                             -----------     -----------     -----------     -----------
     Weighted average shares outstanding         89,811          89,811          89,811          89,811
                                             -----------     -----------     -----------     -----------
                                             -----------     -----------     -----------     -----------

</TABLE>

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


                                        3

<PAGE>

        UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                     ASSETS


                                                       Dec. 31,        June 30,
                                                         1996            1996
                                                      -----------    -----------
                                                      (unaudited)
CURRENT ASSETS:
  Cash and cash equivalents                            $  86,518      $ 114,166
  Trade accounts receivable, net                          42,402         26,271
  Prepaid expenses and other current assets                4,863          2,865
                                                      -----------    -----------
     Total current assets                                133,783        143,302
                                                      -----------    -----------
PROPERTY AND EQUIPMENT:
  Land                                                       351            351
  Buildings and improvements                               4,875          4,785
  Equipment                                              130,610        127,366
                                                      -----------    -----------
                                                         135,836        132,502
  Less - Accumulated depreciation                        (60,809)       (52,019)
                                                      -----------    -----------
        Total property and equipment, net                 75,027         80,483
                                                      -----------    -----------

OTHER ASSETS:
  Satellite deposits                                       1,441          1,380
  Long-term investments, consisting of U.S. Treasury
     securities                                            6,941          6,836
  Other                                                      162            142
                                                      -----------    -----------
     Total other assets                                    8,544          8,358
                                                      -----------    -----------

                                                       $ 217,354      $ 232,143
                                                      -----------    -----------
                                                      -----------    -----------

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


                                        4

<PAGE>

        UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARY
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                          Dec. 31,     June 30,
                                                            1996         1996
                                                         ----------- -----------
                                                         (unaudited)

CURRENT LIABILITIES:
  Accounts payable and accrued expenses                   $  55,598   $  38,147
  Deferred revenue                                           47,120      29,894
                                                         ----------- -----------
    Total current liabilities                               102,718      68,041
                                                         ----------- -----------
LONG TERM LIABILITIES
  Due to HBI                                                 10,527      10,430
  Manufacturer Incentive                                     14,632         -
                                                         ----------- -----------
    Total long term liabilities                              25,159      10,430
                                                         ----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' EQUITY
  Preferred Stock, $.01 par value, 50 million shares
   authorized; none issued or outstanding                       -           -
  Class A Common Stock -
    Participating, voting, $.0001 par value, 500 million
    shares authorized, 15,114,676 shares issued and
    outstanding at December 31, 1996 and 12,601,250 at
    June 30, 1996                                                 2           1
  Common Stock -
    Participating, voting, $.0001 par value, 100 million
    shares authorized, 74,696,099 shares issued and
    outstanding at December 31, 1996 and 77,209,525 at
    June 30, 1996                                                 7           8
  Additional paid-in capital                                378,114     378,114
  Accumulated deficit                                      (285,471)   (220,914)
  Unrealized loss on investments                                (22)       (105)
                                                         ----------- -----------
                                                             92,630     157,104
  Unused media credits                                       (3,153)     (3,432)
                                                         ----------- -----------
    Total shareholders' equity                               89,477     153,672
                                                         ----------- -----------
                                                          $ 217,354   $ 232,143
                                                         ----------- -----------
                                                         ----------- -----------

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


                                        5

<PAGE>

        UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                    UNAUDITED

                                                               For the Six
                                                              Months Ended
                                                               December 31
                                                         -----------------------
                                                             1996        1995
                                                         -----------  ----------
OPERATING ACTIVITIES:
  Net Loss                                                $ (64,557)   $(54,677)
  Adjustments to reconcile net loss to net cash used
   in operating activities -
    Depreciation and amortization                             8,790      10,043
    Interest accretion, net                                     -           721
    Media credits utilized                                      279         506
    Change in operating items:
      Receivables and other current assets                  (18,129)     (9,422)
      Accounts payable and accrued expenses                  17,451      15,359
      Deferred revenue                                       17,226       9,767
      Manufacturer Incentive                                 14,632         -
      Other                                                    (103)       (368)
                                                         -----------  ----------
        Net cash used in operating activities               (24,411)    (28,071)
                                                         -----------  ----------
INVESTING ACTIVITIES:
  Purchase of and deposits on equipment                      (3,334)     (2,270)
                                                         -----------  ----------
        Net cash used in investing activities                (3,334)     (2,270)
                                                         -----------  ----------
FINANCING ACTIVITIES:
  Advances from affiliated companies, net                        97       6,703
  Proceeds from debt borrowings                                 -        30,823
                                                         -----------  ----------
        Net cash provided by financing activities                97      37,526
                                                         -----------  ----------
        Increase (decrease) in cash and cash equivalents    (27,648)      7,185

CASH AND CASH EQUIVALENTS, beginning of period              114,166      12,498
                                                         -----------  ----------
CASH AND CASH EQUIVALENTS, end of period                  $  86,518   $  19,683
                                                         -----------  ----------
                                                         -----------  ----------

SUPPLEMENTARY CASH FLOW INFORMATION:
  Cash paid during the period for -
    Interest                                              $     -      $  3,417
    Income taxes                                                -           -
                                                         -----------  ----------
                                                         -----------  ----------

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


                                        6

<PAGE>

        UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARY
               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 1.   ORGANIZATION:

United States Satellite Broadcasting Company, Inc. and Subsidiary ("USSB" or the
"Company") provide subscription television programming via a high-power direct
broadcast satellite ("DBS") to households throughout the continental United
States.  The Company broadcasts a high quality digital television signal using
the Digital Satellite System ("DSS-Registered Trademark-").  The Company's
programming is available to customers who have a DSS unit, which consists of an
18-inch satellite dish, a receiver/decoder and a remote control.  All of the
Company's gross revenues and identifiable assets relate to the Company's
activities in this industry.

