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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D. C. 20549

FORM 10-K

|ý                                                             | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|For the fiscal year ended December 31, 2007                  
|OR                                                           
|o                                                             | 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 001-16615

LIBERTY MEDIA LLC(Exact name of Registrant as specified in its charter)

|State of Delaware                                              |  | 20-5272297                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)
|                                                               |  |                                     
|12300 Liberty Boulevard
Englewood, Colorado                    |  | 80112                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrant's
telephone number, including area code:(720) 875-5400

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

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

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

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 ý    No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

|Large accelerated filer o |  | Accelerated filer o |  | Non-accelerated filer ý |  | Smaller reporting company o
|------------------------- |  | ------------------- |  | ----------------------- |  | ---------------------------

Indicate
by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o    No ý

The Registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this
Form with the reduced disclosure format.



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LIBERTY MEDIA LLC
2007 ANNUAL REPORT ON FORM 10-K

Table of Contents



|         |  |                                                                                                              |  | Page 
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | -----
|         |  | Part I                                                                                                       |  |      
|Item 1.  |  | Business                                                                                                     |  | I-1  
|Item 1A. |  | Risk Factors                                                                                                 |  | I-25 
|Item 1B. |  | Unresolved Staff Comments                                                                                    |  | I-28 
|Item 2.  |  | Properties                                                                                                   |  | I-28 
|Item 3.  |  | Legal Proceedings                                                                                            |  | I-29 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                          |  | I-30 
|         |  | Part II                                                                                                      |  |      
|Item 5.  |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | II-1 
|Item 6.  |  | Selected Financial Data                                                                                      |  | II-1 
|Item 7.  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                        |  | II-1 
|Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | II-14
|Item 8.  |  | Financial Statements and Supplementary Data                                                                  |  | II-16
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | II-16
|Item 9A. |  | Controls and Procedures                                                                                      |  | II-16
|Item 9B. |  | Other Information                                                                                            |  | II-16
|         |  | Part III                                                                                                     |  |      
|Item 10. |  | Directors, Executive Officers and Corporate Governance                                                       |  | III-1
|Item 11. |  | Executive Compensation                                                                                       |  | III-1
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | III-1
|Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | III-1
|Item 14. |  | Principal Accounting Fees and Services                                                                       |  | III-1
|         |  | Part IV                                                                                                      |  |      
|Item 15. |  | Exhibits and Financial Statement Schedules                                                                   |  | IV-1 

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PART I.

Item 1.    Business.



Liberty Media LLC is a holding company and a wholly-owned subsidiary of Liberty Media Corporation ("New Liberty") which, through its ownership of interests
in subsidiaries and other companies, is primarily engaged in the video and on-line commerce, media, communications and entertainment industries. Through our subsidiaries, we operate in
North America, Europe and Asia. Our principal businesses and assets include QVC, Inc. and Starz, LLC and interests in IAC/InterActiveCorp, Expedia, Inc. and The DIRECTV
Group, Inc.

In
May 2006, New Liberty completed a restructuring pursuant to which it was organized as a new holding company, and it became the new publicly traded parent company of Liberty
Media LLC, which was formerly known as Liberty Media Corporation. Immediately prior to the restructuring, New Liberty was a direct, wholly-owned subsidiary of our company.



In 2007 we sold our non-strategic subsidiaries On Command and OpenTV Corp. In addition, we acquired an 81% ownership interest in
Backcountry.com, Inc. and an 83% ownership interest in Bodybuilding.com, and we exchanged our investment in CBS Corporation for cash and a company owning a television station in Green Bay,
Wisconsin and part of our investment in Time Warner Inc. for cash and a company owning the Atlanta Braves and Leisure Arts, Inc.

In
February 2008, we completed our previously announced exchange transaction with News Corporation pursuant to which we exchanged our approximate 16% ownership interest in News
Corporation for a subsidiary of News Corporation which holds an approximate 41% interest in The DIRECTV Group, Inc., three regional sports television networks and approximately
$465 million in cash.

*
* * * *

Certain
statements in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995,
including statements regarding our business, product and marketing strategies, new service offerings, our tax sharing arrangement with AT&T Corp. and estimated amounts payable under that arrangement,
revenue growth and subscriber trends at QVC, Inc. and Starz Entertainment, LLC, anticipated programming and marketing costs at Starz Entertainment, our expectations regarding Starz
Media's results of operations for the next two to three years, our projected sources and uses of cash, the estimated value of our derivative instruments, and the anticipated non-material
impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. In particular, statements under Item 1. "Business,"
Item 1A. "Risk-Factors," Item 2. "Properties," Item 3. "Legal Proceedings," Item 7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" contain forward-looking statements. Where, in any forward-looking statement, we express an expectation or
belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will
result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:



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These
forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Annual Report, and we expressly disclaim any obligation or undertaking to disseminate
any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on
which any such statement is based. When considering such forward-looking statements, you should keep in mind the factors described in Item 1A, "Risk Factors" and other cautionary statements
contained in

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this
Annual Report. Such risk factors and statements describe circumstances which could cause actual results to differ materially from those contained in any forward-looking statement.

This
Annual Report includes information concerning public companies in which we have minority interests that file reports and other information with the SEC in accordance with the
Securities Exchange Act of 1934. Information contained in this Annual Report concerning those companies has been derived from the reports and other information filed by them with the SEC. If you would
like further information about these companies, the reports and other information they file with the SEC can be accessed on the Internet website maintained by the SEC at www.sec.gov. Those reports and
other information are not incorporated by reference in this Annual Report.



Through our ownership of interests in subsidiaries and other companies, we are primarily engaged in the video and on-line commerce, media,
communications and entertainment industries. Each of these businesses is separately managed.

We
identify our reportable segments as (A) those consolidated subsidiaries that represent 10% or more of our consolidated revenue, earnings before income taxes or total assets and
(B) those equity method affiliates whose share of earnings represent 10% or more of our pre-tax earnings. Financial information related to our operating segments can be found in
note 17 to our consolidated financial statements found in Part II of this report.



The following table identifies our more significant subsidiaries and minority investments.



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Starz Entertainment, LLC, a wholly-owned subsidiary, provides premium movie networks and programming distributed by cable,
direct-to-home satellite, telephony, the Internet and other distribution media providers in the United States. Starz Entertainment's principal service offerings are
(1) Starz, which is primarily a first-run movie service that generally includes Starz plus five multiplex channels branded with the Starz name, each of which exhibits movies
targeted to a specific audience and (2) Encore, which airs first-run movies and classic contemporary movies and generally includes six additional thematic multiplex channels branded
with the Encore name, each of which exhibits movies based upon individual themes. Starz is generally purchased by subscribers as an à-la-carte premium service
for which subscribers pay a separate monthly charge. Distributors may also package Starz with other premium services. Encore is generally purchased by subscribers as part of a digital package, which
includes a variety of general entertainment digital networks. Distributors may also sell Encore on an à-la-carte basis or packaged with Starz. Starz
Entertainment's services also include MoviePlex, a "theme by day" channel featuring a different thematic multiplex channel each day, on a weekly rotation; IndiePlex, featuring art house and
independent films; RetroPlex, featuring "classic" movies; Starz On Demand; Encore on Demand; high definition feeds of several Starz channels and high definition versions of both Starz On Demand and
Encore On Demand. Starz Entertainment also offers Starz Play, an Internet complement to Starz, to cable and telephone companies and other distributors who offer high speed services. In addition, Starz
Entertainment distributes Vongo, an Internet delivered subscription package comprising Starz plus approximately 1,000 movies and 1,500 other video selections on an on-demand basis. As of
December 31, 2007, Starz Entertainment had 16.3 million Starz subscribers and 30.7 million Encore subscribers.

Programming
networks distribute their services through a number of distribution technologies, including cable television, direct-to-home satellite, broadcast
television, telephone networks and the Internet. Programming services may be delivered to subscribers as part of a video distributor's analog or digital package of programming services for a fixed
monthly fee, or may be delivered individually as a "premium" programming service for a separate monthly charge. Premium
services may be scheduled or "on-demand." Additionally, single programs or movies may be delivered on a pay-per-view basis for a per program fee. Whether a
programming service is basic, premium or pay-per-view, the programmer generally enters into separate multi-year affiliation agreements with those distributors that
agree to carry the service. Programmers may also provide their pay-per-view and subscription on-demand services directly to consumers via the Internet. Basic
programming services derive their revenue principally from the sale of advertising time on their networks and from per subscriber license fees received from distributors. Their continued ability to
generate both advertising revenue and subscriber license fees is dependent on these services' ability to maintain and renew their affiliation agreements. Premium and
pay-per-view services do not sell advertising and primarily generate their revenue from subscriber fees.

The
majority of Starz Entertainment's revenue is derived from the delivery of movies to subscribers under long-term affiliation agreements with cable operators, direct
broadcast satellite operators and telephone companies, including Comcast Cable, DIRECTV, EchoStar, Time Warner Cable, Charter Communications, Cox Communications, Cablevision Systems, Insight
Communications, Mediacom Communications, Verizon Communications, AT&T and the National Cable Television Cooperative. Some of Starz Entertainment's affiliation agreements provide for payments based on
the number of subscribers that receive Starz Entertainment's services. Starz Entertainment also has affiliation agreements with certain of its customers pursuant to which those customers pay an
agreed-upon rate regardless of the number of subscribers. These affiliation agreements generally provide for contractual rate increases or rate increases tied to the annual increase in the
Consumer Price Index. Starz Entertainment's agreement with Comcast requires Comcast to carry the Encore and Thematic Multiplex channels through September 2009 and Starz through December 2012. Starz

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Entertainment's
affiliation agreements with DIRECTV and EchoStar expire in December 2008 and June 2009, respectively. In addition, the affiliation agreement with Time Warner, which originally expired
on December 31, 2006, has been extended through April 30, 2008. Starz Entertainment is in negotiations with Time Warner regarding a new affiliation agreement. Starz Entertainment's other
affiliation agreements expire between now and December 2014. For the year ended December 31, 2007, 71% of Starz Entertainment's total revenue was generated by its four largest customers,
Comcast, DIRECTV, EchoStar and Time Warner, each of which individually generated more than 10% of Starz Entertainment's revenue for such period.

The
costs of acquiring rights to programming, including Internet protocol rights, are Starz Entertainment's principal expenses. In order to exhibit theatrical motion pictures, Starz
Entertainment enters into agreements to acquire rights from major motion picture producers including Hollywood Pictures, Touchstone Pictures, Miramax Films, Walt Disney Studios, Revolution Studios,
Sony's Columbia Pictures, Screen Gems and Sony Pictures Classics. Starz Entertainment also has exclusive rights to air first-run output from Overture Films, a wholly owned subsidiary of
Starz Media. These output agreements expire between 2012 and 2015.

Starz
Entertainment uplinks its programming to five non-preemptible, protected transponders on three domestic satellites. "Protected" status means that, in the event of a
transponder failure, Starz Entertainment's signal will be transferred to a spare transponder or, if none is available, to a preemptible transponder located on the same satellite or, in certain cases,
to a transponder on another satellite owned by the same service provider if one is available at the time of the failure. "Non-preemptible" status means that, in the event of a transponder
failure, Starz Entertainment's transponders cannot be preempted in favor of a user of a "protected" failure. Starz Entertainment leases its transponders under long-term lease agreements.
At December 31, 2007, Starz Entertainment's transponder leases had termination dates ranging from 2018 to 2021. Starz Entertainment transmits to these transponders from its uplink center in
Englewood, Colorado.



In 2006, we acquired IDT Entertainment from IDT Corp. and renamed it Starz Media. Starz Media's operations include home video distribution,
live-action television and film production, and theatrical and non-theatrical animation and are divided into the following business units: Anchor Bay Entertainment, Overture
Films, Proprietary Productions, Film Roman, Toronto Animation Studio and Feature Animation,

Starz
Media's home video distribution business is operated through its Anchor Bay Entertainment subsidiary, utilizing the Anchor Bay and Manga brands. Anchor Bay and Manga acquire and
license content for home video distribution and have a combined library of over 3,500 titles, includingThomas the Tank Engine, Delirious, Beowulf and
Grendel,Halloween, Hatchetand others. These titles are distributed through regional and national retailers, including
Wal-Mart, Target and Best Buy. Generally, these retailers have the right to return unsold products. The distribution agreement with HIT Entertainment forThomas the
Tank Engineexpires in December 2008.

Anchor
Bay records its revenue net of an allowance for estimated future returns. Anchor Bay pays its licensors, generally on a quarterly basis, (i) a royalty based on a percentage
of net sales of the licensed title, (ii) a profit participation based on the net profits (if any) of the licensed title or (iii) retains a distribution fee and remits the net sales less
contractually agreed to costs (e.g. manufacturing costs, pick, pack and ship costs, etc.) of the licensed title to the licensor. Anchor Bay markets and advertises each title prior to and during
release generally through the use of discounts, rebates and cooperative advertising with retailers.

Overture
Films, a wholly owned subsidiary of Starz Media, produces and acquires live action theatrical motion pictures for release domestically and throughout the world. Overture
distributes its

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own
movies theatrically in the United States, and Anchor Bay Entertainment and Proprietary Productions perform home video and television distribution in the United States. Overture has entered into
distribution agreements with Paramount Vantage and Alliance Atlantis to distribute its product internationally to the extent Overture controls such rights. Overture's first movie, Mad Money, was
released in January 2008, and Overture plans to distribute another seven movies throughout 2008. All of Overture's films will appear on
Starz Entertainment's channels during their pay television windows.

Overture
records revenue from the theatrical release of its films. The domestic box office receipts are divided between the theatrical exhibitors and Overture based upon contractual
arrangements on a film-by-film basis. Paramount Vantage and Alliance Atlantis contract with foreign distributors and receive a distribution fee for their services. Overture
records revenue related to Anchor Bay's distribution of its films net of a reserve for estimated future returns. Overture receives license fees from Starz Entertainment related to the pay television
agreement that covers the appearance of Overture's films on Starz Entertainment's channels during their pay television windows. Fees are also earned from both domestic and foreign networks/basic cable
channels related to the exploitation of the titles on free television. Other revenue sources include pay-per-view, syndication and exploitation of the titles in a
non-theatrical manner such as the internet and airlines. Significant expenses related to Overture's films include the amortization of film production costs and the theatrical prints and
advertising expenses related to the release of each film, as well as the home video manufacturing and related distribution expenses.

Proprietary
Productions develops and produces proprietary live-action and animated content for television and direct-to-video/DVD distribution.
Proprietary Productions has produced live-action productions for the Sci Fi Network, Lifetime, IFC, Showtime, ABC and Starz Entertainment. Such productions include Painkiller Janefor the Sci Fi Network,
 theMasters of Horrorseries for Showtime and theMasters of Science Fictionseries for ABC. The proprietary animated seriesWow! Wow! Wubbzy!is
currently being shown on Nick Jr and Noggin. Anchor Bay acts as the home video distributor for Proprietary Productions.

Proprietary
Productions receives license fees from networks and basic/pay cable television channels, including Starz Entertainment, related to exploitation of its productions on free or
pay television. The productions are also exploited via the Internet. Amortization of production costs represents Proprietary Productions single largest operating expense.

Film
Roman develops and produces 2D animated content on a for-hire basis for distribution theatrically and on television. Significant for-hire animation projects
at Film Roman includeThe Simpsons Movie,The SimpsonsTV series andKing of the
HillTV series.

Film
Roman recognizes revenue for each project based on the percentage of costs incurred-to-date relative to the estimated total costs of the project. Revenue
recognized is proportional to the work performed-to-date under the contracts.

At
its animation studio located in Toronto, Starz Media develops and produces 3D animated content on a for-hire basis and on a proprietary basis for Starz Media's Feature
Animation unit. Two major theatrical animated films are currently under production in Toronto on a for-hire basis.

The
Toronto studio, like Film Roman, recognizes revenue for each project based on the percentage of costs incurred-to-date relative to the estimated total costs
of the project. Revenue recognized is proportional to the work performed-to-date under the contracts.

Feature
Animation develops and produces proprietary animated theatrical films. During the third quarter of 2006, Feature Animation released its first full-length proprietary
animated film,Everyone's Hero, in theaters.Everyone's Herowas produced at the Toronto studio. Feature
Animation has one additional animated film,Space Chimps,currently in production that is scheduled for theatrical release

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in
July 2008.Space Chimpsis being developed and produced in Vancouver with Vanguard Animation. Starz Media holds a 29% ownership interest in Vanguard.

Domestically,
Feature Animation utilizes Twentieth Century Fox to market and distribute its proprietary theatrical animated films, while internationally it uses foreign sales agents to
contract with foreign distributors. The domestic box office receipts are divided between the theatrical exhibitors and Feature Animation based upon negotiated contractual arrangements on a
film-by-film basis. Fox and the foreign sales agents are paid a distribution fee for their services. The foreign sales agents negotiate with distributors on a
territory-by-territory basis with some contracts requiring minimum guarantees. The international theatrical sales forEveryone's
Herowere not significant due to the genre of the movie.

As
mentioned above, in the U.S., Overture and Feature Animation incur significant marketing, advertising and print costs before and during the theatrical release of a film in an effort
to generate awareness of the film, to increase the consumer's intent to view the film, and to generate significant consumer interest in subsequent home video and other ancillary markets. These costs
are expensed as incurred. Therefore, Starz Media will incur losses prior to theatrical release of a film. The foreign
distributors are normally responsible for the marketing and advertising of films in each of their respective territories.

Starz
Entertainment and Starz Media are both wholly-owned subsidiaries of our subsidiary, Starz, LLC. We believe that Starz LLC will provide opportunities to exploit all
the key domestic and international video distribution vehicles: theatrical, free and premium television, home video, syndication and Internet. Starz, LLC will have the opportunity to test new
programming ideas on a single platform and then migrate the successful ones to other distribution outlets.



QVC, Inc., a wholly-owned subsidiary, markets and sells a wide variety of consumer products in the U.S. and several foreign countries primarily by means of
merchandise-focused televised shopping programs on the QVC television networks and via the Internet through its domestic and international websites. QVC programming is divided into segments that are
televised live with a host who presents the merchandise, sometimes with the assistance of a guest who is knowledgeable about the merchandise, and conveys information relating to the product to QVC's
viewers. QVC's websites offer a complement to televised shopping by allowing consumers to purchase a wide assortment of goods that were previously offered on the QVC networks, as well as other items
that are available from QVC only via its websites. For the year ended December 31, 2007, approximately 22% of QVC's domestic revenue and approximately 20% of QVC's total revenue was generated
from sales of merchandise ordered through its various websites.

QVC
offers a variety of merchandise at competitive prices. QVC purchases, or obtains on consignment, products from domestic and foreign manufacturers and wholesalers, often on favorable
terms based upon the volume of the transactions. QVC classifies its merchandise into three groups: home, apparel/accessories and jewelry. For the year ended December 31, 2007, home,
apparel/accessories and jewelry accounted for approximately 44%, 35% and 21%, respectively, of QVC's net revenue generated by its United States operations. QVC offers products in each of these
merchandise groups that are exclusive to QVC, as well as popular brand name and other products also available from other retailers. QVC's products are often endorsed by celebrities, designers and
other well known personalities. QVC does not depend on any single supplier or designer for a significant portion of its inventory.

QVC
distributes its television programs, via satellite or optical fiber, to multichannel video program distributors for retransmission to subscribers in the United States, the United
Kingdom, Germany, Japan and neighboring countries that receive QVC's broadcast signals. In the U.S., QVC

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uplinks
its programming from its uplink facility in Pennsylvania to a protected, non-preemptible transponder on a domestic satellite. QVC's international business units each obtain
uplinking services from third parties and transmit their programming to non-preemptible transponders on five international satellites. QVC's transponder service agreement for its domestic
transponder expires at the end of the life of the satellite, which is currently estimated to be in 2019. QVC's transponder service agreements for its international transponders expire in 2008 through
2013.

