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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-K/A



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|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For The Fiscal Year Ended December 31, 2003



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: 0-27644



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Digital Generation Systems, Inc.

(Exact Name of Registrant as Specified in its Charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 94-3140772                             
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)



750 West John
Carpenter Freeway, Suite 700

Irving, Texas 75039

(Address Of Principal Executive Offices, Including Zip Code)



(972) 581-2000

(Registrants Telephone Number, Including Area Code)



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Securities registered pursuant to Section 12(b) of the Act: None



Securities registered pursuant to the Section 12 (g) of the Act: Common Stock ($0.001 par value)



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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 and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ̈



Indicate by check mark if the registrant is an accelerated
filer.    YES  x    NO ̈



The aggregate market value of the Common Stock held by non-affiliates of the
registrant, computed by reference to the closing price and shares outstanding, was approximately $94.2 million as of December 31, 2003, and approximately $75.5 million as of June 30, 2003, the last business day of the registrants most recently
completed second quarter. Shares of Common Stock held by each officer and director of the registrant and by each person who may be deemed to be an affiliate have been excluded. This determination of affiliate status is not necessarily a conclusive
determination for other purposes.



As of March 31, 2004, the
registrant had 72,219,953 shares of Common Stock outstanding.



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AMENDMENT NO. 1



The undersigned Registrant hereby amends Part III, to read as follows:



PART III



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



|                      |  |     |  |                                                   |  |                   
|--------------------- |  | --- |  | ------------------------------------------------- |  | ------------------
|Name                  |  | Age |  | Title(s)                                          |  | Expiration of Term
|Scott K. Ginsburg (2) |  | 51  |  | Chairman of the Board and Chief Executive Officer |  | 2004              
|Omar A. Choucair      |  | 41  |  | Chief Financial Officer and Director              |  | 2006              
|David M. Kantor (2)   |  | 46  |  | Director                                          |  | 2006              
|Cappy R. McGarr (1)   |  | 52  |  | Director                                          |  | 2005              
|Kevin C. Howe (1)     |  | 54  |  | Director                                          |  | 2005              

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|(1) | Member of the Audit Committee
|--- | -----------------------------

|(2) | Member of the Compensation Committee
|--- | ------------------------------------



Scott K. Ginsburg joined the Company in December 1998 as Chief Executive Officer and Chairman of the Board. In July 1999, Matthew E. Devine assumed
the responsibilities as Chief Executive Officer, but Mr. Ginsburg remained the Companys Chairman. Mr. Ginsburg reassumed the responsibilities as Chief Executive Officer of the Company in November 2003. Mr. Ginsburg founded the Boardwalk Auto
Group in 1998, which consists of several car dealerships located in the Dallas area. From 1997 to 1998, Mr. Ginsburg served as Chief Executive Officer and Director of Chancellor Media Corporation (now AMFM, Inc.). Mr. Ginsburg founded Evergreen
Media Corporation in 1988, and was the co-founder of Statewide Broadcasting, Inc. and H&G Communications, Inc. Mr. Ginsburg earned a B.A. from George Washington University in 1974 and a J.D. from Georgetown University in 1978.



Omar A. Choucairjoined the Company as Chief Financial Officer in July
1999. Prior to joining the Company, Mr. Choucair served as Vice President of Finance for AMFM, Inc. (formerly Chancellor Media Corporation), and served as Vice President of Finance for Evergreen Media before it was acquired by Chancellor Media in
1997. Prior to entering the media industry, Mr. Choucair was a Senior Manager at KPMG LLP, where he specialized in media and telecommunications clients. Mr. Choucair received a B.B.A. from Baylor University and became a Director in February 2001.



David M. Kantorhas been a member of the Board of
Directors of the Company since August 1999. Mr. Kantor is a media industry consultant and Vice Chairperson and CEO of Reach Media, a company that develops, acquires and partners in quality media and marketing opportunities targeting the African
American population. Formerly, he was Senior Vice President for Network Operations of AMFM, Inc. (formerly Chancellor Media Corporation) and President of ABC Radio Network, having previously served as Executive Vice President. Prior to joining ABC
Radio Network, he held executive positions with Cox Cable and Satellite Music Network. Mr. Kantor holds a B.S. from the University of Massachusetts and an MBA from Harvard Business School.