Hubbard Broadcasting, Inc. ("HBI") beneficially owned 51.8% of the Company as of
June 30, 1996 and December 31, 1996, and had approximately 61.0% of the combined
voting power with respect to all matters submitted for the vote of all
shareholders at December 31, 1996.

NOTE 2.   BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements have been prepared
in accordance with Generally Accepted Accounting Principles for interim
financial statements and, therefore, do not include all information and
disclosures required by Generally Accepted Accounting Principles for complete
financial statements.  In the opinion of management, such statements reflect all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation of the financial position, results of operations, and cash
flows for the periods presented.  The results of operations for interim periods
presented are not necessarily indicative of the results which may be expected
for the entire fiscal year.  These statements should be read in conjunction with
the June 30, 1996 consolidated financial statements, the notes thereto, and the
Company's Annual Report on Form 10-K.

NOTE 3.   RECAPITALIZATION AND INITIAL PUBLIC OFFERING:

In the first quarter of fiscal 1996, the Company decided to proceed with an
initial public offering of its Class A Common Stock.  In connection with the
offering, on January 31, 1996, the Company effected a recapitalization of the
Company's capital structure.

Prior to the recapitalization, the Company's capitalization consisted of two
classes of common stock (referred to herein as "old common stock" and "old class
A common stock").  Terms of the recapitalization included (i) a change in the
authorized capital of the Company to consist of 100,000,000 shares of Common
Stock, 500,000,000 shares of Class A Common Stock and 50,000,000 shares of
undesignated Preferred Stock; (ii) the conversion of the Company's old common
stock and old class A common stock into shares of Common Stock; (iii) the
conversion of certain convertible subordinated promissory notes into shares of
Common Stock and the


                                        7

<PAGE>

cancellation of the warrants issued to the holders of those notes; (iv) a 75-
for-one split of the new capital stock; and (v) the contribution by HBI of
8,300,000 shares of Common Stock in connection with the public offering and
7,411,950 shares of Common Stock in connection with conversion of the
convertible subordinated promissory notes, pursuant to HBI's agreements with
certain current shareholders, in order to prevent those shareholders from
experiencing dilution in their ownership of the Company.  The Company's
consolidated financial statements are presented as if the above changes in
authorized capital and the 75-for-one split of new capital stock had been
effective for all periods presented.

The offering (which closed on February 6, 1996) consisted of the sale by the
Company of 8,300,000 shares of Class A Common Stock at $27.00 per share,
generating proceeds of approximately $206.2 million, net of underwriting
commissions and other expenses incurred in connection with the offering.

Pursuant to the overallotment provisions in the underwriting agreement, certain
shareholders who had purchased shares of the Company's capital stock in previous
private placements sold 1,245,000 shares of newly converted Class A Common Stock
in connection with the offering.  The Company did not receive any of the
proceeds of such sales.

On May 1, 1996, approximately 3.1 million shares of the Company's Common Stock,
with 10 votes per share, automatically converted to Class A Common Stock, with
one vote per share, at a conversion ratio of 1:1.  On July 30, 1996, the
remainder of the Company's Common Stock, with 10 votes per share, became
eligible, at the option of the holders thereof, to convert into Class A Common
Stock, with one vote per share, at a conversion ratio of 1:1.

NOTE 4.   COMMITMENTS AND CONTINGENCIES:

REGULATORY MATTERS

USSB II, Inc. (a wholly owned subsidiary of the Company) holds a license from
the Federal Communications Commission (the "FCC") to broadcast from five
transponders at 101DEG.  west longitude (the "License").  The Company must
continue to maintain the License to operate its business.  The License expires
in June 1999 and is renewable at ten-year intervals.  Although the Company
expects to obtain such renewals in the ordinary course, there can be no
assurance that such renewals will be granted.

The construction and launch of broadcasting satellites and the operation of
satellite broadcasting systems are subject to substantial regulation by the FCC.
Under the License, the Company is subject to FCC review primarily for the
following: (i) standards regarding individual satellites (e.g., meeting minimum
financial, legal and technical standards); (ii) avoiding interference with other
satellites; and (iii) complying with rules the FCC has established specifically
for high-power DBS satellite licenses. In addition, uplink facilities are
separately licensed by the FCC.  The Company's National Broadcast Center and the
Auxiliary Broadcast Center have each


                                        8

<PAGE>

received its FCC license. FCC rules are subject to change in response to
industry developments, new technology and political considerations.