QVC
enters into long-term affiliation agreements with satellite and telephone companies and cable television operators who downlink QVC's programming and distribute the
programming to their customers. QVC's affiliation agreements with these distributors have termination dates ranging from 2008 to 2022. QVC's ability to continue to sell products to its customers is
dependent on its ability to maintain and renew these affiliation agreements in the future.

In
return for carrying the QVC signals, each programming distributor in the United States and Germany receives an allocated portion, based upon market share, of up to 5% of the net sales
of merchandise sold via the television programs to customers located in the programming distributor's service areas. In the United Kingdom and Japan, programming distributors receive an
agreed-upon annual fee, a monthly fee per subscriber regardless of the net sales or a variable percentage of net sales. In addition to sales-based commissions or per-subscriber
fees, QVC also makes payments to distributors in the United States for carriage and to secure favorable positioning on channel 35 or below on the distributor's channel line-up. QVC
believes that a portion of its sales are attributable to purchases resulting from channel "browsing" and that a channel position near broadcast networks and more popular cable networks increases the
likelihood of such purchases. As a result of the ongoing conversion of analog cable customers to digital, channel positioning has become more critical due to the increased channel options on the
digital line-up.

QVC's
shopping program is telecast live 24 hours a day to approximately 93 million homes in the United States. QVC Shopping Channel reaches approximately 22 million
households in the United Kingdom and the Republic of Ireland and is broadcast 24 hours a day with 17 hours of live programming. QVC's shopping network in Germany, reaches approximately
38 million households throughout Germany and Austria and is broadcast live 24 hours a day. QVC Japan, QVC's joint venture with Mitsui & Co., LTD, reaches
approximately 21 million households and is broadcast live 24 hours a day. QVC strives to maintain promptness and efficiency in order taking and fulfillment. QVC has four domestic phone
centers that can direct calls from one call center to another as volume mandates, which reduces a caller's hold time, helping to ensure that orders will not be lost as a result of
hang-ups. QVC also has one phone center in each of the United Kingdom and Japan and two call centers in Germany. QVC also utilizes computerized voice response units, which handle
approximately 32% of all orders taken. QVC has seven distribution centers worldwide and is able to ship approximately 92% of its orders within 48 hours.

QVC's
business is seasonal due to a higher volume of sales in the fourth calendar quarter related to year-end holiday shopping. In recent years, QVC has earned
22%-23% of its revenue in each of the first three quarters of the year and 32%-33% of its revenue in the fourth quarter of the year.



Provide Commerce, Inc., a wholly-owned subsidiary that we acquired in February 2006, operates an e-commerce marketplace of websites that offers
high-quality perishable products direct from suppliers to consumers. Provide Commerce combines an online storefront, proprietary supply chain management technology, established supplier
relationships and integrated logistical relationships with Federal Express Corporation and United Parcel Service, Inc. to create a market platform that bypasses traditional supply chains of
wholesalers, distributors and retailers. Provide Commerce derives its revenue primarily from the sale of flowers and plants on its proflowers.com website and from the sale

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of
gourmet foods from its branded websites: Cherry Moon Farms, for fresh premium fruits; Uptown Prime, for premium meats and seafood; Secret Spoon, for fresh sweets and confections; and Shari's
Berries, for chocolate-dipped berries and related gifting products. Provide Commerce also enters into arrangements with businesses desiring to offer high-quality,
time-sensitive or perishable products to customers on a co-branded or private label basis, designing and hosting dedicated websites on behalf of such clients.

Provide
Commerce initially launched its marketplace to sell and deliver flowers. Provide Commerce later expanded its offerings to include premium meats and seafood, fresh premium fruits
and confections. The sale of flowers continues to be Provide Commerce's most significant product comprising approximately 89% of its sales in 2007. The sale of flowers is seasonal with nearly 63% of
sales coming in the first and second quarters of the year due largely to purchases for Valentine's Day and Mother's Day. Provide Commerce depends on three suppliers for approximately 56% of its floral
products. The loss of any of these suppliers could adversely impact Provide Commerce.

Provide
Commerce believes that one of the keys to its success is its ability to deliver products on time and fresher than its competitors thereby providing a better value for its
customers. Provide Commerce maintains a customer service center located at its corporate headquarters to respond to customer phone calls and emails 24 hours a day, seven days a week.



BuySeasons, Inc., a wholly-owned subsidiary that we acquired in August 2006, operates BuyCostumes.com, an on-line retailer of costumes,
accessories and party supplies for a wide variety of celebration and costuming events. BuySeasons earns revenue from the sale of its products to retail customers who order from the BuyCostumes.com
website and, to a lesser degree, through its fulfillment sales to other retailers. While over 90% of BuySeason's products are also available from other on-line and traditional
brick-and-mortar retailers, BuySeasons believes that no other single retailer offers the range of costume and party accessories that BuySeasons offers to its customers.
BuySeasons also has exclusive arrangements to purchase costumes and party accessories that are only available from BuySeasons and works with manufacturers to design costumes and accessories for which
BuySeasons has exclusive rights for a predetermined period of time. BuySeasons purchases its products from various suppliers, both domestic and international. BuySeasons depends on two suppliers for
approximately 30% of its costumes and accessories. The loss of either of these suppliers could adversely impact BuySeasons.

BuySeasons
believes that it has a competitive advantage due to the combination of a large assortment of on-line products, value pricing and a high level of customer service.
BuySeason's business is highly seasonal with nearly 72% of its revenue earned in September and October leading up to Halloween. BuySeasons maintains a customer service center at its corporate
headquarters, and customer service representatives are available 24 hours a day, seven days a week during its busy season to respond to customer questions. BuySeasons also leases warehouse
space to store inventory and ship orders to customers. The customer service center and warehouse staffing is scalable, and BuySeasons employs contract labor to react to higher volume during the peak
Halloween season.



We acquired 81% of the equity of Backcountry.com, Inc. in June 2007. Backcountry is an e-commerce marketplace for outdoor adventure and action
sports gear and clothing. Its six separate websites each cater to a different outdoor-minded demographic. Three of the sites offer name-brand products at retail prices, and three offer
substantial discounts to online shoppers.

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Backcountry's primary site, Backcountry.com, offers over 400 brands and 120,000 items of high-end gear and clothing for backpacking, camping, trail running, skiing,
snowboarding, rock climbing, kayaking and other outdoor activities. Backcountry's snowboarding-specific site, DogFunk.com, sells technical and lifestyle apparel and gear from established brands and
niche manufacturers. Backcountry's skiing specific site, Tramdock.com, offers premium ski-specific gear and clothing to park, pipe, and big-mountain freeride ski enthusiasts.
Backcountry's online outlet store, BackcountryOutlet.com, sells discounted clothing and gear from past seasons. Backcountry's one-deal-at-a-time sites,
SteepandCheap.com and WhiskeyMilitia.com, feature a limited quantity of one highly discounted item at a time until such item sells out, at which time it is immediately replaced with a new item.
SteepandCheap.com caters to backcountry adventurers and outdoor enthusiasts, while WhiskeyMilitia.com appeals to skateboarders, surfers, snowboarders, wakeboarders and BMX riders.

Backcountry's
business is seasonal, with 50% of its revenue earned in the fourth quarter. Backcountry stores and ships all inventory from its warehouse, located in Salt Lake City, Utah.
Staffing for the customer service center and warehouse is scalable, and Backcountry employs seasonal labor to react to higher volume during peak periods of the year.



On December 31, 2007, we acquired 83% of Bodybuilding.com, LLC. Bodybuilding.com is an internet retailer of sports, fitness and nutritional
supplements. It also hosts an informational SuperSite which answers questions about fitness, work-out programs, overall health, nutritional and product information. The online
e-retail model combines expert information and advice with an array of nutritional supplements and a mission to help every customer reach their personal fitness goals.

Bodybuilding.com's
customers include gym goers, sport specific focused athletes such as football players, tri-athletes, weightlifters and bodybuilders, and the average man or
woman wanting to improve his or her overall mental or physical wellbeing. Bodybuilding.com launched its primary web-site in 1999 and now boasts over 15,000 pages of free, editorial content
with health and fitness advice attracting over one million annual customers and hosting the industry's largest forum with 890,000 members. Bodybuilding introduced BodySpace one year ago with more than
125,000 members. Bodybuilding.com is one of the worlds largest online marketers with over 6,500 different items of nutritional supplements including muscle-builders, protein and fat-loss
supplements that are commonly used in fitness training.

Bodybuilding.com
earns revenue primarily from the sale of nutritional supplements, gym clothing and accessories, and training and nutritional books and videos on its website.
Bodybuilding.com's business is slightly seasonal with the first quarter of the year being its busiest as people start to implement their New Year's resolutions regarding improved health and fitness.



Atlanta National League Baseball Club, Inc., or ANLBC, is a wholly owned subsidiary that we acquired in May 2007. It owns and operates the Atlanta Braves
Major League Baseball franchise. The Atlanta Braves have been one of the most successful Major League baseball clubs over the past 17 years, with 14 divisional titles, five National League
pennants and one World Series win during that time. Turner Field, which is leased from the City of Atlanta and Fulton County Recreation Authority, is the home stadium of the Atlanta Braves. Turner
Field is located just outside the metropolitan area of Atlanta and offers a range of activities and eateries for fans, from interactive gaming and cartoon characters to social gathering places such as
the Braves Chop House.

ANLBC
derives revenue from the sale of tickets for games played at Turner Field, as well as from game-day sales of concessions and other goods and services in and around
Turner Field. ANLBC also derives substantial revenue from the sale of broadcasting rights to the Atlanta Braves baseball games. ANLBC has long-term local broadcasting agreements with WTBS,
Turner Regional Entertainment

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Network, Inc.,
Sportsouth Network, Ltd. and Clear Channel, and through Major League Baseball ("MLB"), has entered into national broadcasting agreements with ESPN, Turner Broadcasting
System, Inc. and Fox Sports.

As
the owner of a MLB franchise, ANLBC must abide by rules promulgated by the MLB Commissioner and comply with MLB's constitution and bylaws. Under the MLB rules, each MLB franchise
participates in the MLB Central Fund, which acts as a conduit of centrally derived revenue (primarily from national broadcast agreements) to the clubs. In addition, each franchise is required to share
locally derived revenue with the other MLB franchises and their owners through MLB's revenue sharing plan. Also under the MLB rules, each MLB franchise is required to participate in and contribute to
certain profit sharing initiatives, such as MLB Advanced Media L.P., MLB's interactive media and internet company which runs MLB's official website and all of the MLB teams' websites.

In
addition to the Atlanta Braves, ANLBC owns and operates a baseball academy in the Dominican Republic and certain minor league baseball clubs. The Richmond Braves are a AAA minor
league team with a home base in Richmond, Virginia. The Mississippi Braves are a AA minor league team with a home base in Pearl, Mississippi. The Rome Braves are a AA minor league team with a home
base in Rome, Georgia. These clubs provide the Atlanta Braves with a cost-effective way to develop players and ready them for the major leagues.



TruePosition, Inc. is a wholly owned subsidiary that develops and markets technology for locating wireless phones and other wireless devices enabling
wireless carriers, application providers and other enterprises to provide E-911 services domestically and other location-based services to mobile users both domestically and worldwide.
"E-911" or "Enhanced 911" refers to a Federal Communications Commission mandate requiring wireless carriers to implement wireless location capability. AT&T (formerly Cingular Wireless)
began deploying TruePosition's technology in late 2002, and T-Mobile USA began deploying such technology in 2003. Both wireless carriers are deploying TruePosition's technology and using
the technology for E-911. In addition, as of December 31, 2007, four smaller wireless carriers had deployed or are deploying TruePosition's technology.

TruePosition
earns revenue from the sale of hardware and licensing of software required to generate location records for wireless phones and other wireless devices on a cellular network
and from the design, installation, testing and commissioning of such hardware and software. In addition, TruePosition earns software maintenance revenue through the provision of ongoing technical and
software support. TruePosition has contractual rights to earn additional revenue from its deployed product base if its customers use such deployed equipment to provide commercial services. However, to
date, TruePosition has not earned any significant revenue from other location-based services. Substantially all of TruePosition's reported revenue in 2005 and 2006 was derived from AT&T. In November
2006, TruePosition amended its contract with AT&T to include, among other things, delivery of specified elements in the future. In accordance with the software revenue recognition rules under
generally accepted accounting principles, TruePosition ceased recognition of certain revenue from AT&T pending delivery of the specified elements. Recognition of revenue earned from
T-Mobile is similarly deferred pending delivery of specified elements, which to date have not been delivered.

TruePosition's
location system is a passive network overlay system designed to enable mobile wireless service providers to determine the location of all network wireless devices,
including cellular and PCS telephones. Using its patented uplink time difference of arrival (U-TDOA) and angle of arrival (AOA) technology, TruePosition's location system calculates the
latitude and longitude of a designated wireless telephone or transmitter and forwards the information in real time to application software. TruePosition's offerings cover major wireless air interfaces
including Time Division Multiple

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Access
(TDMA), Advanced Mobile Phone System (AMPS), Code Division Multiple Access (CDMA) and Global System Mobile (GSM).

Although
many of the following services have not yet been developed, and may not be developed successfully or at all, TruePosition's wireless location technology could also be used to
implement a number of commercial location-based services including (1) comfort and security related applications, including child, pet and elderly tracking; (2) convenience/information
services such as "concierge" and "personal navigation" to identify and provide directions to the nearest restaurant, ATM, or gas station or allow travelers to obtain other information specific to
their location; (3) corporate applications, such as fleet or asset tracking to enable enterprises to better manage mobile assets to optimize service or cut costs;
(4) entertainment/community services such as "friend finder" or "m-dating" to allow mobile users to create a localized community of people with similar interests and receive
notification when another group member is close-by; (5) mobile commerce services to help users shop or purchase goods or services from the retailer closest to their current
location; and (6) safety related applications to help public or private safety organizations find or track mobile users in need of assistance or help locate stolen property. It is uncertain to
what extent TruePosition may ultimately be involved in the development of the foregoing services, or whether such services will be developed successfully at all. However, TruePosition has begun to
invest in the development of certain of these services through its subsidiaries Zoombak and Useful Networks. In this regard, Zoombak has developed and started selling GPS car and pet locator
devices and services.



FUN Technologies, Inc.'s primary business is the provision of online and interactive casual and fantasy sports games and sports information. FUN primarily
provides games and sports information through its Games, Fantasy Sports, Sports Information and International Games divisions. FUN's Games and International Games divisions operate and license a skill
game offering, which includes pay-for-play, person-to-person and tournament-based interactive skill and free games. FUN's Fantasy Sports division
operates its fantasy sports services, which include editorial content and fantasy sports games. FUN's Sports Information division provides on-line sports data and information services.

FUN's
Games division offers a range of free and tournament skill games through its own Internet sites, including WorldWinner.com, Skilljam.com and Teagames.com, and through its
distribution partners. Skill games are games in which a participant pays an entry fee to compete in tournaments against other participants for a prize, and in which the winner is determined based on
skill rather than on chance. FUN offers versions of common casual games such as Bejeweled® 2, branded content such as Scrabble® Cubes as well as internally developed games. FUN
also provides co-branded game portals and services to large interactive entertainment groups, including AOL, EA Pogo, MyPoints, MSN and GSN. FUN's Games division derives revenue through
fees collected from participants in online tournaments, advertising and the design and operation of skill game websites for third parties.

FUN's
Fantasy Sports division develops, operates and licenses fantasy sports games, fantasy sports league-hosting software, content and real-time sports statistics delivered
via broadband. Through FUN's own websites, including Fanball.com, CDMSports.com and Fantasycup.com, Fantasy Sports provides fantasy sports contests, content, strategy and insight. FUN's Fantasy Sports
division operates over 50 salary-cap and draft-style fantasy games for football, baseball, basketball, hockey, golf and auto racing enthusiasts and has private-label distribution
agreements with AOL, Speed Channel, The Golf Channel and Turner Sports Interactive (PGA Tour and Nascar.com), among others. FUN's Fantasy Sports division derives revenue through fees collected from
participants in online Fantasy Sports contests, advertising and the design and operation of fantasy sports websites for third parties.

FUN's
Sports Information division provides real-time sports information services for sports enthusiasts through FUN's destination site, DonBest.com. DonBest provides
customized subscription

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services
for real time odds, major line move alerts, injury reports and statistical reports. DonBest does not accept or make any wagers. FUN's Sports Information division derives revenue primarily
from subscriptions.

In
December 2007, we acquired the 47% of FUN's outstanding common shares that we did not already own, and we now own 100% of FUN.



Leisure Arts, Inc., a wholly owned subsidiary that we acquired in May 2007, is a publisher and distributor of lifestyle and instructional publications. It
publishes and markets how-to books, leaflets, DVDs, webcasts and online e-newsletters on topics such as cross stitching, knitting, crochet, quilting, scrap booking, paper
crafting and other crafts, decorative painting,
other needlework, sewing and holiday decorating. From its 150,000 square foot distribution center located in Little Rock, Arkansas, Leisure Arts ships both its own publications as well as those of
other publishers of how-to books and other media. Leisure Arts publications are sold in craft and fabric chain stores, discounters and general merchandise chain stores as well as in
bookstores and home & garden stores.

Leisure
Arts also produces and sells theMemories in the Makingline of scrapbook supplies and theExclusively
Youline of purse handles, hardware and other accents for handmade fashion accessories. These products are sold in fabric stores, yarn shops and other hobby suppliers.

Leisure
Arts employs a staff of full-time designers and contracts with outside publishing partners and licensing agencies.

Leisure
Arts derives revenue primarily from the sale of its publications and products. For the year ended December 31, 2007, Leisure Arts derived more than 55% of its revenue from
two customers, each of which generated more than 10% of Leisure Arts' revenue.



WFRV and WJMN Television Station, Inc., or WFRV TV Station, our wholly owned subsidiary that we acquired in April 2007, operates two full power television
stations: WFRV-TV, in Green Bay, Wisconsin, and WJMN-TV, in Escanaba, Michigan. WFRV TV Station has entered into an affiliation agreement with CBS Broadcasting Inc.,
which allows both stations to broadcast program offerings of the CBS Television Network in return for a fee and for each station's commitment to air CBS programming at specific times. This agreement
expires in 2014. Both stations also license programs from various producers and distributors and produce their own news and broadcast public affairs, sports and other programming to serve their local
markets. WFRV TV Station has the right to broadcast certain Green Bay Packers' preseason games and related programming under an agreement with Green Bay Packers Inc. which expires in 2012.

WFRV
TV Station generates most of its revenue by the sale of local and national advertising time during the stations' over the air broadcasts and on the stations' websites.



GSN, LLC owns and operates GSN. With approximately 66.6 million Nielsen subscribers as of December 31, 2007, GSN is a basic cable network
dedicated to game-related programming and interactive game playing. GSN offers 24-hour programming featuring game shows, casino games, reality series, documentaries and other
game-related shows. GSN features a full prime-time schedule of interactive programming, which allows viewers a chance to play along with GSN's televised games via GSN.com.

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GSN's
revenue is primarily derived from the delivery of its programming to subscribers under long-term affiliation agreements with cable systems, direct broadcast satellite
systems and Telco video providers and from the sale of advertising on its network. GSN's affiliation agreements provide for payments based on the number of subscribers that receive GSN's services and
expire between now and 2011. GSN is currently out of contract with DirecTV, a distributor that accounts for approximately 25% of GSN's current subscriber base, and is in negotiations for the renewal
of such contract. For the year ended December 31, 2007, GSN earned approximately 10% of its total revenue from each of Comcast and DirecTV.