Cappy R. McGarr has been a member of the Board of Directors of the
Company since February 2001. Mr. McGarr is President of McGarr Capital Holdings, LLC, an asset management company. He received Bachelor of Arts, Bachelor of Journalism and Master of Business Administration degrees from the University of Texas at
Austin. Upon completing his graduate degree in 1977, Mr. McGarr was employed by Goldman, Sachs & Co. He serves on the Board of Trustees of The National Archives Foundation and the Board of Directors of the Lyndon Baines Johnson Foundation.



Kevin C. Howeis the Managing Partner of Mercury
Ventures and has been a member of the Board of Directors of the Company since February 2001. Mercury Ventures manages three different funds that invest in emerging technology companies that focus on Internet applications. Mr. Howe serves on the
board of The Sage Group, plc. which is traded on the London Stock Exchange. Mr. Howe also sits on the boards of seven privately held technology firms. In 1985, he co-founded DacEasy, an early leader in packaged application software. In 1987, Mr.
Howe led the sale of DacEasy to Insilco (a Fortune 500 company). In 1991, Mr. Howe led the carve-out of DacEasy from Insilco and subsequent sale to The Sage Group, plc. which had market capitalization of over $7 billion. He was CEO of the US
operations of The Sage Group, plc. and responsible for operations and acquisitions until 1999. In 1993, Mr. Howe also co-founded Martin Howe Associates, which was an early leader in the merchant credit card processing industry and a pioneer in
wireless solutions. The company was sold in 1997 to PMT, a Nasdaq listed company. Mr. Howe received his MBA from SMU in 1976.



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Resignation of Directors



Two members of the Board of Directors resigned their Board positions subsequent to the annual shareholders meeting
that took place on November 18, 2003. Lawrence D. Lenihan resigned on January 9, 2004 and Robert J. Schlegal resigned on December 23, 2003. Both individuals resigned their positions without any disagreement with the Company on any matter relating to
the Companys operations, policies or practices.



Other
Information



In September 1999, a civil lawsuit was filed
by the Securities and Exchange Commission in the United States District Court for the Southern District of Florida against Scott Ginsburg, the Chairman of the Board of the Company, his brother and his father. The lawsuit alleged that Mr. Ginsburg
had violated the insider trading provisions of the federal securities laws by communicating material, non-public information to his brother in 1996 regarding the securities of EZ Communications, Inc. (EZ) and in 1997 regarding the
securities of Katz Media, Inc. (Katz). The lawsuit further alleged that Mr. Ginsburgs father and brother, relying upon the information allegedly furnished by Mr. Ginsburg, purchased securities in EZ and Katz, and subsequently
profited from the sale of such securities.



In April 2002, a
jury found that Mr. Ginsburg did make these communications, known as tipping, and therefore concluded that he had violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. In July
2002, the United States District Court imposed a $1,000,000 civil penalty against Mr. Ginsburg.



Mr. Ginsburg filed a motion asking the Court to set aside its ruling and the verdict of the jury. On December 19, 2002, the United States District Court
granted Mr. Ginsburgs motion for judgment notwithstanding the verdict. The Court overturned the jury verdict in its entirety and set aside the civil penalty.