The FCC has also granted the Company a Construction Permit and Launch Authority
(the "Permit"), held by USSB II, for satellites with three transponders at
110DEG.  west longitude and eight transponders at 148DEG.  west longitude.  The
Permit requires the Company to comply with specified construction and launch
schedules. The FCC has the authority to revoke the Permit if the Company fails
to comply with the FCC schedule for construction and launch. In connection
therewith, the Company has entered into satellite construction contracts with
Lockheed Martin Astro Space Corp. ("Lockheed Martin") for the construction of
the two satellites (see below).

While the Company has generally been successful to date with respect to
compliance with regulatory matters, there can be no assurance that the Company
will succeed in obtaining and maintaining all requisite regulatory approvals for
its operations.

LOCKHEED MARTIN ASTRO SPACE AGREEMENT

The Company had previously entered into a single agreement, as amended, with
Lockheed Martin for the construction of direct broadcast satellites for the
110DEG.  west longitude orbital location and the 148DEG.  west longitude orbital
location.  Effective December 31, 1996, the Company and Lockheed Martin entered
into a new agreement for the construction of a direct broadcast satellite at the
110DEG.  orbital location (the "110DEG.  Contract") and amended the existing
agreement so that it applies solely to the 148DEG.  orbital location (the
"148DEG.  Contract").

Under the 110DEG.  Contract, the Company is required to pay $67.5 million for
satellite construction.  The contract also provides for payments for ongoing
operations services and in-orbit performance incentive payments during the life
of the satellite.  In addition, substantial costs would be incurred to launch
and insure the satellite.  No material payments are anticipated under the
148DEG.  Contract until December 31, 1997.

While these agreements are cancelable in whole or in part at the option of the
Company, such cancellation would require forfeiture of any deposits and progress
payments made, plus additional penalties.  The Company's obligation to proceed
with satellite construction at 148DEG.  west longitude as a condition of
maintaining its License at 101DEG.  west longitude and its Permit at 110DEG.
west longitude has been eliminated by an FCC Order issued in December 1995.
Although the FCC Order has been appealed, the appeal does not challenge those
portions of the Order releasing the Company from its obligations at 148DEG.
west longitude.

ADVERTISING AND PROMOTIONS

The Company has entered into commitments to purchase or participate in joint
purchases of broadcast, print and other media for advertising and promotional
purposes.  At December 31, 1996, such commitments totaled $7.5 million due in
fiscal 1997, all of which are noncancelable.


                                        9

<PAGE>

INSURANCE

The Company maintains business interruption and in-orbit insurance coverages at
levels management considers necessary to address the normal risks of operating
via communications satellite, including damage, destruction or failure of the
satellite or its transponders.  Additionally, the Company maintains general
liability and directors' and officers' insurance coverages.

LITIGATION

In November 1996, Personalized Media Communications, L.L.C. ("PMC") initiated a
legal proceeding before the United States International Trade Commission
("ITC"), and a separate proceeding in the United States District Court for the
Northern District of California, against Digital Satellite System developers,
manufacturers and programmers, including, among others, Hughes Network Systems,
Thomson Consumer Electronics and other DSS manufacturers, DIRECTV, Inc., and the
Company, alleging that these defendants have infringed, or contributed to the
infringement of, patents owned by PMC.  The Company has denied all material
allegations in both complaints.  Because these proceedings are in the initial
stages of discovery, it is not possible to estimate the probable outcome of
these matters at this time.  The Company does not believe that PMC is entitled
to damages or any remedies from the Company, and management intends to
vigorously defend both actions.

The Company is also exposed to other litigation encountered in the normal 
course of business.  In the opinion of management, the resolution of these 
other litigation matters of which the Company is aware will not have a 
material adverse effect on the Company's financial position, results of 
operations or cash flows.

MANUFACTURER INCENTIVE PROGRAM

On August 26, 1996, the Company, together with DIRECTV, Inc. (the Company's DSS
partner) announced that it had entered into financial incentive arrangements
with certain manufacturers of DSS equipment to assist these manufacturers in
lowering the price of DSS units.  Such arrangements, which run for up to four
years depending on manufacturer, commit the Company to pay the manufacturers
over a five-year period from the date new DSS households are authorized to
receive a free introductory month of USSB's Entertainment Plus-Registered
Trademark- programming package.  The liability for such future commitments is
established and recorded upon activation of the related DSS unit.

In the second quarter, the Company elected to account for expenses of the
manufacturer incentive program in accordance with recently published SEC
guidance.  As a result, the Company charged to expense $13.3 million,
representing the full amount of those future obligations for the manufacturer
incentive program incurred during the second quarter for the


                                       10

<PAGE>

sale of DSS units to new households.  In addition, the Company charged to
expense $3.7 million, representing all unamortized amounts remaining from the
first quarter.

While the amounts to be incurred by the Company under these arrangements cannot
be precisely estimated at this time, for fiscal 1997 the Company expects such
expense to range from approximately $50 to $60 million and related cash payments
to range from approximately $5 to $10 million.  As the levels of retail DSS unit
sales increase, the expense and cash flow related to these arrangements will
increase accordingly.