We
and Sony Pictures Entertainment, a division of Sony Corporation of America, which is a subsidiary of Sony Corporation, each own 50% of GSN, LLC. GSN's
day-to-day operations are managed by a management committee of its board of managers. Pursuant to GSN's operating agreement, we and Sony each have the right to designate half
of the members of the management committee. Also pursuant to the operating agreement, we and Sony have agreed that direct transfers of our interests in GSN and certain indirect transfers that result
in a change of control of the transferring party are subject to a right of first refusal in favor of the non-transferring member.



WildBlue Communications, Inc. delivers two-way broadband Internet access via satellite to homes and small businesses in rural markets
underserved by terrestrial broadband alternatives. WildBlue provides coverage across the continental United States in the Ka spectrum band using a 26-inch outdoor unit and satellite modem.
WildBlue has a prepaid satellite life license for Ka-band capacity on Anik F2, which was launched in July 2004. WildBlue owns
outright its second satellite, WildBlue-1, which was launched in December 2006. Both of WildBlue's satellites are geo stationary satellites. The expected life of Anik F2 and
WildBlue-1 is approximately 15 years and 12 years, respectively.

WildBlue
launched its retail and wholesale service offerings in mid-2005. Its primary revenue is generated through subscription fees for its Internet access services as well
as fees for equipment sales and related installation charges. At December 31, 2007, WildBlue had over 280,000 subscribers. WildBlue also has distribution relationships with DIRECTV, EchoStar,
AT&T and the National Rural Telephone Cooperative and sells its products and services through retail channels consisting of web-based, direct mail, inbound telesales and a national dealer
network.

We
own an approximate 32% equity interest in WildBlue.



News Corporation is a diversified international media and entertainment company with operations in eight industry segments, including filmed entertainment,
television, cable network programming, direct broadcast satellite television, magazines and inserts, newspapers, book publishing and other. News Corporation's activities are conducted principally in
the United States, continental Europe, the United Kingdom, Asia, Australia and the Pacific Basin. News Corporation is a holding company that conducts all of its activities through subsidiaries and
affiliates. Its principal subsidiaries and affiliates are Fox Entertainment Group, Inc., Twentieth Century Fox Film Corporation, Fox Television Holdings, Inc., Fox Broadcasting Company,
Fox Sports Networks, Inc., NDS Group plc, News America Marketing In-Store Services, Inc., News American Marketing FSI, Inc., News International Limited, News
Limited, HarperCollins Publishers, Inc., HarperCollins Publishers Limited, STAR Group Limited, BSkyB and The DIRECTV Group. As of December 31, 2007, we owned shares representing an
approximate 16% equity interest and an approximate 19% voting interest in News Corporation.

As
discussed above, in February 2008 we completed an exchange transaction with News Corporation pursuant to which we exchanged our ownership interest in News Corporation for a

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subsidiary
of News Corporation which owns News Corporation's interests in The DIRECTV Group, Inc., three regional sports television networks and approximately $465 million in cash.



Expedia, Inc. is among the world's leading travel services companies, making travel products and services available to leisure and corporate travelers in
the United States and abroad through a diversified portfolio of brands, including Expedia, Hotels.com, Hotwire, private label programs (Worldwide Travel Exchange and Interactive Affiliate Network),
Expedia Corporate Travel, Classic Vacations, eLong, TripAdvisor and a range of other domestic and international brands and businesses. Expedia's various brands and businesses target the needs of
different consumers, including those who are focused exclusively on price and those who are focused on the breadth of product selection and quality of services. Expedia has created an easily
accessible global travel marketplace, allowing customers to research, plan and book travel products and services from travel suppliers and allows these travel suppliers to efficiently reach and
provide their products and services to Expedia customers. Through its diversified portfolio of domestic and international brands and businesses, Expedia makes available, on a stand-alone and package
basis, travel products and services provided by numerous airlines, lodging properties, car rental companies, cruise lines and destination service providers, such as attractions and tours. Using a
portfolio approach for Expedia's brands and businesses allows it to target a broad range of customers looking for different value propositions. Expedia reaches many customers in several countries and
multiple continents through its various brands and businesses, typically customizing international points of sale to reflect local language, currency, customs, traveler behavior and preferences and
local hotel markets, all of which may vary from country to country.

Expedia
generates revenue by reserving travel services as the merchant of record and reselling these services to customers at a profit. Expedia also generates revenue by passing
reservations booked by its customers to the relevant services for a fee or commission.

We
indirectly own an approximate 24% equity interest and a 58% voting interest in Expedia. We have entered into governance arrangements pursuant to which Mr. Barry Diller,
Chairman of the Board and Senior Executive Officer of Expedia, has voted our shares of Expedia, subject to certain limitations. These governance arrangements are substantially similar to the ones
described under "IAC/InterActiveCorp" below, which are the subject of pending litigation in Delaware (the "IAC Actions"). The IAC Actions are described in greater detail under the heading
"Legal Proceedings" in Item 3 of Part I of this Form 10-K.

In
conjunction with the IAC Actions, we removed Mr. Diller as President and a director of the record holders of our beneficially owned shares of Expedia representing a 48% voting
interest. Although Mr. Diller's ability to vote these shares in Expedia is not directly at issue in the IAC Actions, our removal of Mr. Diller and the outcome of this litigation may
affect how these shares are voted in the future. Because no current controversy has yet arisen with respect to these shares, neither side has taken formal legal action in connection with these shares
or the right to vote them.

Also
through our governance arrangements with Mr. Diller, we have the right to appoint and have appointed 20% of the members of Expedia's board of directors, which is currently
comprised of 10 members.



IAC/InterActiveCorp is a multi-brand interactive commerce company transacting business worldwide via the Internet, television and the telephone. IAC's portfolio
of companies collectively enables direct-to-consumer transactions across many areas, including home shopping, event ticketing, personals, travel, teleservices and local
services.

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IAC consists of the following sectors:



IAC's
businesses largely act as intermediaries between suppliers and consumers. IAC aggregates supply from a variety of sources and captures consumer demand across a variety of channels.

On
November 5, 2007, IAC announced that its board of directors approved in principle a plan to separate IAC into five publicly traded companies:



IAC
reported that the transaction is subject to a number of conditions, including, among others, final approval of the transaction specifics by IAC's board of directors, receipt of an
opinion of counsel regarding the tax-free nature of the transaction, and the filing and effectiveness of
registration statements with the SEC. At a meeting of IAC's board of directors on January 16, 2008, management of IAC made certain proposals to the board of directors regarding, among other
things, the structure of the spin off transactions and the assets and businesses to be attributed to each spin off company. In particular, we understand that IAC management is proposing that each of
the spin-off companies would have a single class of voting stock, as opposed to the two classes (one class with 1 vote per share and a second class with 10 votes per share) currently in
place at IAC. In addition, we understand that IAC management proposed that the spin off transactions would be submitted to IAC stockholders for approval. We refer to IAC's proposal as the
"Spin-Off Proposal". The Spin-Off Proposal, if effected, would have the result of diluting our voting power as it relates to each of the spin-off companies.

As
of February 15, 2008, we indirectly own an approximate 30% equity interest and a 62% voting interest in IAC. Pursuant to certain governance arrangements between
Mr. Barry Diller, Chairman of the Board and CEO of IAC, and our company, Mr. Diller voted our shares of IAC, subject to certain

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limitations,
and we had the right to appoint and had appointed two of the twelve members of IAC's board of directors. We believe that Mr. Diller's actions with respect to the
Spin-Off Proposal constitute a breach of our governance arrangements with Mr. Diller. As a result of Mr. Diller's breach of these governance arrangements, his right to vote
our shares has terminated, and the record holders of a majority of the voting power in IAC have acted by written consent to, among other things, remove Mr. Diller and certain other members of
the IAC board and appoint three of our officers to serve on the board of IAC, along with our two existing designees. The Spin-Off Proposal, Mr. Diller's breach of the governance
arrangements and the removal of the IAC directors, among other things, are the subject of pending litigation in Delaware. Pursuant to a status-quo order entered by a Delaware court, IAC is
required to give us advance notice of numerous actions and potential transactions, and Mr. Diller and the other persons serving as directors of IAC prior to the delivery of the IAC majority
stockholders' written consent will remain in office pending the outcome of the litigation. For more information about this litigation, please see "Legal Proceedings" included in Item 3 of
Part I of this Form 10-K.

Businesses Acquired in the News Corporation Transaction

In February 2008, we completed an exchange transaction with News Corporation pursuant to which we exchanged our ownership interest in News Corporation for a
subsidiary of News Corporation which owns an approximate 41% interest in The DIRECTV Group, Inc., three regional sports television networks (the "RSNs") and approximately $465 million in
cash.

Following
is a description of DIRECTV and the RSNs:



Upon completion of the exchange transaction with News Corporation, we acquired an approximate 41% interest in the DIRECTV Group, which is an equity affiliate.

The
DIRECTV Group is a leading provider of digital television entertainment in the United States and Latin America.

In
the United States, DIRECTV Holdings LLC or DIRECTV U.S. is the largest provider of direct-to-home digital television services and the second largest
provider in the multi-channel video programming distribution industry. DIRECTV U.S. provides access to more than 1,700 channels of digital-quality video pictures and CD-quality audio
programming directly to over 16 million subscribers' homes and businesses via high-powered satellites. To subscribe to the DIRECTV service, customers acquire a small receiving
satellite dish antenna, a digital set-top receiver and a remote control from DIRECTV or third party providers and, after installing such equipment, activate the DIRECTV service by
subscribing to one of DIRECTV's programming packages. DIRECTV currently has a fleet of ten high-powered satellites that it uses to distribute the DIRECTV service to its customers in the
United States. In addition, DIRECTV has three satellites under construction which when launched will provide DIRECTV with increased capability for local and national HD channels as well as capacity
for enhanced services.

In
Latin America (which includes South America, Central America and the Caribbean (including Puerto Rico)), DIRECTV Latin America provides local and international programming to
approximately 1.3 million subscribers in Brazil and 1.4 million subscribers in parts of Latin America other than Brazil and Mexico. In addition, DIRECTV's 41% affiliate, Sky Mexico, has
approximately 1.4 million subscribers in Mexico. DIRECTV Latin America provides services from leased transponders on two satellites. Sky Mexico provides its services from leased transponders on
a separate satellite.

DIRECTV
earns revenue primarily from monthly fees charged to subscribers for subscriptions to basic and premium channel programming, pay-per-view programming,
seasonal and live sporting events, DVR and HD programming fees. DIRECTV also earns revenue from monthly fees charged to

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subscribers
with multiple non-leased set-top receivers, monthly fees charged to subscribers for leased set-top receivers, hardware revenue from subscribers who
purchase set-top receivers from DIRECTV, DIRECTV's published programming guide, warranty service fees and advertising services.



Upon completion of the exchange transaction with News Corporation, we also acquired all of its interests in three regional sports networks, or RSNs: Fox Sports
Net Rocky Mountain, LLC, Fox Sports Net Northwest, LLC and Fox Sports Net Pittsburgh, LLC. Each RSN is currently affiliated with Fox Sports Net, Inc., a subsidiary of News
Corporation, and receives "back drop" national programming from Fox Sports such as The Best Damn Sports Show Period and Chris Myers Interviews. The RSNs will continue to receive national programming
from Fox Sports under agreements which last through 2011.

Each
RSN operates a regional video programming network devoted to local professional sports teams and college sporting events, and produces its own local programming, employing or hiring
the necessary on-air talent and technical personnel to produce and uplink game telecasts. Local programming is supplemented with the national "back drop" programming of Fox Sports.

Fox
Sports Net Rocky Mountain reaches approximately 2.5 million subscribers in Colorado, Utah, Wyoming, Montana, southern Idaho, western Nebraska, western Kansas and northeastern
Nevada. It has regional rights to the Colorado Rockies, Utah Jazz, Colorado Crush and Denver Broncos pre- and post-games, to sporting events at the University of Colorado,
Colorado State and the University of Denver and to Big 12 Conference football and woman's basketball.

Fox
Sports Net Northwest reaches approximately 3.0 million subscribers in Washington, Oregon, Idaho, Montana, Alaska, parts of Wyoming and parts of northern Nevada. Its broadcast
coverage includes the Seattle Mariners, Seattle Supersonics, Seattle Storm, the University of Washington, Washington State University, Oregon State University and Gonzaga University.

Fox
Sports Net Pittsburgh reaches approximately 2.3 million subscribers in Pennsylvania, West Virginia, Ohio, and western Maryland. Its coverage includes the Pittsburgh Pirates,
Pittsburgh Penguins and Cleveland Cavaliers, collegiate games of the University of Pittsburgh and West Virginia University and the WPIAL Football Championships.

The
RSNs derive revenue from fees paid by cable and DTH operators pursuant to affiliation agreements entered into with the RSNs and the sale of advertising time to local, regional and
national advertisers. The RSNs' affiliation agreements expire between now and 2011. For the year ended December 31, 2007, each of Fox Sports Net Rocky Mountain and Fox Sports Net Northwest
derived more than 10% of its total revenue from affiliation agreements with each of Comcast, DirecTV and Echostar, and Fox Sports Net Pittsburgh derived more than 10% of its revenue from its
affiliation agreement with Comcast.

Regulatory Matters



In the United States, the FCC regulates the providers of satellite communications services and facilities for the transmission of programming services, the cable
television systems and other multichannel video programming distributors that distribute such services, and, to some extent, the availability of the programming services themselves through its
regulation of program licensing. Cable television systems in the United States are also regulated by municipalities or other state and local government authorities. Cable television systems are
currently subject to federal rate regulation on the provision of basic service, except where subject to effective competition under FCC rules, and continued rate regulation or other franchise
conditions could place downward pressure on the fees

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cable
television companies are willing or able to pay for programming services in which we have interests. Regulatory carriage requirements also could adversely affect the number of channels available
to carry the programming services in which we have an interest.

Regulation of Program Licensing.The Cable Television Consumer Protection and Competition Act of 1992 (the 1992 Cable Act)
directed the FCC to promulgate regulations regarding the sale and acquisition of cable programming between multi-channel video programming distributors (including cable operators) and
satellite-delivered programming services in which a cable operator has an attributable interest. The legislation and the implementing regulations adopted by the FCC preclude virtually all exclusive
programming contracts between cable operators and satellite programmers affiliated with any cable operator (unless the FCC first determines that the contract serves the public interest) and generally
prohibit a cable operator that has an attributable interest in a satellite programmer from improperly influencing the terms and conditions of sale to unaffiliated multi-channel video programming
distributors. Further, the 1992 Cable Act requires that such affiliated programmers make their programming services available to cable operators and competing multi-channel video programming
distributors such as multi-channel multi-point distribution systems, which we refer to as MMDS, and direct broadcast satellite distributors on terms and conditions that do not unfairly discriminate
among distributors. The Telecommunications Act of 1996 extended these rules to programming services in which telephone companies and other common carriers have attributable ownership interests. The
FCC revised its program licensing rules by implementing a damages remedy in situations where the defendant knowingly violates the regulations and by establishing a timeline for the resolution of
complaints, among other things. Although we no longer own Liberty Cablevision of Puerto Rico Ltd. ("LCPR"), FCC rules continue to attribute an ownership interest in LCPR to us, thereby
subjecting us and satellite-delivered programming services in which we have an interest to the
program access rules. On September 11, 2007, the FCC extended the prohibition on exclusive programming contracts until 2012 and amended the program access complaint rules. The FCC also has
initiated a rulemaking proceeding to consider additional revisions to its program access rules, including, among others, changes in the complaint procedures, restrictions on the bundling of
programming services to distributors and the extension of the rules to terrestrially-delivered programming.

Regulation of Carriage of Programming.Under the 1992 Cable Act, the FCC has adopted regulations prohibiting cable operators
from requiring a financial interest in a programming service as a condition to carriage of such service, coercing exclusive rights in a programming service or favoring affiliated programmers so as to
restrain unreasonably the ability of unaffiliated programmers to compete.

Regulation of Ownership.The 1992 Cable Act required the FCC, among other things, (1) to prescribe rules and
regulations establishing reasonable limits on the number of channels on a cable system that will be allowed to carry programming in which the owner of such cable system has an attributable interest
and (2) to consider the necessity and appropriateness of imposing limitations on the degree to which multi-channel video programming distributors (including cable operators) may engage in the
creation or production of video programming. In 1993, the FCC adopted regulations limiting carriage by a cable operator of national programming services in which that operator holds an attributable
interest. However, in 2001, the United States Court of Appeals for the District of Columbia Circuit found that the FCC had failed to justify adequately the channel occupancy limit, vacated the FCC's
decision and remanded the rule to the FCC for further consideration. In response to the Court's decision, the FCC issued further notices of proposed rulemaking in 2001 and in 2005 to consider channel
occupancy limitations. Even if these rules were readopted by the FCC, they would have little impact on programming companies in which we have interests based upon our current attributable ownership
interests in cable systems. In its 2001 decision, the Court of Appeals also vacated the FCC's rule imposing a thirty percent limit on the number of subscribers served by systems nationwide in which a
multiple system operator can have an attributable ownership interest. After

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conducting
a further rulemaking regarding this ownership limitation, on December 18, 2007, the FCC again adopted a thirty percent limit on the number of subscribers served by a cable operator
nationwide. The FCC's rules also generally had prohibited common ownership of a cable system and broadcast television station with overlapping service areas. In 2002, the United States Court of
Appeals for the District of Columbia Circuit held that the FCC's decision to retain the cable/broadcast cross-ownership rule was arbitrary and capricious and vacated the rule. The FCC did not seek
Supreme Court review of this decision or initiate a new rulemaking proceeding. The FCC rules continue to prohibit common ownership of a cable system and MMDS with overlapping service areas.

Regulation of Carriage of Broadcast Stations.The 1992 Cable Act granted broadcasters a choice of must carry rights or
retransmission consent rights. The rules adopted by the FCC generally provided for mandatory carriage by cable systems of all local full-power commercial television broadcast signals
selecting must carry rights and, depending on a cable system's channel capacity, non-commercial television broadcast signals. Such statutorily mandated carriage of broadcast stations
coupled with the provisions of the Cable Communications Policy Act of 1984, which require cable television systems with 36 or more "activated" channels to reserve a percentage of such channels for
commercial use by unaffiliated third parties and permit franchise authorities to require the
cable operator to provide channel capacity, equipment and facilities for public, educational and government access channels, could adversely affect some or substantially all of the programming
companies in which we have interests by limiting the carriage of such services in cable systems with limited channel capacity. In 2001, the FCC adopted rules relating to the cable carriage of digital
television signals. Among other things, the rules clarify that a digital-only television station can assert a right to analog or digital carriage on a cable system. The FCC initiated a
further proceeding to determine whether television stations may assert rights to carriage of both analog and digital signals during the transition to digital television and to carriage of all digital
signals. In 2005, the FCC denied mandatory dual carriage of a television station's analog and digital signals during the digital television transition and also denied mandatory carriage of all of a
television station's digital signals, other than its "primary" signal. Television station owners continue to seek reconsideration of the FCC's decision and may seek judicial review or legislative
change of the FCC's decision. On September 11, 2007, the FCC adopted an order addressing cable operators' obligations to ensure that local broadcasters' primary video and program-related
material are viewable by all subscribers following completion of the digital transition. The FCC's order allows cable operators to comply with the viewability requirements by carrying a broadcaster's
digital signal in either analog format or digital format, provided that all subscribers have the necessary equipment to view the broadcast content. The viewability requirements extend to February
2012, and during the year prior thereto, the FCC will review the requirements based upon the state of technology and the marketplace.