On February 13, 2003, the Securities and Exchange Commission filed a Notice of Appeal, seeking to reverse the Courts
decision and challenging the Courts earlier refusal to impose an injunction against Mr. Ginsburg. On March 19, 2004 a decision of a three-judge panel of the Eleventh Circuit U.S. Court of Appeals reversed the decision by the U.S. District
Court for the Southern District of Florida on December 19, 2002. The Court of Appeals (i) reinstated the jury verdict that Mr. Ginsburg had, in matters unrelated to the Company, violated Sections 10(b) and 14(e) of the Securities Exchange Act of
1934 and Rules 10b-5 and 14e-3 thereunder, (ii) reinstated a $1 million civil penalty against Mr. Ginsburg and (iii) remanded the case to the District Court with instructions to enjoin Mr. Ginsburg from violations of the federal securities laws and
regulations. The Court of Appeals did not bar Mr. Ginsburg from serving as an officer or director of a public company and the Companys Board immediately and unanimously moved to affirm Mr. Ginsburg in his capacity as CEO and Chairman of the
Board of Directors.



Audit Committee



The Board of Directors has a standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The Audit Committee is comprised of Cappy McGarr and Kevin Howe. The Board of Directors has determined that each of the members of the Audit Committee is
independent as defined by the listing standards of Nasdaq and Section 10A(m)(3) of the Exchange Act. Currently, the Audit Committee does not have an audit committee financial expert as defined in the rules and regulations of the
Securities and Exchange Commission. Although the Board of Directors has determined that each of the committee members possesses the necessary skills and qualifications to critically analyze our financial statements and financial reporting process
and to perform the other duties required of service on the committee, the Board has not determined that any of the current committee members meets the definition of an audit committee financial expert as set forth by the Securities and
Exchange Commission. The Board is actively searching for a new director to act as an audit committee financial expert.



Code of Ethics



We have adopted a code of ethics that applies to all our officers and employees. A copy of the code of ethics is available, without charge, upon request,
by addressing your request to: Corporate Secretary, Digital Generation Systems, Inc., 750 West John Carpenter Freeway, Suite 700, Irving, TX 75039 and on our website at www.dgsystems.com. We will disclose any amendments to our code of ethics and all
waivers from any provisions of our code of ethics granted to any of our executive officers on our website.



Section 16(a) Beneficial Ownership Reporting Compliance



The members of the Board of Directors, the executive officers of the Company and persons who hold more than 10% of the Companys outstanding
common stock are subject to the reporting requirements of Section 16 (a) of the Securities Exchange Act of 1934, as amended, which require them to file reports with respect to their ownership of the Companys common stock and their transactions
in such common stock. Based upon (i) the copies of Section 16(a) reports that the Company received from such persons for their 2003 fiscal year transactions in the common stock and their common stock holdings and (ii) the written representation



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received from one or more of such persons that no annual Form 5 reports were required to be filed by them for the 2003
fiscal year, the Company believes that all reporting requirements under Section 16(a) for such fiscal year were met in a timely manner by its executive officers, Board members and greater than ten-percent shareholders at all times during the 2003
fiscal year, except that a Form 4 filing required of Scott K. Ginsburg was filed late.



ITEM 11. EXECUTIVE COMPENSATION



Summary
Compensation Table



The following Summary Compensation
Table sets forth the compensation earned by the Companys Chief Executive Officer and the four other most highly compensated executive officers (collectively, the Named Officers).