                                       11

<PAGE>

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


Forward-looking statements contained in this Report on Form 10-Q are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995.  There are certain important factors that could cause
results to differ materially from those anticipated by the statements made
herein. Investors are cautioned that all forward-looking statements involve
risks and uncertainty and that the Company faces a number of risks as it
develops its commercial operations.  Among the factors that could cause actual
results to differ materially are the following: the uncertain level of ultimate
demand for DSS and USSB's programming; product offerings and pricing strategies
of competitors; dependence on third-party programmers and upon Hughes
Electronics Corporation; dependence on a single DBS satellite and broadcast
facility; dependence on continued effectiveness of the security and signal
encryption features of the DSS system; potentially adverse governmental
regulation and actions; and overall economic conditions.  In addition, the
Telecommunications Act of 1996 significantly deregulated the telecommunications
industry. The effect of such deregulation on the Company's business, results of
operations and financial condition cannot be predicted.

OVERVIEW

United States Satellite Broadcasting Company, Inc. ("USSB" or the "Company")
provides subscription television programming via a high-power direct broadcast
satellite ("DBS") to households throughout the continental United States.  The
Company broadcasts a high quality digital television signal using the Digital
Satellite System ("DSS-Registered Trademark-").  The Company's programming is
available to customers who have a DSS unit, which consists of an 18-inch
satellite dish, a receiver/decoder and a remote control.  All of the Company's
gross revenues and identifiable assets relate to the Company's activities in
this industry.

The Company commenced commercial operations in June 1994, and has not generated
net earnings to date.  Management expects that the Company will experience net
losses in fiscal 1997 and that net losses will continue for the foreseeable
future as the Company continues to build its subscriber base.

The potential market for the Company's programming continues to grow steadily.
The introduction of DSS units is widely regarded as the most successful
introduction of a major consumer electronics product in United States history.
At December 31, 1996, approximately 2.3 million consumer households were
authorized to receive DSS service ("DSS households"), up from 1.94 million at
September 30, 1996.


                                       12

<PAGE>

SUMMARY OF SUBSCRIBER AND REVENUE DATA

Management currently measures the Company's performance by two key measures:
subscriber base and revenues.

The number of USSB paying subscribers grew to approximately 1,220,000 at
December 31, 1996 from approximately 1,045,000 at September 30, 1996.
Approximately 181,000 additional households were receiving a free promotional
month of USSB programming as of December 31, 1996.

In addition to tracking the absolute number of subscribers, management assesses
the Company's penetration of its potential DSS market by comparing the number of
USSB paying subscribers to the total number of households with active DSS units
that have received the free promotional month of USSB's Entertainment Plus-
Registered Trademark- programming ("convertible households").  As of December
31, 1996, the Company achieved a penetration of convertible households of
approximately 65 percent (i.e., approximately two-thirds of households that have
received the free promotional month of USSB programming are currently paying
USSB subscribers).

Management believes that this comparison of the number of paying subscribers to
convertible households is a more meaningful measure of the Company's performance
than a comparison against the total estimated number of DSS households.  One of
the Company's marketing vehicles is to offer a free promotional month of USSB's
Entertainment Plus to all customers who purchase and activate a DSS unit for
residential use.  Since the first month is free, the consumer's decision to
purchase USSB programming is generally made by the consumer only after the free
promotional month has been received.  As a result, the category of DSS
households includes households receiving the free promotional month that have
not yet made their subscription decision.  In addition, prior to September 1996,
some DSS households were not offered USSB's free month of programming at the
point of purchase and, therefore, the Company has not been able to market USSB
programming directly to these customers.  In September 1996, the Company and
DIRECTV, Inc. agreed to exchange information on all DSS unit purchasers, which
allows each company to market its programming to all new DSS customers.

The summary immediately below shows, as of the end of each period, USSB paying
subscribers, USSB promotional activations, USSB convertible households and the
percentage of convertible households served by the Company.  The estimated
number of DSS households is also shown.


                                       13

<PAGE>

SUBSCRIBER BASE:
(In thousands)
<TABLE>
<CAPTION>
                                              TOTAL USSB
                                                PAYING                       PERCENT OF
                                              SUBSCRIBERS                       USSB
FOR THE         USSB           USSB               AND            USSB        CONVERTIBLE      ESTIMATED
QUARTER        PAYING       PROMOTIONAL       PROMOTIONAL     CONVERTIBLE    HOUSEHOLDS          DSS
 ENDED     SUBSCRIBERS(a) ACTIVATIONS (b)     ACTIVATIONS   HOUSEHOLDS (c)   SERVED (d)    HOUSEHOLDS (e)
 -----     -----------    -----------         -----------   ----------       ------        ----------
<S>        <C>            <C>                 <C>           <C>              <C>           <C>
Dec. 31,
  1995           629            113                742           946            66%           1,215
March 31,
  1996           791             70                861         1,201            66%           1,440
June 30,
  1996           918            102              1,020         1,396            66%           1,701
Sept. 30,
  1996         1,045            134              1,179         1,560            67%           1,942
Dec. 31,
  1996         1,220            181              1,401         1,862            65%           2,300
</TABLE>

(a)  USSB paying subscribers as of the end of such period.

(b)  USSB household activations that were receiving a free promotional month of
     USSB Entertainment Plus-Registered Trademark- as of the end of such period.
     These activations are not counted as USSB Convertible Households until they
     have completed the free promotional month.