Closed Captioning and Video Description Regulation.The Telecommunications Act of 1996 also required the FCC to establish
rules and an implementation schedule to ensure that video programming is fully accessible to the hearing impaired through closed captioning. The rules adopted by the FCC require substantial closed
captioning over an eight to ten year phase-in period, which began in 2000, with only limited exemptions. As a result, the programming companies in which we have interests may incur costs
for closed captioning.

A-La-Carte Proceeding.In 2004, the FCC's Media Bureau conducted a notice of inquiry proceeding
regarding the feasibility of selling video programming services "à-la-carte," i.e. on an individual or small tier basis. The Media Bureau released a
report in 2004, which concluded that à-la-carte sales of video programming services would not result in lower video programming costs for most consumers and that
they would adversely affect video programming networks. In 2006, the Media Bureau released a new report which stated that the 2004 report was flawed and which concluded that
à-la-carte sales could be in the best interests of consumers. Although the FCC's authority to mandate à-la-carte sales has
been questioned, its endorsement of the concept could encourage Congress to

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consider
proposals to mandate à-la-carte sales or otherwise seek to impose greater regulatory controls on how cable programming is sold. The programming
companies that distribute their services in tiers or packages of programming services would experience decreased distribution if à-la-carte carriage were
mandated.

Broadcast Regulation.The Communications Act permits the operation of television broadcast stations pursuant to a license
issued by the FCC upon a finding that the grant of the license would serve the
public interest, convenience and necessity. The FCC grants television broadcast station licenses for a maximum permitted term of eight years and, upon application, may renew the license for additional
terms. Generally, the FCC renews broadcast licenses upon finding that: (1) the television station has served the public interest, convenience and necessity; (2) there have been no
serious violations by the licensee of the Communications Act or FCC rules; and (3) there have been no other violations by the licensee of the Communications Act or FCC rules which, taken
together, indicate a pattern of abuse. After considering these factors, the FCC may grant the license renewal application with or without conditions, including renewal for a lesser term than the
maximum otherwise permitted, or hold an evidentiary hearing.

On
August 6, 2007, the FCC released a new table of allotments which provides television stations in the United States with final digital television ("DTV") channel assignments
following completion of the DTV transition on February 17, 2009. All full power television stations must cease transmission of analog signals by such date. On December 31, 2007, the FCC
released a report and order adopting final rules governing the DTV transition.

The
FCC regulates many aspects of broadcast station operations. For example, legislation enacted in 1990 limits the amount of commercial matter that may be broadcast during programming
designed for children age 12 and younger. In addition, under FCC license renewal processing guidelines, television stations are generally required to broadcast a minimum of three hours per week of
programming, which, among other requirements, must serve, as a "significant purpose," the educational and informational needs of children age 16 and younger. The FCC continues to enforce its
regulations regarding political advertising, environmental matters, equal employment opportunity, indecency, technical operating matters and antenna tower maintenance. FCC rules require the closed
captioning of almost all broadcast programming. FCC regulations governing network affiliation agreements mandate that television broadcast station licensees retain the right to reject or refuse
network programming that the licensee reasonably believes to be unsatisfactory or unsuitable, or contrary to the public interest, or to substitute programming that the licensee reasonably believes to
be of greater local or national importance. Violation of FCC regulations can result in substantial monetary forfeitures, periodic reporting conditions, short-term license renewals and, in
egregious cases, denial of license renewal or license revocation.

Copyright Regulation.The programming companies in which we have interests must obtain any necessary music performance rights
from the rights holders. These rights generally are controlled by the music performance rights organizations of the American Society of Composers, Authors and Publishers (ASCAP), Broadcast
Music, Inc. (BMI) and the Society of European Stage Authors and Composers (SESAC), each with rights to the music of various artists. The programming companies in which we have interests
generally have obtained the necessary rights through separate agreements with ASCAP, BMI and SESAC, which have negotiated agreements with some programmers that include new rate structures and may
require retroactive rate increases. Certain of the programming companies also have obtained licenses for music performance rights outside the United States through various licensing agencies located
in the foreign countries in which their services are distributed.

Satellites and Uplink.In general, authorization from the FCC must be obtained for the construction and operation of a
communications satellite. The FCC authorizes utilization of satellite orbital slots assigned to the United States by the World Administrative Radio Conference. Such slots

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are
finite in number, thus limiting the number of carriers that can provide satellite transponders and the number of transponders available for transmission of programming services. At present,
however, there are numerous competing satellite service providers that make transponders available for video services to the cable industry. The FCC also regulates the earth stations uplinking to
and/or downlinking from such satellites.



The Internet businesses in which we have interests are subject, both directly and indirectly, to various laws and governmental regulations. Certain of our
subsidiaries engaged in the provision of goods and services over the Internet must comply with federal and state laws and regulations applicable to online communications and commerce. For example, the
Children's Online Privacy Protection Act prohibits web sites from collecting personally identifiable information online from children under age 13 without parental consent and imposes a number of
operational requirements. Certain email activities are subject to the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, commonly known as the
CAN-SPAM Act. The CAN-SPAM Act regulates the sending of unsolicited commercial email by requiring the email sender, among other things, to comply with specific disclosure
requirements and to provide an "opt-out" mechanism for recipients. Both of these laws include statutory penalties for non-compliance. Various states also have adopted laws
regulating certain aspects of Internet communications. Goods sold over the Internet also must comply with traditional regulatory requirements, such as the Federal Trade Commission requirements
regarding truthful and accurate claims. With regard to state and local taxes, legislation enacted by Congress in 2007 extended the moratorium on such taxes on Internet access and commerce until 2014.

Congress
and individual states may consider additional online privacy legislation. Other Internet-related laws and regulations enacted in the future may cover issues such as defamatory
speech, copyright infringement, pricing and characteristics and quality of products and services. The future adoption of such laws or regulations may slow the growth of commercial online services and
the Internet, which could in turn cause a decline in the demand for the services and products of the Internet companies in which we have interests and increase such companies' costs of doing business
or otherwise have an adverse effect on their businesses, operating results and financial conditions. Moreover, the applicability to commercial online services and the Internet of existing laws
governing issues such as property ownership, libel, personal privacy and taxation is uncertain and could expose these companies to substantial liability.



On February 26, 2008, the FCC released its Memorandum Opinion and Order ("FCC Order") approving the Consolidated Application for Authority to Transfer
Control of The DIRECTV Group, Inc. from News Corporation to our company. FCC approval was required to conclude the exchange transaction with News Corporation discussed above. The FCC determined
that we acquired, under applicable FCC regulations, a de facto controlling interest in DIRECTV, the parent company of DirecTV Holdings LLC ("DirecTV U.S."). The FCC Order made its approval
subject to certain conditions modeled on similar conditions imposed in 2003 when the FCC approved the transfer of control of DIRECTV to News Corporation, including program access and
non-discrimination, program carriage, RSN arbitration and retransmission consent arbitration conditions. In addition, the FCC is requiring that, within one year of the date of adoption of
the FCC Order, all of the attributable interests connecting the separate operations in Puerto Rico of DIRECTV and of a subsidiary of Liberty Global, Inc., an independent publicly traded
company, must be severed through divestiture or by otherwise making the interests non-attributable, in accordance with applicable FCC regulations, at which point the companies must certify
either that they have reduced the relevant interests to a non-attributable level or that they have filed any applications necessary to divest assets.

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DirecTV
U.S. is the largest provider of direct broadcast satellite ("DBS") service in the United States. DBS operators are subject to extensive FCC regulation, including:
(1) licensing of DBS satellites, earth stations and ancillary communications authorizations; (2) assignment of frequencies and orbital slots, relocation of satellites to different
orbital locations or the replacement of an existing satellite with a new satellite; (3) compliance with the terms and conditions of assignments and authorizations, including required timetables
for construction and operation of satellites; and (4) avoidance of interference with the operations of other entities that use the radio spectrum.

DBS
operators also must comply with Communications Act requirements, such as: (1) certain carriage requirements for local broadcast stations; (2) limitations on the
retransmission of distant television signals; (3) set-aside of certain channel capacity for noncommercial programming of an educational or informational nature; and
(4) participation in the national emergency alert system.



We also have significant ownership interests on a cost basis in other entities, such as Sprint Nextel Corporation, which are extensively regulated. For example,
Sprint Nextel is subject not only to federal regulation but also to regulation in varying degrees, depending on the jurisdiction, by state and local regulatory authorities.



The regulation of programming services, cable television systems and satellite licensees is subject to the political process and has been in constant flux over
the past decade. Further material changes in the law and regulatory requirements must be anticipated and there can be no assurance that our business will not be adversely affected by future
legislation, new regulation or deregulation.

Competition

Our businesses that engage in video and on-line commerce compete with traditional offline and online retailers ranging from large department stores to
specialty shops, other electronic retailers, direct marketing retailers, such as mail order and catalog companies, and discount retailers. In addition, QVC and IAC's subsidiary, Home Shopping Network,
compete for access to customers and audience share with other conventional forms of entertainment and content. Provide Commerce competes with online floral providers such as
1-800-FLOWERS and Hallmark Flowers and floral wire services such as FTD and Teleflora. We believe that the principal competitive factors in the markets in which our electronic
commerce businesses compete are high-quality products, freshness, brand recognition, selection, value, convenience, price, website performance, customer service and accuracy of order
shipment.

Our
businesses that distribute programming for cable and satellite television compete with other programmers for distribution on a limited number of channels. Increasing concentration in
the multichannel video distribution industry could adversely affect the programming companies in which we have interests by reducing the number of distributors to whom they sell their programming,
subjecting more of their programming sales to volume discounts and increasing the distributors' bargaining power in negotiating new affiliation agreements. Once distribution is obtained, the
programming services of our programming businesses compete for viewers and advertisers with other cable and off-air broadcast television programming services as well as with other
entertainment media, including home video, pay-per-view services, online activities, movies and other forms of news, information and entertainment. Our programming businesses
also compete for creative talent and programming content. In addition, Starz Entertainment relies on third parties for substantially all of its programming content whereas Starz Entertainment's
competitors produce some of their own programming content. We believe that the principal competitive factors for our programming businesses are prices charged for programming,

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the
quantity, quality, exclusivity and variety of the programming offered and the effectiveness of marketing efforts.

Our
businesses that offer services through the Internet compete with businesses that offer their own services directly through the Internet as well as with online and offline providers
of similar services including providers of ticketing services, lending services, travel agencies, operators of destination search sites and search-centric portals, search technology providers, online
advertising networks, site aggregation companies, media, telecommunications and cable companies, Internet service providers and niche competitors that focus on a specific category or geography.
Expedia also competes with hoteliers and airlines as well as travel planning service providers, including aggregator sites that offer inventory from multiple suppliers, such as airline sites, Orbitz,
Travelocity and Priceline, and with American Express and Navigant International, providers of corporate travel services. We believe that the principal competitive factors in the markets in which our
businesses that offer services through the Internet engage are selection, price, availability of inventory, convenience, brand recognition, accessibility, customer service, reliability, website
performance, and ease of use.

Starz
Media faces competition from companies within the entertainment business and from alternative forms of leisure entertainment. Starz Media's animated films compete directly with
other animation producer/motion picture studio teams including Pixar, Disney, DreamWorks, and Blue Sky/Twentieth Century Fox, among others. Because of the importance of the domestic theatrical market
in determining revenue from other sources, the primary competition for Starz Media's theatrical films and its other filmed products comes from both animated and live-action films that are
targeted at similar audiences and released into the domestic theatrical market at approximately the same time as Starz Media's films. In addition to competing for box office receipts, Starz Media
competes with other film studios over optimal release dates and the number of motion picture screens on which movies are exhibited. In addition, it competes with other films released into the
international theatrical market and the worldwide home video/DVD and television markets. Starz Media also competes with other movie studios for the services of creative and technical personnel,
particularly in the fields of animation and technical direction.

The
Anchor Bay and Manga distribution operations compete with the distribution divisions of major theatrical production companies, as well as with several other independent home
video/DVD distribution companies, including GoodTimes Entertainment, Lyrick Studios, Sony Wonder and VIZ Entertainment.

Employees

As of December 31, 2007, we had 70 corporate employees, and our consolidated subsidiaries had an aggregate of approximately 19,000 full and
part-time employees. We believe that our employee relations are good.



For financial information related to the geographic areas in which we do business, see note 17 to our consolidated financial statements found in
Part II of this report.



All of our filings with the Securities and Exchange Commission (the "SEC"), including our Form 10-Ks, Form 10-Qs and
Form 8-Ks, as well as amendments to such filings are available on our Internet website free of charge generally within 24 hours after we file such material with the SEC. Our
website address is www.libertymedia.com.

The
information contained on our website is not incorporated by reference herein.

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Item 1A.    Risk Factors

The risks described below and elsewhere in this annual report are not the only ones that relate to our businesses or our capitalization.
The risks described below are considered to be the most material. However, there may be other unknown or unpredictable economic, business, competitive, regulatory or other factors that also could have
material adverse effects on our businesses. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in
future periods. If any of the events described below were to occur, our businesses, prospects, financial condition, results of operations and/or cash flows could be materially adversely
affected.

Risk Factors Relating to Our Company

The risks described below apply to our company.

We do not have the right to manage our business affiliates, which means we are not able to cause those affiliates to operate in a manner that is favorable to
us.We do not have the right to manage the businesses or affairs of any of our business affiliates (generally those companies in which we have less than a majority
stake). Rather, our rights may take the form of representation on the board of directors or a partners' or similar committee that supervises management or possession of veto rights over significant or
extraordinary actions. The scope of our veto rights vary from agreement to agreement. Although our board representation and veto rights may enable us to exercise influence over the management or
policies of a business affiliate, enable us to prevent the sale of material assets by a business affiliate in which we own less than a majority voting interest or prevent us from paying dividends or
making distributions to its stockholders or partners, they will not enable us to cause these actions to be taken.

The liquidity and value of our interests in our business affiliates may be affected by market conditions beyond our control that could cause us to take
significant impairment charges due to other than temporary declines in the market value of our available for sale securities.Included among our assets are equity
interests in one or more publicly-traded companies which are accounted for as available for sale securities. The value of these interests may be affected by economic and market conditions that are
beyond our control. We are required by U.S. generally accepted accounting principles to determine, from time to time, whether a decline in the market value of any of those investments below our cost
for that investment is other than temporary. If we determine that the decline is other than temporary, we are required to write down its cost to a new cost basis, with the amount of the
write-down accounted for as a realized loss in the determination of net income for the period in which the write-down occurs. We have at times realized significant losses due
to other than temporary declines in the fair value of certain of our available for sale securities, and we may be required to realize further losses of this nature in future periods. A number of
factors are used in determining the fair value of an investment and whether any decline in an investment is other than temporary. As the assessment of fair value and any resulting impairment losses
requires a high degree
of judgment and includes significant estimates and assumptions, the actual amount we may eventually realize for an investment could differ materially from our assessment of the value of that
investment made in an earlier period. In addition, our ability to liquidate these interests without adversely affecting their value may be limited.

A substantial portion of our debt is held above the operating subsidiary level, and we could be unable in the future to obtain cash in amounts sufficient to
service that debt and our other financial obligations.As of December 31, 2007, we had $8.3 billion principal amount of debt outstanding. Our ability
to meet our financial obligations will depend upon our ability to access cash. Our sources of cash include our available cash balances, net cash from operating activities, dividends and interest from
our investments, availability under credit facilities, monetization of our public investment portfolio and proceeds from asset sales. There are no assurances that we will maintain the amounts of cash,
cash equivalents or marketable securities that we maintained over the past few years.

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The
ability of our operating subsidiaries to pay dividends or to make other payments or advances to us depends on their individual operating results and any statutory, regulatory or
contractual restrictions to which they may be or may become subject. Some of our subsidiaries are subject to loan agreements that restrict sales of assets and prohibit or limit the payment of
dividends or the making of distributions, loans or advances to stockholders and partners.

We
do not generally receive cash, in the form of dividends, loans, advances or otherwise, from our business affiliates. In this regard, we will not have sufficient voting control over
most of our business affiliates to cause those companies to pay dividends or make other payments or advances to their partners or stockholders, including our company.

Our subsidiaries and business affiliates depend on a limited number of potential customers for carriage of their
programming.The cable television and direct-to-home satellite industries have been undergoing a period of consolidation. As a result, the
number of potential buyers of our programming services is decreasing. In this more concentrated market, there can be no assurance that our owned and affiliated program suppliers will be able to obtain
or maintain carriage of their programming services by distributors on commercially reasonable terms or at all.

Rapid technological advances could render the products and services offered by our subsidiaries and business affiliates obsolete or
non-competitive.Our subsidiaries and business affiliates must stay abreast of rapidly evolving technological developments and offerings to remain
competitive and increase the utility of their services. These subsidiaries and business affiliates must be able to incorporate new technologies into their products in order to address the needs of
their customers.
There can be no assurance that they will be able to compete with advancing technology, and any failure to do so may adversely affect our company.

Certain of our subsidiaries and business affiliates depend on their relationships with third party distribution channels, suppliers and advertisers and any
adverse changes in these relationships could adversely affect our results of operations.An important component of the success of our subsidiaries and business
affiliates is their ability to maintain their existing, as well as build new, relationships with third party distribution channels, suppliers and advertisers, among other parties. Adverse changes in
existing relationships or the inability to enter into new arrangements with these parties on favorable terms, if at all, could have a significant adverse effect on our results of operations.

Adverse events or trends in the industries in which our subsidiaries and business affiliates operate could harm our
company.In general, our subsidiaries and business affiliates are sensitive to trends and events that are outside their control. For example, adverse trends or
events, such as general economic downturns, decreases in consumer spending and natural or other disasters, among other adverse events and trends, could have a significantly negative impact on our
company.

Our subsidiaries and business affiliates are subject to risks of adverse government regulation.Programming services, cable
television systems, the Internet, telephony services and satellite carriers are subject to varying degrees of regulation in the United States by the Federal Communications Commission and other
entities and in foreign countries by similar entities. Such regulation and legislation are subject to the political process and have been in constant flux over the past decade. The application of
various sales and use tax provisions under state, local and foreign law to certain of our subsidiaries' and business affiliates' products and services sold via the Internet, television and telephone
is subject to interpretation by the applicable taxing authorities, and no assurance can be given that such authorities will not take a contrary position to that taken by those subsidiaries and
business affiliates, which could have a material adverse effect on their business. In addition, there have been numerous attempts at the federal, state and local levels to impose additional taxes on
online commerce transactions. Moreover, substantially every foreign country in which our subsidiaries or business affiliates have, or may in the future make, an investment regulates, in varying
degrees, the distribution,

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content
and ownership of programming services and foreign investment in programming companies and wireline and wireless cable communications, satellite and telephony services and the Internet. Further
material changes in the law and regulatory requirements must be anticipated, and there can be no assurance that our business and the business of our affiliates will not be adversely affected by future
legislation, new regulation or deregulation.

The success of certain of our subsidiaries and business affiliates whose businesses involve the Internet depends on maintaining the integrity of their systems and
infrastructure.A fundamental requirement for online commerce and communications is the secure transmission of confidential information, such as credit card
numbers or other personal information, over public networks. If the security measures of any of our subsidiaries or business affiliates engaged in online commerce were to be compromised, it
could have a detrimental effect on their reputation and adversely affect their ability to attract customers.

Computer
viruses transmitted over the Internet have significantly increased in recent years, thereby increasing the possibility of disabling attacks on and damage to websites of our
subsidiaries and business affiliates whose businesses are dependent on the Internet. In addition, certain of our subsidiaries and business affiliates rely on third-party computer systems and service
providers to facilitate and process a portion of their transactions. Any interruptions, outages or delays in these services, or a deterioration in their performance, could impair the ability of these
subsidiaries and business affiliates to process transactions for their customers and the quality of service they can offer to them.