|                                                                                                |  |              |  |                     |                       |     |                              |     |          |                             |     |                      |           |  |                    
|----------------------------------------------------------------------------------------------- |  | ------------ |  | ------------------- | --------------------- | --- | ---------------------------- | --- | -------- | --------------------------- | --- | -------------------- | --------- |  | -------------------
|Name and Principal Position                                                                     |  | Year         |  | Annual Compensation |                       |     | Long-TermCompensation Awards
|                                                                                                |  | Salary       |  |                     | Bonus                 |     | Other AnnualCompensation     |     |          | SecuritiesUnderlyingOptions
|Scott K. Ginsburg Chairman of the Board and Chief Executive Officer                             |  | 200320022001 |  | $$$                 | 250,000250,000250,000 |     |                              | $$$ |       |                             | $$$ | 12,000755,848167,542 | (2)(1)(1) |  | 25,00050,000      
|                                                                                                |  |              |  |                     |                      
|Omar A. Choucair Chief Financial Officer                                                        |  | 200320022001 |  | $$$                 | 184,731175,000175,000 |     |                              | $$$ | 21,250 |                             | $$$ | 500                | (2)       |  | 25,000250,00050,000
|                                                                                                |  |              |  |                     |                      
|Matthew E. Devine Former Chief Executive Officer                                                |  | 200320022001 |  | $$$                 | 243,862250,000250,000 | (3) |                              | $$$ |       |                             | $$$ | 11,07612,00012,000   | (2)(2)(2) |  | 525,00050,000     
|                                                                                                |  |              |  |                     |                      
|Jeffrey A. Dankworth Former President of StarGuide Digital Networks, Inc.                       |  | 200320022001 |  | $$$                 | 101,292250,000250,000 | (5) |                              | $$$ |       |                             | $$$ | 4,15310,80010,800    | (2)(2)(2) |  | 25,00050,000      
|                                                                                                |  |              |  |                     |                      
|Robert C. Ryan Former General Intellectual Property Counsel of StarGuide Digital Networks, Inc. |  | 200320022001 |  | $$$                 | 127,382275,000275,000 | (6) |                              | $$$ |       |                             | $$$ | 4,43319,895420,733   | (4)(4)(4) |  | 25,00050,000      

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|(1) | For 2002, represents reimbursement of automobile expenses ($32,612), travel expenses incurred during 1999 and 2000 but not reimbursed by the Company until 2002 ($706,305) and
miscellaneous expenses ($16,931). For 2001, represents reimbursement of automobile expenses ($12,000) and travel expenses incurred during 1999 and 2000 ($155,542). Effective January 1, 2001, the Company ceased reimbursement of expenses related to
Mr. Ginsburgs airplane incurred after such date.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Reimbursement of automobile expenses.
|--- | -------------------------------------

|(3) | Represents compensation through termination date. Mr. Devine resigned as Chief Executive Officer effective November 18, 2003.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(4) | For 2003 and 2002, includes medical expense reimbursement of $4,433 and $19,895, respectively. For 2001, includes forgiveness of loan ($400,000) and medical expense reimbursement
($20,733).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Represents compensation through termination date. Mr. Dankworth resigned as President of StarGuide Digital Networks, Inc. effective May 14, 2003.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Represents compensation through termination date. Mr. Ryan resigned as General Intellectual Property Counsel of StarGuide Digital Networks, Inc. effective April 16, 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Stock Option Grants



The following table contains information concerning the stock option grants made to any of the Named Officers in 2003. No
stock appreciation rights were granted to any Named Officer during such year.



|                 |                                                 |                      |                                                |                                                                                                |   |                         |   |                 |  |          |  |     |        |  |   |       
|---------------- | ----------------------------------------------- | -------------------- | ---------------------------------------------- | ---------------------------------------------------------------------------------------------- | - | ----------------------- | - | --------------- |  | -------- |  | --- | ------ |  | - | ------
|Name             |                                                 | Individual Grant (1) |                                                | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation For Option
Term
|                 | Number of Securities Underlying Options Granted |                      | % Of Total Options Granted to EmployeesIn 2003 |                                                                                                |   | Exercise PricePer Share |   | Expiration Date |  | 5%       |  | 10%
|Omar A. Choucair |                                                 | 25,000               |                                                | 1.9                                                                                            | % |                         | $ | 2.60            |  | 05/16/10 |  | $   | 26,462 |  | $ | 61,667

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|(1) | The option listed above has a term of 7 years, subject to earlier termination upon termination of employment. In the event of a merger of the Company with or into another
corporation or other legal entity, where vested options have not been assumed or substituted by such successor corporation or other entity, such options will be exercisable for a period of 15 days from the date of notice thereof, and will terminate
upon the expiration of such period. The Companys 1992 Stock Option Plan provides that upon a change in control, the unvested options granted to each of the Companys executive officers will be subject to accelerated vesting to the extent
of 50% of such unvested options. A change in control is defined as (i) a merger or acquisition of the Company resulting in a 50% or greater change in the total voting power of the Company immediately following such transaction, or (ii) certain
changes in the majority composition of the Companys Board of Directors during a 24-month period, which changes are not initiated by the Board of Directors.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Stock Option Exercises