(c)  Total number of USSB household activations since July 1994 that have
     completed a free promotional month of USSB Entertainment Plus.  The amounts
     shown on and after June 30, 1996 reflect the elimination of certain DSS
     activations.  See note (e).

(d)  Total USSB Paying Subscribers as of the end of the period as a percent of
     USSB Convertible Households.  The elimination of certain DSS activations
     from the estimate of DSS households described in note (e) has a favorable
     impact on the percentage shown in this column on and after June 30, 1996.

(e)  Total estimated number of households with active DSS units which are
     authorized to receive either USSB or DIRECTV programming as of the end of
     the period.  Estimate based on cumulative DSS activations, less cumulative
     DSS deactivations, less activations by dealers, manufacturing facilities,
     technical facilities and commercial locations known to the Company, and
     less additional receivers in a single household, as of the end of such
     period.  The Company will make periodic reconciliations to estimate the
     number of DSS households as accurately as possible.

The Company's per subscriber and total revenues are shown below for the periods
indicated.  From time to time, the Company engages in certain promotional
activities which include special rates for limited periods, which could result
in lower average per subscriber revenues for such periods.  In addition, the
Company's programming revenues associated with increased DSS unit sales are
largely reflected in subsequent quarters due to the lag between the purchase of
a DSS unit and its installation and activation, combined with the free
promotional month of programming offered by the Company.

REVENUES:
(In thousands, except per subscriber data)
<TABLE>
<CAPTION>
                                                         FOR THE QUARTER ENDED
                                                         ---------------------
                                          DEC. 31    SEPT. 30     JUNE 30    MARCH 31    DEC. 31
                                           1996        1996        1996        1996        1995
                                           ----        ----        ----        ----        ----
<S>                                      <C>         <C>         <C>         <C>         <C>
Average monthly subscription revenue
 per paying subscriber (a)                $24.93      $25.43      $25.10      $24.94      $25.38

Programming revenues                     $92,104     $79,244     $64,288     $56,988     $40,001
</TABLE>
_____
(a)  Excludes pay-per-view event and commercial revenues.

                                       14
<PAGE>

RESULTS OF OPERATIONS

REVENUE OVERVIEW.  The Company's total revenues increased to $92.1 million and
$171.3 million for the quarter and six month period ended December 31, 1996,
respectively, compared to $40.0 million and $70.7 million for the comparable
prior year periods.  The revenue increase was primarily attributable to a larger
subscriber base at December 31, 1996.  Pay-per-view revenues, which vary with
the number and type of events provided on a pay-per-view basis in any fiscal
period, are included in the Company's total revenues.

SUBSCRIPTION REVENUES.  The Company derives its revenues principally from
monthly fees from subscribers for television programming.  Revenues are a
function of the number of subscribers, the mix of programming packages selected
by customers and the rates charged.  The increase in revenues for both periods
was primarily attributable to the increase in the number of paying subscribers
to approximately 1,220,000 at December 31, 1996, from approximately 629,000 at
December 31, 1995.

Compared to the quarter ended September 30, 1996, revenue per subscriber
decreased to $24.93.  Because certain of the Company's promotional programs are
offered only for limited periods based on market and seasonal factors, and
because subscribers can easily change their USSB programming packages,
management continues to believe that annual average revenue per paying
subscriber will be in the range of $24 to $25 for fiscal 1997.

COST OF PROGRAMMING.  Programming costs consist of payments to programmers,
which are based on the number of paying subscribers.  Programming costs also
include the purchase of rights to broadcast event programming on a pay-per-view
basis.  The cost of programming increased to $60.4 million for the quarter and
$112.6 million for the six month period ended December 31, 1996, respectively,
compared to $26.4 million and $46.5 million for the comparable prior year
periods.  The increase in cost of programming was primarily the result of an
increased number of subscribers from the comparable prior year periods and
increases in the cost of pay-per-view programming.  The cost of programming as a
percent of programming revenues will vary based on the mix of programming
packages taken by subscribers, the number of pay-per-view events per quarter,
and the extent to which volume-based discounts from the Company's programming
providers are realized.

OPERATING EXPENSE OVERVIEW.  Total operating expenses increased to $74.1 million
and $126.1 million for the quarter and six month periods ended December 31,
1996, respectively, compared to $38.6 million and $74.2 million for the
comparable prior year periods.  The increase was primarily attributable to the
cost of providing the Company's services to a growing subscriber base, including
increased marketing, customer service, security and encryption fees.

SELLING AND MARKETING.  Selling and marketing costs include promotional and
advertising costs, the costs of direct marketing and customer service and
amounts expended pursuant to joint marketing efforts with other DSS broadcasting
system participants.  Selling and marketing


                                       15

<PAGE>

expenses increased to $32.2 million and $62.7 million for the quarter and six
month periods ended December 31, 1996, compared to $24.5 million and $40.9
million for the comparable prior year periods.  The increase for the period was
primarily attributable to continuing increases in selling and marketing
expenditures to increase consumer awareness of both the DSS system and USSB
programming, as well as customer service associated with the growth of the
Company's subscriber base.  Expenses associated with the Company's telemarketing
and direct mail marketing programs, which are directed at purchasers of DSS
units who activate with the Company, have also increased as the number of such
DSS activations has increased.