The success of certain of our subsidiaries and business affiliates is dependent upon audience acceptance of its programs and programming services which is
difficult to predict.Entertainment content production and premium subscription television program services are inherently risky businesses because the revenue
derived from the production and distribution of a cable program and the exhibition of theatrical feature films and other programming depend primarily upon their acceptance by the public, which is
difficult to predict. The commercial success of a cable program or premium subscription television service depends upon the quality and acceptance of other competing programs and films released into
the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible and intangible factors,
many of which are difficult to predict. Audience sizes for cable programming and premium subscription television program services are important factors when cable television and DTH satellite
providers negotiate affiliation agreements and, in the case of cable programming, when advertising rates are negotiated. Consequently, low public acceptance of cable programs and premium subscription
television program services will have an adverse effect on our results of operations.

Increased programming and content costs may adversely affect profits.Our subsidiaries and business affiliates produce
programming and incur costs for all types of creative talent including actors, writers and producers. These subsidiaries and business affiliates also acquire programming, such as movies and television
series, from television production companies and movie studios. An increase in the costs of programming may lead to decreased profitability.

Risk Factors Relating to QVC

The risks described below are unique to QVC.

QVC conducts its merchandising businesses under highly competitive conditions.Although QVC is the nation's largest home
shopping network, it has numerous and varied competitors at the national and local levels, including conventional and specialty department stores, other specialty stores, mass merchants, value
retailers, discounters, and Internet and mail-order retailers. Competition is characterized by many factors, including assortment, advertising, price, quality, service, location,

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reputation
and credit availability. If QVC does not compete effectively with regard to these factors, its results of operations could be materially and adversely affected.

QVC's sales and operating results depend on its ability to predict or respond to consumer preferences.QVC's sales and
operating results depend in part on its ability to predict or respond to changes in consumer preferences and fashion trends in a timely manner. QVC develops new retail concepts and continuously
adjusts its product mix in an effort to satisfy customer demands. Any sustained failure to identify and respond to emerging trends in lifestyle and consumer preferences could have a material adverse
affect on QVC's business. Consumer spending may be affected by many factors outside of QVC's control, including competition from store-based retailers, mail-order and Internet companies,
consumer confidence and preferences, and general economic conditions.

QVC's success depends in large part on its ability to recruit and retain key employees capable of executing its unique business
model.QVC has a business model that requires it to recruit and retain key employees with the skills necessary for a unique business that demands knowledge of the
general retail industry, television production, direct to consumer marketing and fulfillment and the Internet. We can not assure you that if QVC experiences turnover of its key employees, they will be
able to recruit and retain acceptable replacements because the market for such employees is very competitive and limited.

QVC has operations outside of the United States that are subject to numerous operational and financial risks.QVC has
operations in countries other than the United States and are subject to the following risks inherent in international operations:



Item 1B.    Unresolved Staff Comments

None.

Item 2.    Properties.

We own our corporate headquarters in Englewood, Colorado. All of our other real or personal property is owned or leased by our subsidiaries and business
affiliates.

QVC
owns its corporate headquarters and operations center in West Chester, Pennsylvania. It also owns call centers in San Antonio, Texas, Port St. Lucie, Florida, Chesapeake,
Virginia and Bochum,

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Germany,
as well as a call center and warehouse in Knowsley, United Kingdom. QVC owns a distribution center in Hücklehoven, Germany and distribution centers in Lancaster, Pennsylvania,
Suffolk, Virginia, Rocky Mount, North Carolina, Florence, South Carolina and Sakura-shi, Chiba, Japan. To supplement the facilities it owns, QVC also leases various facilities in the
United States, the United Kingdom, Germany and Japan for retail outlet stores, office space, warehouse space and call center locations.

Starz
Entertainment owns its corporate headquarters in Englewood, Colorado. In addition, Starz Entertainment leases office space for its business affairs and sales staff at five
locations around the United States.

Starz
Media leases space for its executive offices, distribution and sales operations, and production studio facilities in Burbank, California, Troy, Michigan, Beverly Hills, California
and New York, New York. Starz Media also leases space for its international production and distribution operations in Toronto, Ontario, Vancouver, British Columbia, London, England and Melbourne,
Australia.

Our
other subsidiaries and business affiliates own or lease the fixed assets necessary for the operation of their respective businesses, including office space, transponder space,
headends, cable television and telecommunications distribution equipment, telecommunications switches and customer equipment (including converter boxes). Our management believes that our current
facilities are suitable and adequate for our business operations for the foreseeable future.

Item 3.    Legal Proceedings.

Liberty/IAC Litigation

On January 22, 2008, IAC and Barry Diller, Chairman of the Board and CEO of IAC, filed a complaint styledIAC/InteractiveCorp, et
al. v. Liberty Media Corporation, C.A. No. 3486 in the Court of Chancery (the "Chancery Court") of the State of Delaware against our company seeking a declaratory
judgment that, among other things, (i) the Spin-Off Proposal (as described above) complies with IAC's charter and certain governance arrangements existing between our company and
Mr. Diller (collectively, the "Governance Arrangements"), pursuant to which Mr. Diller voted our shares of IAC common stock and IAC Class B common stock, subject to certain
limitations, and (ii) Mr. Diller is permitted to vote all shares of IAC common stock and IAC Class B common stock beneficially owned by us in favor of the Spin-Off
Proposal.

On
January 24, 2008, we filed a complaint styledLiberty Media Corporation, et al. v. Diller, et al., C.A. No. 3491 in the
Chancery Court against IAC, Mr. Diller and certain other members of IAC's board of directors seeking a judgment that, among other things, the Spin-Off Proposal constitutes a
violation of IAC's charter, breaches of fiduciary duty on the part of each of the incumbent directors (other than our two designees), and breaches of the Governance Arrangements. As a result of
Mr. Diller's breach of the Governance Arrangements, the proxy held by Mr. Diller with respect to our shares of IAC common stock and IAC Class B common stock was terminated in
accordance with its terms.

On
January 28, 2008, the record holders of a majority of the voting power in IAC acted to, among other things, (i) execute and deliver to IAC a stockholder consent (the
"IAC Stockholder Consent") that amended IAC's bylaws, removed Mr. Diller and certain other directors from IAC's board of directors and appointed Gregory B. Maffei, Mark D. Carleton, and William
R. Fitzgerald to IAC's board of directors (in addition to Liberty's two current designees); and (ii) file a complaint styledLMC Silver King, Inc., et al.
v. IAC/InteractiveCorp, et al., C.A. No. 3501 in the Chancery Court against IAC, Mr. Diller and certain of the other members of IAC's board of directors
requesting that, among other things, the Chancery Court declare that the IAC Stockholder Consent was duly and validly executed and was immediately effective in all respects upon delivery to IAC.

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These
three actions were consolidated by the Chancery Court on February 6, 2008 in the action styledIn re IAC/InterActiveCorp C.A.
No. 3486-VCL. Trial for the consolidated action concluded before the Chancery Court on March 14, 2008. Pending resolution of the validity of the IAC
Stockholder Consent by the Chancery Court, a status-quo order has been entered by the Chancery Court pursuant to which, among other things, Mr. Diller and the other persons serving
as
directors of IAC prior to the delivery of the IAC Stockholder Consent will remain in office pending the outcome of the litigation.

IAC Stockholder Litigations

On January 30, 2008, Salvatore Caruso, purportedly on behalf of a class of IAC stockholders, filed a complaint (the "Caruso Complaint") in the Chancery
Court, styledCaruso v. Malone, et al., C.A. No. 3509-VCL (the "Caruso Action"). The Caruso Action seeks declaratory relief stating
that our opposition to the Spin-Off Proposal, through our designees on the IAC board of directors, is a violation of those designees' fiduciary duties to IAC's public stockholders. The
Caruso Action remains pending and the defendants anticipate moving to dismiss the Caruso Complaint in the near future. No date has been set for trial.

On
February 8, 2008, St. Clair Shores Police and Fire Retirement Systems, purportedly on behalf of a class of IAC stockholders, filed a complaint (the "Saint Clair
Complaint") in the Chancery Court styledSt. Clair Shores Police and Fire Retirement Systems v. Berkman, et al.C.A.
No. 3535-VCL (the "Saint Clair Action"). The Saint Clair Complaint names as defendants the current board of directors of IAC as well as our company and seeks a declaration that
IAC's charter requires IAC to issue shares of single vote stock of the spin-off companies to both the holders of IAC's low-vote Common Stock and IAC's controlling
high-vote Class B Common Stock. The Saint Clair Complaint also seeks a declaration that issuing anything other than low-vote shares to IAC's Class B Common Stock
would constitute a breach of the fiduciary duties of the members of the IAC board and an order requiring the defendants to account for all damages caused to IAC's public stockholders. The Saint Clair
Action remains pending and the defendants anticipate moving to dismiss the Saint Clair Complaint in the near future. No date has been set for trial.

Item 4.    Submission of Matters to a Vote of Security Holders.

Omitted pursuant to General Instruction I(2)(c) of Form 10-K.

I-30

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PART II.

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.



As of December 31, 2007, all of our outstanding common stock is held by Liberty Media Corporation. Prior to May 10, 2006, our two series of common
stock, Series A and Series B, traded on the New York Stock Exchange under the symbols L and LMC.B, respectively. The following table sets forth the range of high and low sales prices of
shares of our common stock for the year ended December 31, 2006.

Series A (L)

Series B (LMC.B)High

Low

High

Low2006First quarter

$
8.44

7.73

8.50

7.80Second quarter through May 9, 2006

$
8.76

8.20

8.90

8.20




As of January 31, 2008, all of our common stock is held by Liberty Media Corporation.



We have not paid any cash dividends on our common stock, and we have no present intention of so doing. Payment of cash dividends, if any, in the future will be
determined by our Board of Directors in light of our earnings, financial condition and other relevant considerations.

Item 6.    Selected Financial Data.

Omitted pursuant to General Instruction I(2)(a) of Form 10-K.

Item 7.    Management's Discussion and Analysis of Results of Operations.

The following discussion and analysis provides information concerning our results of operations. This discussion should be read in conjunction with our
accompanying consolidated financial statements and the notes thereto.

Overview

We are a holding company that owns controlling and non-controlling interests in a broad range of video and on-line commerce, media,
communications and entertainment companies. Our more significant operating subsidiaries, which are also our principal reportable segments, are QVC, Inc. and Starz Entertainment, LLC. QVC
markets and sells a wide variety of consumer products in the United States and several foreign countries, primarily by means of televised shopping programs on the QVC networks and via the Internet
through its domestic and international websites. Starz Entertainment provides premium programming distributed by cable operators, direct-to-home satellite providers, other
distributors and via the Internet throughout the United States.

In
2006, we began implementing a strategy to convert investments into operating businesses. In August 2006, we exchanged our cost investment in IDT Corporation for IDT's subsidiary IDT
Entertainment, which is now known as Starz Media. Also in 2006, we acquired controlling interests in Provide Commerce, Inc., FUN Technologies, Inc. and BuySeasons, Inc. In 2007,
(1) we exchanged our shares of CBS Corporation Class B common stock for a subsidiary of CBS that holds WFRV and

II-1

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WJMN
Television Station, Inc. and approximately $170 million in cash, (2) we exchanged approximately 68.5 million shares of Time Warner Inc. common stock for a
subsidiary of Time Warner which holds Atlanta National League Baseball Club, Inc., Leisure Arts, Inc. and $984 million in cash and (3) we acquired a controlling interest in
each of Backcountry.com, Inc. and Bodybuilding.com, LLC. In February 2008, we exchanged our investment in News Corporation for a News Corporation subsidiary which owns News Corporations'
approximate 41% interest in The DIRECTV Group, three regional sports television networks and $465 million in cash (the "News Corporation Exchange").

Our
"Corporate and Other" segment includes our other consolidated subsidiaries and corporate expenses. Our other consolidated subsidiaries include Provide Commerce, Inc., Starz
Media, LLC, FUN Technologies, Inc., Atlanta National League Baseball Club, Inc., Leisure Arts, Inc., TruePosition, Inc., BuySeasons, Inc.,
Backcountry.com, Inc., Bodybuilding.com, LLC and WFRV and WJMN Television Station, Inc. ("WFRV TV Station"). Provide, which we acquired in February 2006, operates an
e-commerce marketplace of websites for perishable goods, including flowers, gourmet
foods, fruits and desserts. Starz Media, which we acquired in the third quarter of 2006, is focused on developing, acquiring, producing and distributing live-action and animated films and
television productions for the home video, film, broadcast and direct-to-consumer markets. FUN, in which we acquired a controlling interest in March 2006, operates websites
that offer casual gaming, sports information and fantasy sports services. Atlanta National League Baseball Club, Inc. ("ANLBC"), which we acquired in May 2007, owns the Atlanta Braves, a major
league baseball club, as well as certain of the Atlanta Braves' minor league clubs. Leisure Arts, which we acquired in May 2007, publishes and markets needlework, craft, decorating, entertaining and
other lifestyle interest "how-to" books. TruePosition provides equipment and technology that deliver location-based services to wireless users. BuySeasons, which we acquired in August
2006, operates BuyCostumes.com, an on-line retailer of costumes, accessories, décor and party supplies. Backcountry, which we acquired in June 2007, operates six websites
offering outdoor and backcountry sports gear and clothing. Bodybuilding.com, which we acquired on December 31, 2007, manages two websites related to sports nutrition, body building and fitness.
WFRV TV Station, which we acquired in April 2007, is a CBS broadcast affiliate that serves Green Bay, Wisconsin and Escanaba, Michigan.

In
addition to the foregoing businesses, we hold an approximate 24% interest in Expedia, Inc., which we account for as an equity method investment, and we continue to maintain
significant investments and related financial instruments in public companies such as IAC/InterActiveCorp, Time Warner Inc. and Sprint Nextel Corporation, which are accounted for at their
respective fair market value and are included in corporate and other.

2007 Completed Transactions

In addition to the sales of OPTV and AEG discussed under "Discontinued Operations" below, we have several other completed transactions in 2007. Among these are:

On
April 16, 2007, we completed an exchange transaction (the "CBS Exchange") with CBS Corporation pursuant to which we exchanged our 7.6 million shares of CBS
Class B common stock valued at $239 million for a subsidiary of CBS that holds WFRV TV Station and approximately $170 million in cash.

On
May 17, 2007, we completed an exchange transaction (the "Time Warner Exchange") with Time Warner Inc. in which we exchanged approximately 68.5 million shares of
Time Warner common stock valued at $1,479 million for a subsidiary of Time Warner which holds ANLBC, Leisure Arts and $984 million in cash.

On
June 22, 2007, we acquired 81.3% of the outstanding capital stock of Backcountry.com, Inc. for cash consideration of $120 million, of which $11 million
will be held in escrow for one year following the closing to satisfy any indemnification claims.

II-2

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On
December 31, 2007, we acquired 82.9% of the outstanding equity of Bodybuilding.com, LLC for cash consideration of $116 million, of which $5 million will be
held in escrow for one year following the closing to satisfy any indemnification claims.

Discontinued Operations

In the fourth quarter of 2006, we committed to two separate transactions pursuant to which we intended to sell our interests in OpenTV Corp and Ascent
Entertainment Group ("AEG") to unrelated third parties. The sale of OpenTV for approximately $132 million in cash was completed in January 2007. Pursuant to an agreement with OpenTV, we paid
OpenTV approximately $5 million of the sales proceeds at closing and approximately $14 million of the sales proceeds on the first anniversary of the closing upon the satisfaction of
certain conditions. The sale of AEG, of which the primary asset is 100% of the common stock of On Command Corporation, for $332 million in cash and 2.05 million shares of common stock of
the buyer valued at approximately $50 million was completed in April 2007.

OpenTV
and AEG each met the criteria of Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," for classification as assets held for sale as of December 31, 2006.

On
July 21, 2005, we completed the spin off of our wholly-owned subsidiary, Discovery Holding Company ("DHC"), to our shareholders. At the time of the spin off, DHC's assets were
comprised of our 100% ownership interest in Ascent Media Group, our 50% ownership interest in Discovery Communications, Inc. and $200 million in cash. The spin off is intended to qualify
as a tax-free spin off. We recognized no gain or loss in connection with the spin off due to the pro rata nature of the distribution.

Our
consolidated financial statements and accompanying notes have been prepared to reflect OpenTV, AEG and DHC as discontinued operations. Accordingly, the assets and liabilities,
revenue, costs and expenses, and cash flows of these subsidiaries have been excluded from the respective captions in the accompanying consolidated balance sheets, statements of operations, statements
of comprehensive earnings (loss) and statements of cash flows and have been reported under the heading of discontinued operations in such consolidated financial statements.

Strategies and Challenges of Business Units

QVC faced several challenges in 2007 that adversely impacted revenue and operating cash flow growth. QVC intends to continue addressing those challenges in 2008.
Domestically, revenue and operating cash flow growth were negatively impacted by general economic conditions, and to a lesser extent, higher precious metals prices and increased penetration of
satellite television which hinders QVC's ability to gain favorable channel positioning. In the fall of 2007, QVC launched a national branding campaign to help drive awareness of its programming and
products and increase revenue. In 2008, QVC intends to continue its branding campaign to the extent it yields positive results, freshen its product mix and programming, enhance and optimize its
website and implement cost control measures.

In
2007, international results were negatively impacted by a number of factors. Results in Germany were hurt by increased competition and a soft retail market, as well as
QVC-Germany's over-reliance on certain categories of products. In 2008, QVC-Germany intends to diversify its programming and product mix and increase its focus on
underperforming product categories. In Japan, a heightened regulatory focus on health and beauty product presentations restricted QVC-Japan's ability to sell such products which have
historically comprised in excess of 40% of QVC-Japan's sales. In addition, the migration of Japanese viewers from analog to digital and the resulting increase in channels available to
Japanese viewers has hurt QVC's ability to obtain and retain customers. In 2008, QVC-Japan intends to stabilize the health and beauty category and grow its product categories other than
health and beauty.

II-3

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The
key challenges to achieving these goals in both the U.S. and international markets are (1) increased competition from other home shopping and Internet retailers,
(2) macro-economic conditions, (3) advancements in technology, such as video on demand and personal video recorders, which may alter TV viewing habits, (4) maintaining favorable
channel positioning as digital TV penetration increases and (5) successful management transition.

In
2007, Starz Entertainment's operating cash flow improved primarily due to reductions in programming costs, and to a lesser extent, increases in revenue and cost containment
initiatives. Such reductions in programming costs were achieved primarily due to lower theatrical performance of movies exhibited by Starz Entertainment. In 2008, Starz Entertainment's primary goal
will be to improve operating cash flow by increasing revenue. Starz Entertainment hopes to increase revenue by (i) improving brand awareness, (ii) selling suites of services, including
high definition, on demand and linear program offerings and (iii) launching original programming on the Starz channel. Another key initiative for Starz Entertainment in 2008 is to negotiate new
affiliation agreements with key distributors.

Starz
Entertainment faces several key obstacles in its attempt to meet these goals, including: (1) cable operators' promotion of bundled service offerings rather than premium
video services; (2) the impact on viewer habits of new technologies such as personal video recorders; (3) continued consolidation in the broadband and satellite distribution industries;
and (4) an increasing number of alternative movie and programming sources.

Results of Operations

To assist you in understanding and analyzing our businesses in the same manner we do, we have organized the following discussion of our results of operations into
two parts: Consolidated Operating Results and Operating Results by Business.