The following table sets forth information concerning option exercises during the 2003 fiscal year and option holdings as of the end of the 2003 fiscal
year with respect to any of the Named Officers. No stock appreciation rights were outstanding at the end of the year.



|                     |  |                            |             |               |               |                                                                        |             |                                                                  |               |  |   |         |  |   |        
|-------------------- |  | -------------------------- | ----------- | ------------- | ------------- | ---------------------------------------------------------------------- | ----------- | ---------------------------------------------------------------- | ------------- |  | - | ------- |  | - | -------
|Name                 |  | Shares Acquiredon Exercise |             | ValueRealized |               | Number of Securities Underlying Unexercised Options at Fiscal Year End |             | Value of Unexercised in-the-Money Options at Fiscal Year End (1)
|                     |  |                            | Exercisable |               | Unexercisable |                                                                        | Exercisable |                                                                  | Unexercisable
|Scott K. Ginsburg    |  |                           |             | $             |              |                                                                        | 481,217     |                                                                  | 27,083        |  | $ | 45,549  |  | $ | 12,865 
|Matthew E. Devine    |  |                           |             | $             |              |                                                                        | 1,987,989   |                                                                  | 323,459       |  | $ | 600,549 |  | $ | 349,359
|Omar A. Choucair     |  |                           |             | $             |              |                                                                        | 581,133     |                                                                  | 167,187       |  | $ | 122,720 |  | $ | 128,645
|Jeffrey A. Dankworth |  |                           |             | $             |              |                                                                        |            |                                                                  |              |  | $ |        |  | $ |       
|Robert C. Ryan       |  | 378,223                    |             | $             | 208,919       |                                                                        |            |                                                                  |              |  | $ |        |  | $ |       

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|(1) | Based on the fair market value of the Companys common stock at December 31, 2003, of $2.24 per share, less the exercisable price payable for each share.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



Director Compensation



Non-employee Directors are entitled to compensation of $2,500 per meeting
plus $1,000 per audit committee meeting. Employee Directors are not compensated for their participation as Directors. In addition, non-employee Directors receive reimbursement for documented reasonable expenses incurred in connection with attendance
at meetings of the Companys Board of Directors and the committees thereof. The Company does not pay compensation for special assignments of the Board of Directors.



Non-employee Board members are eligible for option grants pursuant to the provisions of the Companys 1995 Director
Option Plan. The exercise price per share of all options granted under the 1995 Director Option Plan must be equal to the fair market value of a share of the Companys common stock on the date of grant of the option. The terms of the options
granted are ten years.



Directors who are also employees of the
Company are eligible to receive options for common stock directly under the 1992 Stock Option Plan and, if officers of the Company, are eligible to receive incentive cash bonus awards and are eligible to participate in the 1996 Employee Stock
Purchase Plan.



Employment Contracts and Change in Control
Arrangements



Pursuant to an employment agreement dated
December 10, 2003 between Mr. Choucair and the Company (the Agreement), the Company agreed to employ Mr. Choucair as its Senior Vice President and Chief Financial Officer from the date of the Agreement



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through December 31, 2006. Under the Agreement, Mr. Choucair is entitled to an annualized base salary of $190,000 for the
period beginning January 1, 2004, escalating by $5,000 per annum for each of the next two years. The Company retained the right to increase the base compensation as it deems necessary. In addition, Mr. Choucair is entitled to participate in the
Companys stock option plans, is entitled to four weeks of paid vacation per calendar year and is to receive a car allowance totaling $500 per month for the term of the contract. Finally, during the term of the Agreement, the Company shall pay
the amount of premiums or other costs incurred for the coverage of Mr. Choucair and his spouse and dependent family members under the Companys health plan.