MANUFACTURER INCENTIVE.  On August 26, 1996, the Company, together with DIRECTV,
Inc. (the Company's DSS partner) announced that it had entered into financial
incentive arrangements with certain manufacturers of DSS equipment to assist
these manufacturers in lowering the price of DSS units.  Such arrangements,
which run for up to four years depending on manufacturer, commit the Company to
pay the manufacturers over a five-year period from the date new DSS households
are authorized to receive a free introductory month of USSB's Entertainment
Plus-Registered Trademark- programming package.  The liability for such future
commitments is established and recorded upon activation of the related DSS unit.

Manufacturer incentive expenses totaled $17.0 million and $18.4 million,
respectively, for the quarter and six month periods ended December 31, 1996.  No
amounts were incurred in the comparable prior year periods.  In the second
quarter, the Company elected to account for expenses of the manufacturer
incentive program in accordance with recently published SEC guidance.  As a
result, the Company charged to expense $13.3 million, representing the full
amount of those future obligations for the manufacturer incentive program
incurred during the second quarter for the sale of DSS units to new households.
In addition, the Company charged to expense $3.7 million, representing all
unamortized amounts remaining from the first quarter.

While the amounts to be incurred by the Company under these arrangements cannot
be precisely estimated at this time, for fiscal 1997 the Company expects such
expense to range from approximately $50 to $60 million and related cash payments
to range from approximately $5 to $10 million.  As the levels of retail DSS unit
sales increase, the expense and cash flow related to these arrangements will
increase accordingly.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expenses relate
mainly to the Company's transponders on DBS-1 and transmission equipment located
both at the Company's National Broadcast Center and its Auxiliary Broadcast
Center.  Depreciation and amortization decreased to $4.5 million and $8.8
million for the quarter and six month periods ended December 31, 1996, compared
to $5.1 million and $10.0 million for the comparable prior year periods.  The
decrease was primarily attributable to the utilization of an accelerated method
of depreciation for the Company's transponders, which results in decreasing
periodic depreciation expense over their useful life.

GENERAL AND ADMINISTRATIVE.  General and administrative costs include in-orbit
and general insurance costs, billing and remittance processing, staff functions
such as finance and


                                       16

<PAGE>

information services, and administrative services provided by HBI.  General and
administrative expenses increased to $10.8 million and $21.0 million for the
quarter and six month periods ended December 31, 1996, compared to $5.3 million
and $16.3 million for the comparable prior year periods.  The Company had
recorded the balance of a management fee due to Hubbard Broadcasting, Inc. of
$6.7 million in the comparable prior six month period, with no similar amount
accrued in the current fiscal year.  The Company's bad debt expense for the
second quarter totaled $5.2 million and includes amounts associated with
purchases of DSS units under a previously-available third-party retail financing
program, and higher bad debt reserves associated with the growth of the
Company's customer base.  Management believes that this provision for bad debts
covers the majority of the Company's exposure for the defaults resulting from
such financing program.  Also impacting general and administrative expense for
the quarter was an increase in billing and remittance processing costs resulting
from the growth of the Company's subscriber base.

ENGINEERING AND OPERATIONS.  Engineering and operations expenses include the
operation of the National Broadcast Center and the Auxiliary Broadcast Center,
fees charged in connection with the operation of the conditional access system
(determined by subscriber levels) and satellite telemetry, tracking and control
expenses.  Engineering and operations expenses increased to $6.2 million and
$8.4 million for the quarter and six month periods ended December 31, 1996,
compared to $1.4 million and $2.7 million for the comparable prior year periods.
The increases were primarily attributable to higher total security and
encryption costs, which are paid on a per subscriber basis.

COMMISSIONS TO RETAILERS.  Commissions consist of amounts paid by the Company to
eligible DSS retailers whose customers become paying subscribers, to encourage
retailers to promote the sale of DSS units and subscriptions to USSB
programming.  Commissions to dealers increased to $3.4 million and $6.9 million
for the quarter and six month periods ended December 31, 1996, compared to $2.4
million and $4.2 million for the comparable prior year periods.  The increase
primarily reflects increased USSB programming subscriptions.

NET OPERATING LOSS.  The Company recorded a net operating loss for the quarter
and six month period ended December 31, 1996 of $42.4 million and $67.4 million,
respectively, compared to $25.0 million and $49.9 million for the comparable
prior year periods.

INTEREST EXPENSE.  No interest expense was incurred for the quarter and six
month periods ended December 31, 1996, compared to $2.6 million and $5.0
million, respectively, for the comparable prior year periods.  The elimination
of interest expense in the current periods was due to the repayment in April
1996 of the entire outstanding balance of $90.0 million under the Company's term
loan.

INTEREST INCOME.  Interest income for the quarter and six month periods ended
December 31, 1996 was $1.3 million and $2.7 million, respectively, compared to
$0.4 million $0.8 million for the comparable prior year periods.  Interest
income increased as a result of the investment of the


                                       17

<PAGE>

net proceeds of the public offering of the Company's Class A Common Stock which
closed on February 6, 1996.