Consolidated Operating Results

Years ended December 31,2007

2006

2005amounts in millionsRevenueQVC

$
7,397

7,074

6,501Starz Entertainment


1,066

1,033

1,004Starz Media


254

86

Corporate and other


706

420

141Consolidated revenue

$
9,423

8,613

7,646Operating Cash Flow (Deficit)QVC

$
1,652

1,656

1,422Starz Entertainment


264

186

171Starz Media


(143
)
(24
)
Corporate and other


(42
)
(35
)
(52
)Consolidated operating cash flow

$
1,731

1,783

1,541Operating Income (Loss)QVC

$
1,114

1,130

921Starz Entertainment


210

163

105Starz Media


(342
)
(29
)
Corporate and other


(242
)
(243
)
(82
)Consolidated operating income

$
740

1,021

944


II-4

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Revenue.Our consolidated revenue increased 9.4% in 2007 and 12.6% in 2006, as compared to the
corresponding prior year. The 2007 increase is due to a $323 million or 4.6% increase for QVC, our acquisition of Starz Media in August 2006 ($168 million increase), our acquisition of
ANLBC in May 2007 ($159 million increase) and the combined impact of our 2006 and 2007 acquisitions of e-commerce businesses ($153 million increase). The 2006 increase is due
primarily to an 8.8% or $573 million increase at QVC and our 2006 acquisitions of Provide ($220 million), Starz Media ($86 million), FUN ($42 million) and BuySeasons
($32 million). See Operating Results by Business below for a more complete discussion of QVC's and Starz Entertainment's results of operations.

In
November 2006, TruePosition signed an amendment to its existing services contract with AT&T Corp. (formerly Cingular Wireless) that requires TruePosition to develop and deliver
additional software features. Because TruePosition does not have vendor specific objective evidence related to the value of these additional features, TruePosition is required to defer revenue
recognition until all of the features have been delivered. TruePosition currently estimates that these features will be delivered at the end of 2008. Accordingly, absent any further contractual
changes, TruePosition will not recognize any significant revenue under this contract until the first quarter of 2009. TruePosition recognized approximately $105 million of revenue under this
contract in 2006 prior to signing the amendment. TruePosition's services contract with its other major customer, T-Mobile, Inc., has a similar provision which prevents TruePosition
from recognizing revenue. Such contract expires in June 2008, but contains provisions allowing T-Mobile to extend. It should be noted that both AT&T and T-Mobile are paying
currently for services they receive and that the aforementioned deferrals have normal gross profit margins included.

Operating Cash Flow.We define Operating Cash Flow as revenue less cost of sales, operating expenses
and selling, general and administrative ("SG&A") expenses (excluding stock compensation). Our chief operating decision maker and management team use this measure of performance in conjunction with
other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of
our businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure allows us to view operating results, perform analytical comparisons and
benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization, stock compensation, separately
disclosed litigation settlements and impairments of long-lived assets that are included in the measurement of operating income pursuant to generally accepted accounting principles
("GAAP"). Accordingly, Operating Cash Flow should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures
of financial performance prepared in accordance with GAAP. See note 17 to the accompanying
consolidated financial statements for a reconciliation of Operating Cash Flow to Earnings (Loss) From Continuing Operations Before Income Taxes and Minority Interest.

Consolidated
Operating Cash Flow decreased $52 million or 2.9% and increased $242 million or 15.7% in 2007 and 2006, respectively, as compared to the corresponding prior
year. In 2007, operating cash flow deficits for Starz Media and TruePosition increased $119 million and $75 million, respectively, compared to 2006. These cash flow decreases were
partially offset by increases for Starz Entertainment and ANLBC of $78 million and $38 million, respectively. Starz Media's operating cash flow deficit resulted from (i) the
$79 million write-off of capitalized production costs due to the abandonment of certain films and downward adjustments to the revenue projections for certain TV series and other
films, (ii) start up costs for Overture Films and the delay of film release dates into 2008 and (iii) lower than expected revenue for Anchor Bay, its DVD distribution division. We
currently expect Starz Media to continue incurring operating cash flow deficits and operating losses for the next two to three years. TruePosition's operating cash flow deficit was due in large part
to the deferral of revenue under its AT&T and T-Mobile contracts described above. QVC's operating cash flow decreased marginally in

II-5

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2007.
The 2006 increase in our consolidated operating cash flow is due to a $234 million or 16.5% increase at QVC and a $15 million or 8.8% increase at Starz Entertainment. Operating
cash flow in 2006 for Provide of $24 million and BuySeasons of $6 million were offset by operating cash flow deficits for Starz Media of $24 million and FUN of $11 million.

Stock-based compensation.Stock-based compensation includes compensation related to
(1) options and stock appreciation rights ("SARs") for shares of our common stock that are granted to certain of our officers and employees, (2) phantom stock appreciation rights
("PSARs") granted to officers and employees of certain of our subsidiaries pursuant to private equity plans and (3) amortization of restricted stock grants.

Effective
January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123R (revised 2004),"Share-Based
Payment"("Statement 123R"). Statement 123R requires that we amortize the grant date fair value of our stock option awards that qualify as equity awards as stock compensation
expense over the vesting period of such awards. Statement 123R also requires that we record our liability awards at fair value each reporting period and that the change in fair value be reflected as
stock compensation expense in our consolidated statements of operations. Prior to adoption of Statement 123R, the amount of expense associated with stock-based compensation was generally based on the
vesting of the related stock options and stock appreciation rights and the market price of the underlying common stock, as well as the vesting of PSARs and the equity value of the related subsidiary.
The expense reflected in our consolidated financial statements was based on the market price of the underlying common stock as of the date of the financial statements.

In
connection with our adoption of Statement 123R, we recorded an $89 million transition adjustment loss, net of related income taxes of $31 million, which primarily
reflects the fair value of the liability portion of QVC's stock option awards at January 1, 2006. The transition adjustment is reflected in the
accompanying consolidated statement of operations as the cumulative effect of accounting change. In addition, we recorded $93 million, $67 million and $52 million of stock
compensation expense for the years ended December 31, 2007, 2006 and 2005, respectively. The 2006 stock compensation expense is net of a $24 million credit related to the terminations of
QVC's stock option plan as described in note 15 to the accompanying consolidated financial statements. As of December 31, 2007, the total unrecognized compensation cost related to
unvested Liberty equity awards was approximately $81 million. Such amount will be recognized in our consolidated statements of operations over a weighted average period of approximately
2 years.

Depreciation and amortization.Depreciation and amortization increased in 2007 and 2006 due to our
acquisitions and capital expenditures partially offset by a decrease at Starz Entertainment due to certain intangibles becoming fully amortized. As the businesses we acquired in 2007 and 2006 are not
capital intensive, we do not expect them to have a significant impact on our depreciation in the future.

Impairment of long-lived assets.In connection with our 2007 annual evaluation of the
recoverability of Starz Media's goodwill, we estimated the fair value of Starz Media's reporting units using a combination of discounted cash flows and market comparisons and concluded that the
carrying value of certain reporting units exceeded their respective fair values. Accordingly, we recognized a $182 million impairment charge related to goodwill. During the third quarter of
2007, FUN recognized a $41 million impairment loss related to its sports information segment due to new competitors in the marketplace and the resulting loss of revenue and operating income.

We
acquired our interest in FUN in March 2006. Subsequent to our acquisition, the market value of FUN's stock declined significantly due to the performance of certain of FUN's
subsidiaries and uncertainty surrounding government legislation of Internet gambling which we believe the market perceived as potentially impacting FUN's skill gaming business. In connection with our
2006 annual evaluation of the recoverability of FUN's goodwill, we estimated the fair value of FUN using a

II-6

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combination
of discounted cash flows and market comparisons and concluded that the carrying value of FUN's goodwill exceeded its market value. Accordingly, we recognized a $111 million
impairment charge related to goodwill and a $2 million impairment charge related to trademarks.

Operating income.We generated consolidated operating income of $740 million,
$1,021 million and $944 million in 2007, 2006 and 2005, respectively. The 2007 decrease in operating income is due primarily to increased operating losses of $313 million for
Starz Media and $73 million for TruePosition. These losses were partially offset by improved operating results of $83 million for FUN and $47 million for Starz Entertainment. The
improvement in FUN's operating loss from $140 million to $57 million was largely due to the $113 million impairment charge recognized in 2006, compared to the $41 million
impairment charge in 2007.

The
2006 increase in consolidated operating income is due to increases for QVC ($209 million) and Starz Entertainment ($58 million), partially offset by losses generated by
FUN ($140 million, including the above-described impairment charges) and Starz Media ($29 million) as well as an increase in corporate stock compensation expense of $34 million
due to the adoption of Statement 123R. Our operating income in 2005 is attributable to QVC ($921 million) and Starz Entertainment ($105 million) partially offset by operating losses of
our other consolidated subsidiaries and corporate expenses.



Interest expense.Consolidated interest expense decreased 5.7% and increased 8.6% for the years ended
December 31, 2007 and 2006, respectively, as compared to the corresponding prior year. The 2007 decrease is the net effect of increased borrowings, which were used to repurchase shares of our
parent common stock, more than offset by the impact of our adoption of Statement of Financial Accounting Standards No. 155 ("Statement 155") on January 1, 2007. Statement 155 permits
fair value remeasurement of hybrid financial instruments that contain an embedded derivative (such as our senior exchangeable debentures) that would otherwise require bifurcation. We previously
reported the fair value of the call option feature of our senior exchangeable debentures separate from the long-term debt, and the long-term debt was accreted to its face
amount through interest expense. Our 2006 interest expense included $95 million of such accretion. The 2006 increase in interest expense is due to increased borrowings by QVC, which were used
to retire certain of our publicly-traded debt and for repurchases of our parent common stock.

Dividend and interest income.Interest income increased in 2007 and 2006 due to higher invested cash
balances. Interest and dividend income for the year ended December 31, 2007 was comprised of interest income earned on invested cash ($206 million), dividends on News Corporation common
stock ($57 million), dividends on other available-for-sale ("AFS") securities ($17 million) and other ($41 million). As a result of the consummation of our
exchange transaction with News Corporation described below, our dividend income from News Corporation will be zero in future years.

Share of earnings of affiliates.Our 2007 share of earnings of affiliates is due primarily to
earnings of Expedia, Inc. ($68 million), and losses of WildBlue Corporation ($54 million). Our 2006 share of earnings of affiliates are attributable to Expedia
($50 million) and other investees ($41 million). In February 2008, we completed an exchange transaction with News Corporation pursuant to which we exchanged our approximate 16% ownership
interest in News Corporation for a subsidiary of News Corporation, which owns News Corporation's approximate 41% interest in The DIRECTV Group, Inc., three regional sports television networks
and approximately $465 million in cash. We will account for our interest in The DIRECTV Group using the equity method of accounting, which could result in a significant increase in our share of
earnings of affiliates in future periods. In this regard, The DIRECTV Group reported net income for the year ended December 31, 2007 of $1,451 million.

II-7

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Realized and unrealized gains (losses) on financial instruments.Realized and unrealized gains
(losses) on financial instruments are comprised of changes in the fair value of the following:

Years ended December 31,2007

2006

2005amounts in millionsSenior exchangeable debentures

$
541



Equity collars


527

(59
)
311Borrowed shares


298

(32
)
(205
)Exchangeable debenture call option obligations




(353
)
172Other derivatives


(97
)
165

(21
)$
1,269

(279
)
257


Gains (losses) on dispositions.Aggregate gains (losses) from dispositions are comprised of the
following.

Years ended December 31,Transaction2007

2006

2005amounts in millionsTime Warner Exchange

$
582



CBS Exchange


31



Sale of investment in Court TV




303

Sale of investment in Freescale




256

Sale of investment in Telewest Global, Inc.






(266
)Sale of investment in Cablevisión S.A.






(188
)Other, net


33

48

93$
646

607

(361
)


In
the above transactions, the gains or losses were calculated based upon the difference between the carrying value of the assets relinquished, as determined on an average cost basis,
compared to the fair value of the assets received. See notes 5 and 14 to the accompanying consolidated financial statements for a discussion of the foregoing transactions.

Other than temporary declines in fair value of investments.During 2007, 2006 and 2005, we determined
that certain of our cost investments experienced other than temporary declines in value. As a result, the cost bases of such investments were adjusted to their respective fair values based primarily
on quoted market prices at the date each adjustment was deemed necessary. These adjustments are reflected as other than temporary declines in fair value of investments in our consolidated statements
of operations.

Income taxes.Our effective tax rate was 15.6% in 2007, 26.5% in 2006 and 74.6% in 2005. The Time
Warner Exchange and the CBS Exchange, which were completed in 2007, qualify as IRC Section 355 transactions, and therefore do not trigger federal or state income tax obligations. In addition,
upon consummation of the exchange transactions, deferred tax liabilities previously recorded for the difference between our book and tax bases in our Time Warner and CBS Corporation investments in the
amount of $354 million were reversed with an offset to income tax benefit.

Our
2006 rate is less than the U.S. federal income tax rate of 35% due, in part, to a deferred tax benefit we recognized when we decided to effect a restructuring transaction which was
effective on April 1, 2006, and which enabled us to include TruePosition in our Federal consolidated tax group on a prospective basis. As a result of this decision and considering our overall
tax position, we reversed $89 million of valuation allowance recorded against TruePosition's net deferred tax assets into our

II-8

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statement
of operations as a deferred tax benefit in 2006. This valuation allowance did not relate to net operating loss carryforwards or some other future tax deduction of TruePosition, but rather
related to temporary differences caused by revenue and cost amounts that were recognized for tax purposes in prior periods, but have been deferred for financial reporting purposes until future
periods. In addition, we recorded deferred tax benefits of $105 million for changes in our estimated foreign tax rate based on our projections of our ability to use foreign tax credits in the
future and $25 million for changes in our estimated state tax rate used to calculate our deferred tax liabilities. These benefits were partially offset by current tax expense of
$43 million on the gain on sale of Court TV for which we had higher book basis than tax basis and $39 million for impairment of goodwill that is not deductible for tax purposes. In
addition, we recorded state ($34 million) and foreign ($20 million) tax expense.

Our
effective tax rate in 2005 was greater than the U.S. federal income tax rate of 35% primarily due to a tax benefit of $147 million that we recorded as a result of a change in
our estimated effective state and foreign tax rates. In the third quarter of 2005, we assessed our weighted average state tax rate in connection with our spin off of Discovery Holding Company. As a
result of this assessment, we decreased our state tax rate used in calculating the amount of our deferred tax liabilities and
recognized a deferred income tax benefit of $131 million. Also in 2005, we reduced our estimated foreign tax rate related to QVC and recognized a tax benefit of $16 million. These tax
benefits were partially offset by our foreign tax expense and an increase in our valuation allowance for deferred tax assets of subsidiaries that we do not consolidate for tax purposes.

Historically,
we have not made significant federal income tax payments due to our ability to use prior year net operating ("NOL") and capital losses carryforwards to
offset current year taxable income. However, as a result of our February 2008 settlement with the IRS related to interest deductions on our exchangeable debentures, our NOL carryforwards were
eliminated and we had taxable income in 2006 and 2007. Consequently, we will make federal tax payments of approximately $152 million for the 2007 tax year during the first quarter of 2008.
Based on current projections, we expect to remit federal tax payments for the 2008 tax year and beyond.

Net earnings (loss).Our net earnings (loss) was $2,212 million, $856 million and ($33)
million for the years ended December 31, 2007, 2006 and 2005, respectively, and was the result of the above-described fluctuations in our revenue and expenses. In addition, we recognized
earnings from discontinued operations of $149 million, $220 million and $10 million for the years ended December 31, 2007, 2006 and 2005, respectively. Included in our 2006
earnings from discontinued operations are tax benefits of $236 million related to our excess outside tax basis in OPTV and AEG over our basis for financial reporting.

Operating Results by Business

QVC.QVC is a retailer of a wide range of consumer products, which are marketed and sold primarily by
merchandise-focused televised shopping programs and via the Internet. In the United States, QVC's live programming is aired through its nationally televised shopping network 24 hours a day
("QVC-US"). Internationally, QVC's program services are based in the United Kingdom ("QVC-UK"), Germany ("QVC-Germany") and Japan ("QVC-Japan").
QVC-UK broadcasts 24 hours a day with 17 hours of live programming, and QVC-Germany and QVC-Japan each broadcast live 24 hours a day.

II-9

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QVC's
operating results are as follows:

Years ended December 31,2007

2006

2005amounts in millionsNet revenue

$
7,397

7,074

6,501Cost of sales


(4,682
)
(4,426
)
(4,112
)Gross profit


2,715

2,648

2,389Operating expenses


(616
)
(579
)
(570
)SG&A expenses (excluding stock-based compensation)


(447
)
(413
)
(397
)Operating cash flow


1,652

1,656

1,422Stock-based compensation


(22
)
(50
)
(52
)Depreciation and amortization


(516
)
(476
)
(449
)Operating income

$
1,114

1,130

921


Net
revenue is generated in the following geographical areas:

Years ended December 31,2007

2006

2005amounts in millionsQVC-US

$
5,208

4,983

4,640QVC-UK


707

612

554QVC-Germany


870

848

781QVC-Japan


612

631

526$
7,397

7,074

6,501


QVC's
net revenue increased 4.6% and 8.8% for the years ended December 31, 2007 and 2006, respectively, as compared to the corresponding prior year. The 2007 increase in revenue
is comprised of $101 million related to a 1.3% increase in the number of units shipped from 165.7 million to 167.8 million, $125 million due to a 1.6% increase in the
average sales price per unit ("ASP") and a $122 million increase due to favorable foreign currency rates. These increases were partially offset by a net decrease of $25 million primarily
due to an increase in estimated product returns. Returns as a percent of gross product revenue increased from 18.5% in 2006 to 18.7% in 2007.

The
2006 increase in revenue is comprised of $582 million due to a 7.3% increase in the number of units shipped from 154.4 million to 165.7 million and
$88 million related to a 2.0% increase in the ASP. The revenue increases were partially offset by an $11 million decrease due to unfavorable foreign currency rates and an
$86 million decrease due primarily to an increase in estimated product returns. Returns as a percent of gross product revenue increased from 18.0% in 2005 to 18.5% in 2006 due to a continued
shift in the mix from home products to apparel and accessories products, which typically have higher return rates.

As
noted above, during the years ended December 31, 2007 and 2006, the changes in revenue and expenses were also impacted by changes in the exchange rates for the UK pound
sterling, the euro and the Japanese yen. In the event the U.S. dollar strengthens against these foreign currencies in the

II-10

---



future,
QVC's revenue and operating cash flow will be negatively impacted. The percentage increase in revenue for each of QVC's geographic areas in dollars and in local currency is as follows:

Percentage increase (decrease) in net revenueYear ended
December 31, 2007

Year ended
December 31, 2006U.S. dollars

Local currency

U.S. dollars

Local currencyQVC-US

4.5
%
4.5
%
7.4
%
7.4
%QVC-UK

15.5
%
6.5
%
10.5
%
8.4
%QVC-Germany

2.6
%
(5.9
)%
8.6
%
7.1
%QVC-Japan

(3.0
)%
(2.0
)%
20.0
%
26.1
%


Revenue
for QVC-US was negatively impacted in 2007 by a slow retail environment and weakness in the gold jewelry category due to higher gold prices. QVC-Germany
net revenue in local currency declined during the year ended December 31, 2007 relative to the prior year due to increased competition, a soft retail market, a 300 basis point increase in the
German value added tax (VAT) rate and higher usage of markdowns in the fashion category. QVC-Japan net revenue declined in local currency during the year ended December 31, 2007, as
compared to the prior year, due to the heightened regulatory focus on health and beauty product presentations beginning in March 2007, which caused QVC-Japan to remove a number of products
from its programming.