The Agreement also includes provisions regarding severance, non-solicitation, non-competition, and confidentiality
obligations. Pursuant to the Agreement, if Mr. Choucair terminates his employment for Good Reason (as defined in the Agreement), he shall be entitled to all remaining salary to the end of the Employment Term, plus salary from the end of the
Employment Term through the end of the third anniversary of the Date of Termination, at the rate of salary in effect on the Date of Termination in a lump sum payment. He shall have no obligation to seek other employment and any income so earned
shall not reduce the foregoing amounts. If Mr. Choucair is terminated by the Company for Cause (as defined in the Agreement), or at the end of the Employment Term, he shall not be entitled to further compensation. Following the end of the Employment
Term, upon termination of his employment with the Company for any reason other than Cause, but upon ninety days prior written notice if such termination is by Mr. Choucair, the Company shall pay to Mr. Choucair his salary as then in effect for a
period of six months.



Compensation Committee Interlocks and
Insider Participation



The members of the Compensation
Committee during 2003 were Messrs. Ginsburg, Kantor and Schlegel. Other than Mr. Ginsburg, the Companys Chairman of the Board and Chief Executive Officer, none of these individuals were at any time during 2003, or at any other time, an officer
or employee of the Company.



No executive officer of the
Company serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Companys Board of Directors or Compensation Committee.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



Equity Compensation Plan Information



The following table provides information about the securities authorized for
issuance under the Companys equity compensation plans as of December 31, 2003:



|                                                           |  |                                                                                                   |  |                                                                                 |      |                                                                                                                                                   |          
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Plan Category                                              |  | (a) Number of securitiesto be issued upon exercise of outstanding options,warrants and rights (1) |  | (b) Weighted-average exercise price of outstanding options, warrants and rights |      | (c) Number of securitiesremaining available for future issuance under equity compensationplans (excluding securities reflected in column (a)) (2)
|Equity compensation plans approved by security holders     |  | 8,272,646                                                                                         |  | $                                                                               | 2.99 |                                                                                                                                                   | 9,844,909
|Equity compensation plans not approved by security holders |  |                                                                                                  |  | $                                                                               |     |                                                                                                                                                   |         
|                                                           |  |                                                                                                   |  |                                                                                 |      |                                                                                                                                                   |          
|Total                                                      |  | 8,272,646                                                                                         |  | $                                                                               | 2.99 |                                                                                                                                                   | 9,844,909
|                                                           |  |                                                                                                   |  |                                                                                 |      |                                                                                                                                                   |          

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|(1) | This table excludes an aggregate of 6,273,892 shares issuable upon exercise of outstanding options and warrants assumed by the Company in connection with the Companys merger
with StarGuide Digital Networks, Inc. in January 2001. The weighted-average exercise price of the excluded options and warrants is $1.53 per share.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes 55,138 shares issuable under the Companys Employee Stock Purchase Plan, of which approximately 5,992 shares are issuable within the current offering period, which
ends on April 30, 2004.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Security Ownership of Certain Beneficial Owners and Management



The following table sets forth, as of December 31, 2003 (except where
otherwise noted), certain information with respect to shares beneficially owned by (i) each person who is known by the Company to be the beneficial owner of more than five percent of the Companys outstanding shares of common stock, (ii) each
of the Companys directors and the Named Officers and (iii) all then-current directors and executive officers as a group. Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Under this rule, certain
shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the
right to acquire shares (for example, upon exercise of an option or warrant) within sixty (60) days of the date as of which the information is provided; in computing the percentage ownership of any person, the amount of shares is deemed to include
the amount of shares beneficially owned by such person (and only such person) by reason of such acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the
persons actual voting power at any particular date. As of December 31, 2003, the then-current directors and executive officers of the Company owned 24,206,056 shares of Common Stock entitled to vote, representing 33.6% of the outstanding
shares of Common Stock.