NET LOSS.  The Company recorded a net loss for the second quarter and six month
period ended December 31, 1996 of $41.1 million and $64.6 million, respectively,
compared to $27.5 million and $54.7 million for the comparable prior year
periods.


FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Prior to February 1996, the Company's operations were financed by equity
contributions from shareholders, approximately $31.2 million of cash advances
from HBI and approximately $42.0 million in privately-issued notes and
associated warrants.  Such advances from HBI were converted into equity in
fiscal 1990 and fiscal 1994 and, upon consummation of the recapitalization of
the Company in February 1996, the notes were converted into equity and the
warrants were canceled.  In addition, the Company's operations were financed by
$90.0 million of borrowings made between January and December 1995 under a
credit agreement with a syndicate of financial institutions.  Upon completion of
the public offering of the Company's Class A Common Stock in February 1996, the
Company received net proceeds of approximately $206.2 million.

COMPONENTS OF CASH FLOWS.  The significant components of the changes in cash and
cash equivalents were as follows (in millions):

                                           SIX MONTHS ENDED DECEMBER 31
                                           ----------------------------
                                               1996             1995
                                              ------            -----
          Net loss                            $(64.6)          $(54.7)
          Depreciation and amortization          8.8             10.0
          Changes in operating items            31.1             15.4
          Net capital expenditures              (3.3)            (2.3)
          Proceeds from debt borrowings       ------             30.8
          Other -                                 .4              8.0
                                              ------             ----
          Net increase (decrease) in cash
            and cash equivalents              $(27.6)            $7.2
                                              ------             ----
                                              ------             ----

CASH AND CASH EQUIVALENTS.  As of December 31, 1996, cash, cash equivalents and
marketable securities totaled $86.5 million, compared to $114.2 million at June
30, 1996.  The decrease reflects the net use of cash resulting from the
Company's operations during the quarter and six months periods ended December
31, 1996.

WORKING CAPITAL.  Working capital at December 31, 1996 was $31.1 million, 
compared to working capital of $75.3 million at June 30, 1996, primarily due 
to the net use of cash resulting from the Company's operations. In addition, 
net trade accounts receivable increased by $16.1 million due to growth in 
paying subscriber levels.  This increase was offset by an increase in 
accounts payable and accrued expenses of $17.5 million, due primarily to 
increased advertising, promotion and program provider license fee expenses 
and manufacturer

                                       18

<PAGE>

incentive program expense.  Additionally, deferred revenue increased $17.2
million, resulting from greater levels of pre-paid subscriptions.

LIQUIDITY AND CAPITAL RESOURCES.  After completion of the initial public
offering of the Company's Class A Common Stock, the Company invested the net
proceeds of the offering in short-term United States Treasury-backed securities.
In April 1996, the Company elected to repay the entire outstanding balance of
$90.0 million under its term loan and to terminate the credit agreement.

Management believes that the Company's current cash position is adequate to meet
the operating expenses of the business during fiscal 1997.  However, the Company
may require external financing for future major capital expenditures such as the
construction of a new satellite, DBS-4, at the 101DEG.  west longitude orbital
location, or the cost of satellites at the 110DEG.  and 148DEG.  locations.
Further, the Company may seek additional debt financing and/or lines of credit
to support the expansion of any business opportunities that may develop at the
110DEG.  or 148DEG.  locations.  The Company believes that such financing is
available from a number of sources and management continues to explore a credit
facility which would provide additional flexibility in satisfying the Company's
future financing needs.

Personalized Media Communications, L.L.C. ("PMC") has commenced two legal
proceedings against Hughes Network Systems, Thomson Consumer Electronics and
other DSS manufacturers, DIRECTV, Inc., and the Company.  Because these
proceedings are in the initial stages of discovery, the ultimate outcome of
these matters and the resulting effect on the liquidity and financial position
of the Company cannot be determined with certainty.  Part II, Item 1 of this
Report on Form 10-Q and Note 4 to the condensed consolidated financial
statements contain addition information on this matter.

CAPITAL EXPENDITURES.  Capital expenditures for the six months ended December
31, 1996 totaled $3.3 million, consisting primarily of computer software.  The
Company is required to make progress payments under its contract with Lockheed
Martin.  If DBS-4 is built and put into operation at 101DEG.  west longitude,
the Company will also incur additional capital expenditures.

NET OPERATING LOSS CARRY FORWARD.  At December 31, 1996, the Company's net
operating loss carry forward was $267.9 million for federal tax purposes and
$279.0 million for financial reporting purposes.  The difference in loss carry
forward amounts primarily represents differing amounts of depreciation recorded
by the Company for tax and for financial reporting purposes.

SEASONALITY

Sales of DSS units, which directly impact the growth of programming revenues,
may be subject to seasonal sales patterns experienced by the consumer
electronics industry, in which approximately 35 to 45 percent of sales occur in
the October to December period.  The Company continues to believe that
seasonality may be a significant factor in the Company's long-term sales
patterns.


                                       19

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     IN THE MATTER OF CERTAIN DIGITAL SATELLITE SYSTEM (DSS) RECEIVERS AND
     COMPONENTS THEREOF, United States International Trade Commission,
     Investigation No. 337-TA-392; and PERSONALIZED MEDIA COMMUNICATIONS, L.L.C.
     V. THOMSON CONSUMER ELECTRONICS, ET AL., United States District Court,
     Northern District of California, Case No. C-96 20957.