The
number of homes receiving QVC's services are as follows:

Homes (in millions)December 31,2007

2006

2005QVC-US

93.4

90.7

90.0QVC-UK

21.8

19.4

17.8QVC-Germany

37.6

37.5

37.4QVC-Japan

21.1

18.7

16.7


The
QVC service is already received by substantially all of the cable television and direct broadcast satellite homes in the U.S. and Germany. In addition, the rate of growth in
households is expected to diminish in the UK and Japan. Therefore, future sales growth will primarily depend on continued additions of new customers from homes already receiving the QVC service and
continued growth in sales to existing customers. QVC's future sales may also be affected by (i) the willingness of cable and satellite distributors to continue carrying QVC's programming
service, (ii) QVC's ability to maintain favorable channel positioning, which may become more difficult as distributors convert analog customers to digital, (iii) changes in television
viewing habits because of personal video recorders, video-on-demand and IP television and (iv) general economic conditions.

QVC's
gross profit percentage was 36.7%, 37.4% and 36.7% for the years ended December 31, 2007, 2006 and 2005, respectively. The decrease in gross profit percentage in 2007 is due
primarily to higher distribution costs and to a lesser extent, a higher obsolescence provision. The higher distribution costs resulted from increases in shipping rates and costs associated with new
distribution centers in the U.S. and Japan for which economies of scale have not yet been achieved. The increase in the gross profit percentage in 2006 was due to higher initial margins due to a shift
in the sales mix from home products to higher margin apparel and accessories products and to a lower inventory obsolescence provision.

QVC's
operating expenses are comprised of commissions and license fees, order processing and customer service expense, credit card processing fees, telecommunications expense and bad
debt expense. Operating expenses increased 6.4% and 1.6% for the years ended December 31, 2007 and

II-11

---



2006,
respectively, as compared to the corresponding prior year period. These increases are primarily due to increases in sales volume. As a percentage of net revenue, operating expenses were 8.3%,
8.2% and 8.8% for 2007, 2006 and 2005, respectively. The 2007 increase in operating expenses as a percent of revenue is due primarily to an increase in bad debt expense due to higher
write-offs related to QVC's installment receivables and private label credit card. Operating expenses increased at a lower rate than sales in 2006 due primarily to commissions and bad debt
expense. Commissions, as a percent of net revenue decreased in 2006, as compared to 2005. The decrease in 2006 is due to a greater percentage of Internet sales for which lower commissions are required
to be paid. In addition, commissions decreased as a percentage of revenue in QVC-Japan where certain distributors are paid the greater of (i) a fixed fee per subscriber and
(ii) a specified percentage of sales. In 2006, more distributors started to receive payments based on sales volume rather than a fixed fee per subscriber. QVC's bad debt provision decreased as
a percent of net revenue in 2006 due to lower write-offs on QVC's private label credit card. As a percent of net revenue, order processing and customer service expenses remained constant
in 2006. QVC's telecommunications expenses as a percent of revenue remained consistent in 2006. Credit card processing fees remained consistent as a percent of net revenue for each of the years ended
December 31, 2007, 2006 and 2005.

QVC's
SG&A expenses include personnel, information technology, marketing and advertising expenses. Such expenses increased 8.2% and 4.0% during the years ended December 31, 2007
and 2006,
respectively, as compared to the corresponding prior year. The 2007 increase is due primarily to (i) an $11 million increase in marketing and advertising expense related to QVC's new
branding campaign and other marketing initiatives, (ii) an $8 million increase in franchise taxes driven by the Company's settlement of certain franchise tax audit issues in 2006 which
caused a $15 million reversal of franchise tax reserves in the prior year, (iii) a $5 million accrual for a legal settlement and (iv) a $5 million net increase in
personnel expenses due to merit and headcount increases offset by decreased management bonus compensation. Due to the fixed cost and discretionary nature of many of these expenses, SG&A expenses
increased at a lower rate than revenue in 2006. In addition, QVC settled certain franchise tax audit issues and reversed $15 million of reserves recorded in prior years.

QVC's
depreciation and amortization expense increased for the years ended December 31, 2007 and 2006. Such increases are due to fixed asset and software additions.

Starz Entertainment.Starz Entertainment primarily provides premium programming distributed by cable
operators, direct-to-home satellite providers and other distributors throughout the United States. Substantially all of Starz Entertainment's revenue is derived from the
delivery of movies to subscribers under affiliation agreements with television video programming distributors. Some of Starz Entertainment's affiliation agreements provide for payments to Starz
Entertainment based on the number of subscribers that receive Starz Entertainment's services. Starz Entertainment also has fixed-rate affiliation agreements with certain of its customers.
Pursuant to these agreements, the customers pay an agreed-upon rate regardless of the number of subscribers. The agreed-upon rate is contractually increased annually or
semi-annually as the case may be, and these agreements, expire in 2008 through 2012. During the year ended December 31, 2007, 71% of Starz Entertainment's revenue was generated by
its four largest customers, Comcast, Echostar Communications, DIRECTV and Time Warner, each of which individually generated more than 10% of Starz Entertainment's revenue for such period. Starz
Entertainment's affiliation agreement with DIRECTV expires in December 2008. In addition, the affiliation agreement with Time Warner has expired. Starz Entertainment is currently in negotiations with
Time Warner regarding a new agreement. There can be no assurance that any new agreement with Time Warner will have economic terms comparable to the old agreement.

II-12

---



Starz
Entertainment's operating results are as follows:

Years ended December 31,2007

2006

2005amounts in millionsRevenue

$
1,066

1,033

1,004Operating expenses


(689
)
(741
)
(706
)SG&A expenses


(113
)
(106
)
(127
)Operating cash flow


264

186

171Stock-based compensation


(33
)
3

(17
)Depreciation and amortization


(21
)
(26
)
(49
)Operating income

$
210

163

105


Starz
Entertainment's revenue increased 3.2% and 2.9% for the years ended December 31, 2007 and 2006, respectively, as compared to the corresponding prior year. During the third
quarter of 2007, Starz Entertainment entered into a new affiliation agreement with DIRECTV which is retroactive to January 1, 2007 and extends through the end of 2008. The previous affiliation
agreement with DIRECTV expired June 30, 2006. Since June 30, 2006, Starz Entertainment had recognized revenue from DIRECTV based on cash payments from DIRECTV which were at lower rates
than required by the old affiliation agreement. The new affiliation agreement provides for rates that are higher than those paid by DIRECTV since June 30, 2006, but lower than the rates in the
old affiliation agreement. Accordingly, in the third quarter of 2007, Starz Entertainment recognized $7 million of revenue related
to 2006 based on the difference between the rates provided in the new affiliation agreement and the rates previously paid by DIRECTV.

In
addition to the retroactive impact of the new DirecTV affiliation agreement noted above, the 2007 increase in revenue is due to a $26 million increase resulting from growth in
the average number of subscription units for Starz Entertainment's services.

The
2006 increase in revenue is due to a $56 million increase resulting from an increase in the average number of subscription units for Starz Entertainment's services partially
offset by a $27 million decrease due to a decrease in the effective rate for Starz Entertainment services.

The
Starz movie service and the Encore and Thematic Multiplex channels ("EMP") movie service are the primary drivers of Starz Entertainment's revenue. Starz average subscriptions
increased 7.5% and 5.7% in 2007 and 2006, respectively; and EMP average subscriptions increased 8.8% and 6.6% in 2007 and 2006, respectively. The effects on revenue of these increases in subscriptions
units are somewhat mitigated by the fixed-rate affiliation agreements that Starz Entertainment has entered into in recent years. In this regard, approximately 36% of Starz Entertainment's
revenue was earned under its fixed-rate affiliation agreements during the year ended December 31, 2007.

At
December 31, 2007, cable, direct broadcast satellite, and other distribution represented 68.3%, 28.7% and 3.0%, respectively, of Starz Entertainment's total subscription units.

Starz
Entertainment's operating expenses decreased 7.0% and increased 5.0% for the years ended December 31, 2007 and 2006, respectively, as compared to the corresponding prior
year. The 2007 decrease is due primarily to a reduction in programming costs, which decreased from $703 million for the year ended December 31, 2006 to $656 million in 2007. The
decrease in programming costs is due primarily to a lower effective rate for the movie titles exhibited in 2007. Such decrease was partially offset by an increase in the percentage of
first-run movie exhibitions (which have a relatively higher cost per title) as compared to the number of library product exhibitions. In addition to the foregoing programming cost
reductions, Starz Entertainment reversed an accrual in the amount of $7 million for music copyright fees in the third quarter of 2007 as a result of a settlement with a music copyright

II-13

---



authority.
Starz Entertainment expects it 2008 programming expenses to be comparable to the 2007 amount as lower license fees for movies are expected to be offset by costs for original programming.

The
2006 increase in operating expenses is due primarily to an increase in programming costs from $668 million in 2005 to $703 million in 2006. The 2006 programming
increase is due primarily to $63 million of additional amortization of deposits previously made under certain of its output
arrangements. Such amortization was partially offset by a lower cost per title for movies under certain license agreements and a decrease in programming costs due to a lower percentage of
first-run movie exhibitions (which have a relatively higher cost per title) as compared to the number of library product exhibitions.

Starz
Entertainment's SG&A expenses increased 6.6% and decreased 16.5% during 2007 and 2006, respectively, as compared to the corresponding prior year. The 2007 increase is due primarily
to increases in personnel costs and marketing expenses. The 2006 decrease is due primarily to lower sales and marketing expenses of $18 million due to the elimination of certain marketing
support commitments under the Comcast affiliation agreement and less marketing with other affiliates, partially offset by marketing expenses related to the commercial launch of Starz Entertainment's
Internet product.

Starz
Entertainment has outstanding phantom stock appreciation rights held by its former chief executive officer. Starz Entertainment also has a long-term incentive plan for
certain members of its current management team. Compensation relating to the phantom stock appreciation rights and the long-term incentive plan has been recorded based upon the estimated
fair value of Starz Entertainment. The amount of expense associated with the phantom stock appreciation rights and the long-term incentive plan is generally based on the change in the fair
value of Starz Entertainment.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to market risk in the normal course of business due to our ongoing investing and financial activities and our subsidiaries in different foreign
countries. Market risk refers to the risk of loss arising from adverse changes in stock prices, interest rates and foreign currency exchange rates. The risk of loss can be assessed from the
perspective of adverse changes in fair values, cash flows and future earnings. We have established policies, procedures and internal processes governing our management of market risks and the use of
financial instruments to manage our exposure to such risks.

We
are exposed to changes in interest rates primarily as a result of our borrowing and investment activities, which include investments in fixed and floating rate debt instruments and
borrowings used to maintain liquidity and to fund business operations. The nature and amount of our long-term and short-term debt are expected to vary as a result of future
requirements, market conditions and other factors. We manage our exposure to interest rates by entering into interest rate swap arrangements and by maintaining what we believe is an appropriate mix of
fixed and variable rate debt. We believe this best protects us from interest rate risk. We have achieved this mix by (i) issuing fixed rate debt that we believe has a low stated interest rate
and significant term to maturity and (ii) issuing variable rate debt with appropriate maturities and interest rates. As of December 31, 2007, the face amount of our fixed rate debt
(considering the effects of interest rate swap agreements) was $10,736 million, which had a weighted average interest rate of 4.7%.
Our variable rate debt of $1,785 million had a weighted average interest rate of 6.5% at December 31, 2007.

We
are exposed to changes in stock prices primarily as a result of our significant holdings in publicly traded securities. We continually monitor changes in stock markets, in general,
and changes in the stock prices of our holdings, specifically. We believe that changes in stock prices can be expected to vary as a result of general market conditions, technological changes, specific
industry changes and other factors. We use equity collars and other financial instruments to manage market risk associated with

II-14

---



certain
investment positions. These instruments are recorded at fair value based on option pricing models.

At
December 31, 2007, the fair value of our AFS securities was $17,534 million. Had the market price of such securities been 10% lower at December 31, 2007, the
aggregate value of such securities would have been $1,753 million lower resulting in a decrease to unrealized holding gains in other comprehensive earnings. Such decrease would be partially
offset by an increase in the value of our AFS Derivatives. Because we mark our senior exchangeable debentures to fair value each reporting date, they are also subject to market risk. Increases in the
stock price of the respective underlying security generally result in higher liabilities and unrealized losses in our statement of operations.

We
are exposed to foreign exchange rate fluctuations related primarily to the monetary assets and liabilities and the financial results of QVC's foreign subsidiaries. Assets and
liabilities of foreign subsidiaries for which the functional currency is the local currency are translated into U.S. dollars at period-end exchange rates, and the statements of operations
are generally translated at the average exchange rate for the period. Exchange rate fluctuations on translating foreign currency financial statements into U.S. dollars that result in unrealized gains
or losses are referred to as translation adjustments. Cumulative translation adjustments are recorded in other comprehensive earnings (loss) as a separate component of stockholders' equity.
Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in
transaction gains and losses, which are reflected in income as unrealized (based on period-end translations) or realized upon settlement of the transactions. Cash flows from our operations
in foreign countries are translated at the average rate for the period. Accordingly, we may experience economic loss and a negative impact on earnings and equity with respect to our holdings solely as
a result of foreign currency exchange rate fluctuations.

We
periodically assess the effectiveness of our derivative financial instruments. With regard to interest rate swaps, we monitor the fair value of interest rate swaps as well as the
effective interest rate the interest rate swap yields, in comparison to historical interest rate trends. We believe that any losses incurred with regard to interest rate swaps would be offset by the
effects of interest rate movements on the underlying debt facilities. With regard to equity collars, we monitor historical market trends relative to values currently present in the market. We believe
that any unrealized losses incurred with regard to equity collars and swaps would be offset by the effects of fair value changes on the underlying assets.
These measures allow our management to evaluate the success of our use of derivative instruments and to determine when to enter into or exit from derivative instruments.

Our
derivative instruments are executed with counterparties who are well known major financial institutions with high credit ratings. While we believe these derivative instruments
effectively manage the risks highlighted above, they are subject to counterparty credit risk. Counterparty credit risk is the risk that the counterparty is unable to perform under the terms of the
derivative instrument upon settlement of the derivative instrument. To protect ourselves against credit risk associated with these counterparties we generally:



Due
to the importance of these derivative instruments to our risk management strategy, we actively monitor the creditworthiness of each of these counterparties. Based on our analysis, we
currently consider nonperformance by any of our counterparties to be unlikely.

II-15

---



Our
counterparty credit risk by financial institution is summarized below:

Counterparty

Aggregate fair value of
derivative instruments at
December 31, 2007amounts in millionsCounterparty A

$
747Counterparty B


712$
1,459


Item 8.    Financial Statements and Supplementary Data.

The consolidated financial statements of Liberty Media LLC are filed under this Item, beginning on Page II-18. The financial statement
schedules required by Regulation S-X are filed under Item 15 of this Annual Report on Form 10-K.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.    Controls and Procedures.

In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company carried out an evaluation, under the supervision and with the
participation of management, including its chief executive officer, principal accounting officer and principal financial officer (the "Executives"), of the effectiveness of its disclosure controls and
procedures as of the end of the period covered by this
report. Based on that evaluation, the Executives concluded that the Company's disclosure controls and procedures were effective as of December 31, 2007 to provide reasonable assurance that
information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.

See
page II-17 forManagement's Report on Internal Control Over Financial Reporting

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to
provide only management's report in this annual report.

There
has been no change in the Company's internal control over financial reporting identified in connection with the evaluation described above that occurred during the three months
ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Item 9B.    Other Information.

None.

II-16

---



MANAGEMENT'S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING

Liberty Media LLC's management is responsible for establishing and maintaining adequate internal control over the Company's financial reporting. The
Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated
financial statements and related disclosures in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions of the Company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of the consolidated financial statements and related disclosures in accordance with generally accepted accounting principles;
(3) provide reasonable assurance that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(4) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the
consolidated financial statements and related disclosures.

Because
of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

The
Company assessed the design and effectiveness of internal control over financial reporting as of December 31, 2007. In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") inInternal ControlIntegrated Framework.

Based
upon our assessment using the criteria contained in COSO, management has concluded that, as of December 31, 2007, Liberty Media LLC's internal control over financial
reporting is effectively designed and operating effectively.

II-17

---



Report of Independent Registered Public Accounting Firm

The
Member
Liberty Media LLC:

We
have audited the accompanying consolidated balance sheets of Liberty Media LLC and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements
of operations, member's equity, comprehensive earnings (loss), and cash flows for each of the years in the three-year period ended December 31, 2007. These consolidated financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Liberty Media LLC and subsidiaries as
of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity
with U.S. generally accepted accounting principles.

As
discussed in note 2 to the accompanying consolidated financial statements, effective January 1, 2007, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 155,Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140, Financial Accounting
Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes,an interpretation of FASB Statement
No.109, and effective January 1, 2006 the Company adopted SFAS No. 123(R),Share-Based Payment.