|                                                                                    |  |                                                           |  |                     |  
|----------------------------------------------------------------------------------- |  | --------------------------------------------------------- |  | ------------------- | -
|                                                                                    |  | Shares Beneficially Owned as of December 31, 2003 (1) (2) | 
|Beneficial Owner                                                                    |  | Number of Shares                                          |  | Percentage of Class |  
|Scott Ginsburg (3) Moon Doggie Family Partnership                                   |  | 30,863,930                                                |  | 39.0                | %
|Pequot Capital Management, Inc. (4) 500 Nyala Farm Road Westport, Connecticut 06880 |  | 5,262,686                                                 |  | 7.2                 | %
|Matthew E. Devine (5)                                                               |  | 3,255,016                                                 |  | 4.4                 | %
|Omar A. Choucair (6)                                                                |  | 703,117                                                   |  | 1.0                 | %
|Jeffrey A. Dankworth P.O. Box 484 Verdi, NV 89439                                   |  | 5,091,146                                                 |  | 7.1                 | %
|Robert C. Ryan                                                                      |  | 467,002                                                   |  | *                   |  
|David M. Kantor (7)                                                                 |  | 70,000                                                    |  | *                   |  
|Cappy R. McGarr (8)                                                                 |  | 214,200                                                   |  | *                   |  
|Kevin Howe (8)                                                                      |  | 196,660                                                   |  | *                   |  
|All current directors and executive officers as a group (9)                         |  | 32,047,907                                                |  | 40.1                | %

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|* | Less than 1% of the outstanding shares of common stock.
|- | -------------------------------------------------------

|(1) | Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with
respect to all shares of common stock. To the Companys knowledge, the entities named in the table have sole voting and investment power with respect to all shares of Common stock shown as beneficially owned by them. Unless otherwise indicated,
the business address of each beneficial owner listed is 750 West John Carpenter Freeway, Suite 700, Irving, Texas 75039.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The number of shares of common stock deemed outstanding as of December 31, 2003 was 72,094,841. The number of beneficially owned shares includes shares issuable pursuant to stock
options and warrants that may be exercised within sixty days after December 31, 2003.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Based on a filing with the Securities and Exchange Commission, dated January 22, 2001, indicating beneficial ownership as of such date. Includes 20,941,197 shares held of record by
Scott K. Ginsburg and 2,920,134 shares held in the name of Moon Doggie Family Partnership, L.P. Scott K. Ginsburg, the Companys Chairman of the Board, is the sole general partner of Moon Doggie Family Partnership, L.P. Includes options
exercisable into 484,342 shares of common stock, warrants issued to Moon Doggie Family Partnership, L.P. exercisable into 3,008,527 shares of common stock and warrants issued to Scott K. Ginsburg exercisable into 3,509,730 shares of common stock.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Based solely on a Schedule 13G filing made by Pequot Capital Management, Inc. on January 9, 2004.
|--- | -------------------------------------------------------------------------------------------------

|(5) | Includes options exercisable into 1,990,073 shares of common stock and warrants exercisable into 303,310 shares of common stock. This includes 693,280 shares of common stock that
were acquired by Mr. Devine upon conversion of shares of StarGuide Digital Networks, Inc. in connection with its merger with the Company. Such shares of StarGuide were purchased by Mr. Devine from Mr. Ginsburg pursuant to a promissory note and
security agreement dated June 1, 1999. The promissory note is secured by such shares and became due in December 2003.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes options exercisable into 592,592 shares of common stock and warrants exercisable into 86,660 shares of common stock.
|--- | -----------------------------------------------------------------------------------------------------------------------------



7



---

|(7) | Includes options exercisable into 60,000 shares of common stock.
|--- | ----------------------------------------------------------------

|(8) | Includes options exercisable into 50,000 shares of common stock.
|--- | ----------------------------------------------------------------

|(9) | Includes options exercisable into 1,236,933 shares of commons stock and warrants exercisable into 6,604,917 shares of common stock.
|--- | -----------------------------------------------------------------------------------------------------------------------------------



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



During 2003 and 2002, the Company paid approximately $730,000 and
$1,435,000, respectively, in legal fees to Latham & Watkins, a law firm for which Eric L. Bernthal is a partner. Eric L. Bernthal is a former Director of the Company.