In November 1996, Personalized Media Communications, L.L.C. ("PMC") initiated a
legal proceeding before the United States International Trade Commission ("ITC")
and a separate proceeding in the United States District Court for the Northern
District of California against digital satellite system developers,
manufacturers and programmers, including, among others, Hughes Network Systems,
Thomson Consumer Electronics and other DSS manufacturers, DIRECTV, Inc., and the
Company.

In the ITC action, PMC alleges that Hughes Network Systems, Thomson Consumer 
Electronics and other DSS manufacturers have infringed, and that DIRECTV, 
Inc. and the Company have contributed to and/or induced the infringement of, 
a patent owned by PMC and requests the ITC to (i) bar the importing, 
marketing, promoting, distributing, or sale of imported infringing DSS 
receivers in the United States which are covered by PMC's patent and (ii) 
prohibit DIRECTV, Inc. and the Company from broadcasting television 
programming to any imported infringing DSS receiver.  A trial of the ITC 
proceeding before an administrative law judge is presently scheduled for June 
1997 and an initial determination by the administrative law judge is expected 
in September 1997.  The ITC is expected to render its decision by December 
1997.

In the Federal District Court action, PMC alleges that the same defendants,
including DIRECTV, Inc. and the Company, have infringed at least one claim of
several PMC patents and have induced the infringement of PMC's patents by
various DSS manufacturers.  PMC has requested the court to award PMC damages, to
treble such damages, and to enjoin the Company and the other defendants from
infringing PMC's patents.  PMC and the defendants have filed a stipulated motion
to stay the Federal District Court action pending resolution of the ITC
investigation.

The Company has denied all material allegations in both complaints.  While it is
not possible to estimate the probable outcome of these proceedings at this time,
management believes, based on advice of counsel, that it has valid defenses to
PMC's claims and that, in particular, PMC's request in the ITC proceeding to
block DIRECTV, Inc. and the Company from broadcasting to imported DSS receivers
is unprecedented.  The Company does not believe that PMC is entitled to damages
or any remedies from the Company, and management intends to vigorously defend
both actions.


                                       20

<PAGE>

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

      a.    Exhibits

            10.25   Amendment No. 12, effective November 27, 1996, to Direct
                    Broadcast Satellite Contract between Lockheed Martin
                    Corporation and United States Satellite Broadcasting
                    Company, Inc.

            10.26   Amendment No. 13, effective December 31, 1996, to Direct
                    Broadcast Satellite Contract between Lockheed Martin
                    Corporation and United States Satellite Broadcasting
                    Company, Inc.

            10.27   Contract No. 104274-B, effective December 31, 1996, Direct
                    Broadcast Satellite Contract between Lockheed Martin
                    Corporation and United States Satellite Broadcasting
                    Company, Inc.*

            27.1    Financial Data Schedule
      _____

      *     Portions of this document were redacted and filed separately with 
            the Securities and Exchange Commission pursuant to a request by 
            the Company for confidential treatment pursuant to Rule 24b-2 
            under the Securities Exchange Act of 1934, as amended, in 
            connection with the filing of the Company's Report on Form 10-Q 
            for the quarter ended December 31, 1996.

      b.    Reports on Form 8-K

            None


                                       21

<PAGE>

                                   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: February 13, 1997        UNITED STATES SATELLITE
                                BROADCASTING COMPANY, INC.



                                By: /s/ Stanley E. Hubbard
                                   --------------------------------------------
                                   Stanley E. Hubbard
                                   President and Chief Executive Officer
                                   (Principal Executive Officer)


                                By: /s/ Gerald D. Deeney
                                   --------------------------------------------
                                   Gerald D. Deeney
                                   Treasurer and Chief Financial Officer
                                   (Principal Financial and Accounting Officer)


                                       22

<PAGE>

        UNITED STATES SATELLITE BROADCASTING COMPANY, INC. AND SUBSIDIARY

               Index of Exhibits to Quarterly Report on Form 10-Q
                     For the Quarter Ended December 31, 1996


      Exhibit No.        Exhibit Description
      -----------        -------------------

          10.25          Amendment No. 12, effective November 27, 1996 to Direct
                         Broadcast Satellite Contract between Lockheed Martin
                         Corporation and United States Satellite Broadcasting
                         Company, Inc.

          10.26          Amendment No. 13, effective December 31, 1996, to
                         Direct Broadcast Satellite Contract between Lockheed
                         Martin Corporation and United States Satellite
                         Broadcasting Company, Inc.

          10.27          Contract No. 104274-B, effective December 31, 1996,
                         Direct Broadcast Satellite Contract between Lockheed
                         Martin Corporation and United States Satellite
                         Broadcasting Company, Inc.*

          27.1           Financial Data Schedule

     _____

     *    Portions of this document were redacted and filed separately with 
          the Securities and Exchange Commission pursuant to a request by 
          the Company for confidential treatment pursuant to Rule 24b-2 
          under the Securities Exchange Act of 1934, as amended, in 
          connection with the filing of the Company's Report on Form 10-Q 
          for the quarter ended December 31, 1996.