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES



The shareholders re-elected the independent accounting firm KPMG LLP (KPMG) to serve as independent auditors of
the Company for the year ended December 31, 2003. KPMG served as the Companys independent auditors since 1999 and is considered by management of the Company to be well qualified. KPMG has advised the Company that neither it nor any of its
members has any financial interest, direct or indirect, in the Company in any capacity.



Fee Disclosure



The following is a summary of
the fees billed to the Company by KPMG for professional services rendered for the fiscal years ended December 31, 2003 and December 31, 2002:



|                   |  |                         |         |      |   |        
|------------------ |  | ----------------------- | ------- | ---- | - | -------
|                   |  | Year Ended December 31,
|                   |  | 2003                    |         | 2002
|Audit Fees(1)      |  | $                       | 221,000 |      | $ | 209,000
|Audit Related Fees |  |                         | 33,000  |      |   | 24,000 
|Tax Fees(2)        |  |                         | 177,000 |      |   | 95,000 
|All other Fees     |  |                         |        |      |   |       
|                   |  |                         |         |      |   |        
|Total              |  | $                       | 431,000 |      | $ | 328,000

---

|(1) | Audit Fees. These are fees for professional services for the audit of the Companys annual financial statements, and for the review of the financial statements included
in the Companys filings on Form 10-Q, and for services that are normally provided in connection with statutory and regulatory filings or engagements.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Tax Fees. These are fees for professional services with respect to tax compliance, tax advice, and tax planning.
|--- | ----------------------------------------------------------------------------------------------------------------



The Audit Committee has considered whether (and has determined that) the
provision by KPMG of the services described under Tax Fees is compatible with maintaining KPMGs independence from management and the Company. In addition, all of the services rendered to the Company by KPMG were pre-approved by the Audit
Committee.



PART IV



ITEM 15. EXHIBITS



|      |  |                                        
|----- |  | ---------------------------------------
|31.1* |  | Rule 13a-14(a)/15d-14(a) Certifications
|31.2* |  | Rule 13a-14(a)/15d-14(a) Certifications
|32.1* |  | Section 1350 Certifications            

---

|* | Filed herewith.
|- | ---------------



8



---

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.



|                      |  |                                  |  |                                                               
|--------------------- |  | -------------------------------- |  | --------------------------------------------------------------
|                      |  | DIGITAL GENERATION SYSTEMS, INC.
|                      |  |                                 
|Dated: April 29, 2004 |  | By:                              |  | /S/ SCOTT K. GINSBURG                                         
|                      |  |                                  |  | Scott K. Ginsburg                                             
|                      |  |                                  |  | Chairman of the Board of Directors and Chief Executive Officer



In accordance with the
requirements of the Securities Exchange Act of 1934, this Amendment was signed below by the following persons on behalf of the Registrant and in the capacities and dates indicated.



|                                       |  |                                                                                   |  |               
|-------------------------------------- |  | --------------------------------------------------------------------------------- |  | --------------
|Signature                              |  | Title                                                                             |  | Date          
|/S/ SCOTT K. GINSBURGScott K. Ginsburg |  | Chairman of the Board of Directors and Chief Executive Officer                    |  | April 29, 2004
|                                       |  |                                                                                  
|*Omar A. Choucair                      |  | Chief Financial Officer and Director (Principal Financial and Accounting Officer) |  | April 29, 2004
|                                       |  |                                                                                  
|*David M. Kantor                       |  | Director                                                                          |  | April 29, 2004
|                                       |  |                                                                                  
|*Cappy R. McGarr                       |  | Director                                                                          |  | April 29, 2004
|                                       |  |                                                                                  
|*Kevin Howe                            |  | Director                                                                          |  | April 29, 2004
|                                       |  |                                                                                  
|By: /S/ SCOTT K. GINSBURG              |  |                                                                                   |  |               
|Attorney-in-Fact                       |  |                                                                                   |  |               



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