KPMG LLP

Denver,
Colorado
March 25, 2008

II-18

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2007 and 2006

|                                                                                                                                                                                     |                                            | 2007                 |             | 2006  |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | -------------------- | ----------- | ----- | ------
|
|Assets                                                                                                                                                                               |                                            |                      |             |       |       
|Current assets:                                                                                                                                                                      |                                            |                      |             |       |       
|                                                                                                                                                                                     | Cash and cash equivalents                  |                      | $           | 3,135 |       
|                                                                                                                                                                                     | Trade and other receivables, net           |                      |             | 1,517 |       
|                                                                                                                                                                                     | Inventory, net                             |                      |             | 975   |       
|                                                                                                                                                                                     | Program rights                             |                      |             | 515   |       
|                                                                                                                                                                                     | Current deferred tax assets                |                      |             |      |       
|                                                                                                                                                                                     | Other current assets                       |                      |             | 167   |       
|                                                                                                                                                                                     | Assets of discontinued operations (note 4) |                      |             |      |       
|                                                                                                                                                                                     |                                            |                      |             |       |       
|                                                                                                                                                                                     |                                            | Total current assets |             |       | 6,309 
|                                                                                                                                                                                     |                                            |                      |             |       |       
|Investments in available-for-sale securities and other cost investments, including $1,183 million and $1,482 million pledged as collateral for share borrowing arrangements (note 5) |                                            |                      | 17,569      |       | 21,622
|Investments in affiliates, accounted for using the equity method (note 8)                                                                                                            |                                            |                      | 1,817       |       | 1,842 
|Investment in special purpose entity (note 6)                                                                                                                                        |                                            |                      | 750         |       |      
|Property and equipment, at cost                                                                                                                                                      |                                            |                      | 1,894       |       | 1,531 
|Accumulated depreciation                                                                                                                                                             |                                            |                      | (543        | )     | (385  
|                                                                                                                                                                                     |                                            |                      |             |       |       
|                                                                                                                                                                                     |                                            |                      | 1,351       |       | 1,146 
|                                                                                                                                                                                     |                                            |                      |             |       |       
|Intangible assets not subject to amortization (note 2):                                                                                                                              |                                            |                      |             |       |       
|                                                                                                                                                                                     | Goodwill                                   |                      |             | 7,855 |       
|                                                                                                                                                                                     | Trademarks                                 |                      |             | 2,515 |       
|                                                                                                                                                                                     | Other                                      |                      |             | 173   |       
|                                                                                                                                                                                     |                                            |                      |             |       |       
|                                                                                                                                                                                     |                                            |                      | 10,543      |       | 10,059
|                                                                                                                                                                                     |                                            |                      |             |       |       
|Intangible assets subject to amortization, net (note 2)                                                                                                                              |                                            |                      | 3,863       |       | 3,910 
|Other assets, at cost, net of accumulated amortization (note 6)                                                                                                                      |                                            |                      | 3,447       |       | 2,330 
|                                                                                                                                                                                     |                                            |                      |             |       |       
|                                                                                                                                                                                     |                                            | Total assets         |             | $     | 45,649
|                                                                                                                                                                                     |                                            |                      |             |       |       
|                                                                                                                                                                                     |                                            |                      | (continued) |      

II-19

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

December 31, 2007 and 2006

|                                                                                              |                                                                  | 2007                                  |        | 2006    |       
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------- | ------ | ------- | ------
|
|Liabilities and Member's Equity                                                               |                                                                  |                                       |        |         |       
|Current liabilities:                                                                          |                                                                  |                                       |        |         |       
|                                                                                              | Accounts payable                                                 |                                       | $      | 605     |       
|                                                                                              | Accrued interest                                                 |                                       |        | 148     |       
|                                                                                              | Other accrued liabilities                                        |                                       |        | 936     |       
|                                                                                              | Current portion of debt (note 9)                                 |                                       |        | 191     |       
|                                                                                              | Accrued stock compensation                                       |                                       |        | 207     |       
|                                                                                              | Current deferred income tax liabilities                          |                                       |        | 93      |       
|                                                                                              | Other current liabilities (note 7)                               |                                       |        | 1,359   |       
|                                                                                              | Liabilities of discontinued operations (note 4)                  |                                       |        |        |       
|                                                                                              |                                                                  |                                       |        |         |       
|                                                                                              |                                                                  | Total current liabilities             |        |         | 3,539 
|                                                                                              |                                                                  |                                       |        |         |       
|Long-term debt, including $3,690 million measured at fair value at December 31, 2007 (note 9) |                                                                  |                                       | 11,524 |         | 8,909 
|Deferred income tax liabilities (note 10)                                                     |                                                                  |                                       | 8,463  |         | 9,671 
|Other liabilities                                                                             |                                                                  |                                       | 1,741  |         | 3,576 
|                                                                                              |                                                                  |                                       |        |         |       
|                                                                                              |                                                                  | Total liabilities                     |        |         | 25,267
|                                                                                              |                                                                  |                                       |        |         |       
|Minority interests in equity of subsidiaries                                                  |                                                                  |                                       | 866    |         | 290   
|Member's equity:                                                                              |                                                                  |                                       |        |         |       
|                                                                                              | Member's equity                                                  |                                       |        | 29,084  |       
|                                                                                              | Note receivable from parent (note 15)                            |                                       |        | (3,624  | )     
|                                                                                              | Accumulated other comprehensive earnings, net of taxes (note 14) |                                       |        | 4,073   |       
|                                                                                              | Accumulated deficit                                              |                                       |        | (10,017 | )     
|                                                                                              |                                                                  |                                       |        |         |       
|                                                                                              |                                                                  | Total member's equity                 |        |         | 19,516
|                                                                                              |                                                                  |                                       |        |         |       
|Commitments and contingencies (note 16)                                                       |                                                                  |                                       |        |         |       
|                                                                                              |                                                                  | Total liabilities and member's equity |        | $       | 45,649
|                                                                                              |                                                                  |                                       |        |         |       

See
accompanying notes to consolidated financial statements.

II-20

---





LIBERTY MEDIA LLC AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS        Years ended December 31, 2007, 2006 and 2005

|                                                              |                                                                                  | 2007                                                                                 |                  | 2006  |       | 2005  |       
|------------------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ---------------- | ----- | ----- | ----- | ------
|
|Revenue:                                                      |                                                                                  |                                                                                      |                  |       |       |       |       
|                                                              | Net retail sales                                                                 |                                                                                      | $                | 7,802 |       | 7,326 |       
|                                                              | Communications and programming services                                          |                                                                                      |                  | 1,621 |       | 1,287 |       
|                                                              |                                                                                  |                                                                                      |                  |       |       |       |       
|                                                              |                                                                                  |                                                                                      | 9,423            |       | 8,613 |       | 7,646 
|                                                              |                                                                                  |                                                                                      |                  |       |       |       |       
|Operating costs and expenses:                                 |                                                                                  |                                                                                      |                  |       |       |       |       
|                                                              | Cost of sales                                                                    |                                                                                      |                  | 4,921 |       | 4,565 |       
|                                                              | Operating                                                                        |                                                                                      |                  | 1,843 |       | 1,526 |       
|                                                              | Selling, general and administrative, including stock-based compensation (note 2) |                                                                                      |                  | 1,021 |       | 806   |       
|                                                              | Depreciation                                                                     |                                                                                      |                  | 163   |       | 119   |       
|                                                              | Amortization                                                                     |                                                                                      |                  | 512   |       | 463   |       
|                                                              | Impairment of long-lived assets (note 2)                                         |                                                                                      |                  | 223   |       | 113   |       
|                                                              |                                                                                  |                                                                                      |                  |       |       |       |       
|                                                              |                                                                                  |                                                                                      | 8,683            |       | 7,592 |       | 6,702 
|                                                              |                                                                                  |                                                                                      |                  |       |       |       |       
|                                                              |                                                                                  |                                                                                      | Operating income |       |       | 740   |       
|Other income (expense):                                       |                                                                                  |                                                                                      |                  |       |       |       |       
|                                                              | Interest expense                                                                 |                                                                                      |                  | (641  | )     | (680  | )     
|                                                              | Dividend and interest incomethird party                                         |                                                                                      |                  | 321   |       | 214   |       
|                                                              | Interest income-parent (note 15)                                                 |                                                                                      |                  | 156   |       | 26    |       
|                                                              | Share of earnings of affiliates, net                                             |                                                                                      |                  | 22    |       | 91    |       
|                                                              | Realized and unrealized gains (losses) on financial instruments, net (note 7)    |                                                                                      |                  | 1,269 |       | (279  | )     
|                                                              | Gains (losses) on dispositions, net (notes 5 and 14)                             |                                                                                      |                  | 646   |       | 607   |       
|                                                              | Other than temporary declines in fair value of investments (note 5)              |                                                                                      |                  | (33   | )     | (4    | )     
|                                                              | Other, net                                                                       |                                                                                      |                  | (1    | )     | 18    |       
|                                                              |                                                                                  |                                                                                      |                  |       |       |       |       
|                                                              |                                                                                  |                                                                                      | 1,739            |       | (7    | )     | (1,062
|                                                              |                                                                                  |                                                                                      |                  |       |       |       |       
|                                                              |                                                                                  | Earnings (loss) from continuing operations before income taxes and minority interest |                  |       | 2,479 |       | 1,014 
|Income tax benefit (expense) (note 10)                        |                                                                                  |                                                                                      | (381             | )     | (262  | )     | 126   
|Minority interests in earnings of subsidiaries                |                                                                                  |                                                                                      | (35              | )     | (27   | )     | (51   
|                                                              |                                                                                  |                                                                                      |                  |       |       |       |       
|                                                              |                                                                                  | Earnings (loss) from continuing operations                                           |                  |       | 2,063 |       | 725   
|Earnings from discontinued operations, net of taxes (note 4)  |                                                                                  |                                                                                      | 149              |       | 220   |       | 10    
|Cumulative effect of accounting change, net of taxes (note 2) |                                                                                  |                                                                                      |                 |       | (89   | )     |      
|                                                              |                                                                                  |                                                                                      |                  |       |       |       |       
|                                                              |                                                                                  | Net earnings (loss)                                                                  |                  | $     | 2,212 |       | 856   
|                                                              |                                                                                  |                                                                                      |                  |       |       |       |       

See
accompanying notes to consolidated financial statements.

II-21

---





LIBERTY MEDIA LLC AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)        Years ended December 31, 2007, 2006 and 2005

|                                                             |                                                                                           | 2007 |       | 2006   |       | 2005  |     
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------- | ---- | ----- | ------ | ----- | ----- | ----
|
|Net earnings (loss)                                          |                                                                                           | $    | 2,212 |        | 856   |       | (33 
|                                                             |                                                                                           |      |       |        |       |       |     
|Other comprehensive earnings (loss), net of taxes (note 14): |                                                                                           |      |       |        |       |       |     
|                                                             | Foreign currency translation adjustments                                                  |      |       | 107    |       | 111   |     
|                                                             | Recognition of previously unrealized foreign currency translation losses                  |      |       |       |       |      |     
|                                                             | Unrealized holding gains (losses) arising during the period                               |      |       | (1,611 | )     | 2,605 |     
|                                                             | Recognition of previously unrealized losses (gains) on available-for-sale securities, net |      |       | (375   | )     | (185  | )   
|                                                             | Reclass unrealized gain on available-for-sale security to equity method investment        |      |       |       |       |      |     
|                                                             | Other comprehensive earnings (loss) from discontinued operations (note 4)                 |      |       |       |       |      |     
|                                                             |                                                                                           |      |       |        |       |       |     
|                                                             | Other comprehensive earnings (loss)                                                       |      |       | (1,879 | )     | 2,531 |     
|                                                             |                                                                                           |      |       |        |       |       |     
|Comprehensive earnings (loss)                                |                                                                                           | $    | 333   |        | 3,387 |       | (834
|                                                             |                                                                                           |      |       |        |       |       |     

See
accompanying notes to consolidated financial statements.

II-22

---





LIBERTY MEDIA LLC AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        Years ended December 31, 2007, 2006 and 2005

|                                                   |                                                                                            | 2007                                                                                              |                                                   | 2006                                           |                                           | 2005   |      
|-------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------- | ------------------------------------------------- | ---------------------------------------------- | ----------------------------------------- | ------ | -----
|
|Cash flows from operating activities:              |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|                                                   | Net earnings (loss)                                                                        |                                                                                                   | $                                                 | 2,212                                          |                                           | 856    |      
|                                                   | Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: |                                                                                                   |                                                   |                                                |                                           |        |      
|                                                   |                                                                                            | Earnings from discontinued operations                                                             |                                                   |                                                | (149                                      | )      | (220 
|                                                   |                                                                                            | Cumulative effect of accounting change                                                            |                                                   |                                                |                                          |        | 89   
|                                                   |                                                                                            | Depreciation and amortization                                                                     |                                                   |                                                | 675                                       |        | 582  
|                                                   |                                                                                            | Impairment of long-lived assets                                                                   |                                                   |                                                | 223                                       |        | 113  
|                                                   |                                                                                            | Stock-based compensation                                                                          |                                                   |                                                | 93                                        |        | 67   
|                                                   |                                                                                            | Cash payments for stock-based compensation                                                        |                                                   |                                                | (40                                       | )      | (115 
|                                                   |                                                                                            | Noncash interest expense (income), net                                                            |                                                   |                                                | (147                                      | )      | 82   
|                                                   |                                                                                            | Share of earnings of affiliates, net                                                              |                                                   |                                                | (22                                       | )      | (91  
|                                                   |                                                                                            | Realized and unrealized losses (gains) on financial instruments, net                              |                                                   |                                                | (1,269                                    | )      | 279  
|                                                   |                                                                                            | Losses (gains) on disposition of assets, net                                                      |                                                   |                                                | (646                                      | )      | (607 
|                                                   |                                                                                            | Other than temporary declines in fair value of investments                                        |                                                   |                                                | 33                                        |        | 4    
|                                                   |                                                                                            | Minority interests in earnings of subsidiaries                                                    |                                                   |                                                | 35                                        |        | 27   
|                                                   |                                                                                            | Deferred income tax expense (benefit)                                                             |                                                   |                                                | 116                                       |        | (455 
|                                                   |                                                                                            | Other noncash charges, net                                                                        |                                                   |                                                | 141                                       |        | 44   
|                                                   |                                                                                            | Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions: |                                                   |                                                |                                           |        |      
|                                                   |                                                                                            |                                                                                                   |                                                   | Current assets                                 |                                           |        | (436 
|                                                   |                                                                                            |                                                                                                   |                                                   | Payables and other current liabilities         |                                           |        | 341  
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                | Net cash provided by operating activities |        |      
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|Cash flows from investing activities:              |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|                                                   | Cash proceeds from dispositions                                                            |                                                                                                   |                                                   | 495                                            |                                           | 1,322  |      
|                                                   | Premium proceeds from origination of derivatives                                           |                                                                                                   |                                                   |                                               |                                           | 59     |      
|                                                   | Net proceeds from settlement of derivatives                                                |                                                                                                   |                                                   | 75                                             |                                           | 101    |      
|                                                   | Cash received in exchange transactions                                                     |                                                                                                   |                                                   | 1,154                                          |                                           |       |      
|                                                   | Cash paid for acquisitions, net of cash acquired                                           |                                                                                                   |                                                   | (348                                           | )                                         | (1,207 | )    
|                                                   | Investments in and loans to cost and equity investees                                      |                                                                                                   |                                                   | (159                                           | )                                         | (235   | )    
|                                                   | Investment in special purpose entity                                                       |                                                                                                   |                                                   | (750                                           | )                                         |       |      
|                                                   | Capital expenditures                                                                       |                                                                                                   |                                                   | (316                                           | )                                         | (278   | )    
|                                                   | Net sales (purchases) of short term investments                                            |                                                                                                   |                                                   | 34                                             |                                           | 287    |      
|                                                   | Net increase in restricted cash                                                            |                                                                                                   |                                                   | (882                                           | )                                         |       |      
|                                                   | Other investing activities, net                                                            |                                                                                                   |                                                   | (36                                            | )                                         | 66     |      
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|                                                   |                                                                                            |                                                                                                   | Net cash provided (used) by investing activities  |                                                |                                           | (733   | )    
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|Cash flows from financing activities:              |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|                                                   | Borrowings of debt                                                                         |                                                                                                   |                                                   | 1,869                                          |                                           | 3,229  |      
|                                                   | Repayments of debt                                                                         |                                                                                                   |                                                   | (498                                           | )                                         | (2,191 | )    
|                                                   | Net cash transfers to parent                                                               |                                                                                                   |                                                   | (2,496                                         | )                                         | (953   | )    
|                                                   | Contribution from minority owner                                                           |                                                                                                   |                                                   | 751                                            |                                           |       |      
|                                                   | Other financing activities, net                                                            |                                                                                                   |                                                   | (34                                            | )                                         | (21    | )    
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|                                                   |                                                                                            |                                                                                                   | Net cash provided (used) by financing activities  |                                                |                                           | (408   | )    
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|Effect of foreign currency exchange rates on cash  |                                                                                            |                                                                                                   | 8                                                 |                                                | 18                                        |        | (45  
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|Net cash provided by (to) discontinued operations: |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|                                                   | Cash provided by operating activities                                                      |                                                                                                   |                                                   | 8                                              |                                           | 62     |      
|                                                   | Cash used by investing activities                                                          |                                                                                                   |                                                   | (9                                             | )                                         | (67    | )    
|                                                   | Cash provided by financing activities                                                      |                                                                                                   |                                                   |                                               |                                           | 6      |      
|                                                   | Change in available cash held by discontinued operations                                   |                                                                                                   |                                                   | 2                                              |                                           |       |      
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|                                                   |                                                                                            |                                                                                                   | Net cash provided by (to) discontinued operations |                                                |                                           | 1      |      
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|                                                   |                                                                                            |                                                                                                   |                                                   | Net increase in cash and cash equivalents      |                                           |        | 28   
|                                                   |                                                                                            |                                                                                                   |                                                   | Cash and cash equivalents at beginning of year |                                           |        | 3,107
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      
|                                                   |                                                                                            |                                                                                                   |                                                   | Cash and cash equivalents at end of year       |                                           | $      | 3,135
|                                                   |                                                                                            |                                                                                                   |                                                   |                                                |                                           |        |      

See accompanying notes to consolidated financial statements.

II-23

---





LIBERTY MEDIA LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY

Years ended December 31, 2007, 2006 and 2005

|                             |                                                                                           |   |        |        |        |        |       |        |         | Common stock |    |     |   |    |        |         |     
|---------------------------- | ----------------------------------------------------------------------------------------- | - | ------ | ------ | ------ | ------ | ----- | ------ | ------- | ------------ | -- | --- | - | -- | ------ | ------- | ----
|
|
|
|Balance at January 1, 2005   |                                                                                           | $ |       |        |       |        | 4,227 |        | (13,245 | )            | 27 |     | 1 |    | 33,701 |         | (125
|                             | Net loss                                                                                  |   |        |       |        |       |       |       |         | (33          | )  |    |   |   |        |        |     
|                             | Other comprehensive loss                                                                  |   |        |       |        |       |       | (801   | )       |             |    |    |   |   |        |        |     
|                             | Issuance of Series A common stock for investment in available-for-sale security           |   |        |       |        |       |       |       |         |             |    |    |   |   |        | 14      |     
|                             | Amortization of deferred compensation                                                     |   |        |       |        |       |       |       |         |             |    |    |   |   |        | 38      |     
|                             | Distribution to stockholders for spin off of Discovery Holding Company ("DHC") (note 4)   |   |        |       |        |       |       | (5     | )       |             |    |    |   |   |        | (4,609  | )   
|                             | Losses in connection with issuances of stock by subsidiaries and affiliates, net of taxes |   |        |       |        |       |       |       |         |             |    |    |   |   |        | (22     | )   
|                             | Issuance of common stock upon exercise of stock options                                   |   |        |       |        |       |       |       |         |             |    |    |   |   |        | 10      |     
|                             | AT&T tax sharing agreement adjustments                                                    |   |        |       |        |       |       |       |         |             |    |    |   |   |        | (40     | )   
|                             | Adjustment of spin off of Liberty Media International                                     |   |        |       |        |       |       |       |         |             |    |    |   |   |        | (28     | )   
|                             | Other                                                                                     |   |        |       |        |       |       |       |         |             |    |    |   |   |        | 10      |     
|                             |                                                                                           |   |        |        |        |        |       |        |         |              |    |     |   |    |        |         |     
|Balance at December 31, 2005 |                                                                                           |   |       |        |       |        | 3,421 |        | (13,278 | )            | 27 |     | 1 |    | 29,074 |         | (125
|                             | Net earnings                                                                              |   |        |       |        |       |       |       |         | 856          |    |    |   |   |        |        |     
|                             | Other comprehensive earnings                                                              |   |        |       |        |       |       | 2,531  |         |             |    |    |   |   |        |        |     
|                             | Issuance of common stock upon exercise of stock options                                   |   |        |       |        |       |       |       |         |             |    |    |   |   |        | 3       |     
|                             | Restructuring (note 1)                                                                    |   |        | 28,975 |        |       |       |       |         |             |    | (27 | ) | (1 | )      | (29,072 | )   
|                             | Stock compensation                                                                        |   |        | 62     |        |       |       |       |         |             |    |    |   |   |        |        |     
|                             | Contribution from parent for acquisition                                                  |   |        | 36     |        |       |       |       |         |             |    |    |   |   |        |        |     
|                             | Cash transfers to parent, net                                                             |   |        |       |        | (953   | )     |       |         |             |    |    |   |   |        |        |     
|                             | Intercompany interest allocation                                                          |   |        |       |        | (26    | )     |       |         |             |    |    |   |   |        |        |     
|                             | Other                                                                                     |   |        | (1     | )      |       |       |       |         |             |    |    |   |   |        | (5      | )   
|                             |                                                                                           |   |        |        |        |        |       |        |         |              |    |     |   |    |        |         |     
|Balance at December 31, 2006 |                                                                                           |   | 29,072 |        | (979   | )      | 5,952 |        | (12,422 | )            |   |     |  |    |       |         |    
|                             | Net earnings                                                                              |   |        |       |        |       |       |       |         | 2,212        |    |    |   |   |        |        |     
|                             | Other comprehensive loss                                                                  |   |        |       |        |       |       | (1,879 | )       |             |    |    |   |   |        |        |     
|                             | Cumulative effects of accounting changes (note 2)                                         |   |        |       |        |       |       |       |         | 193          |    |    |   |   |        |        |     
|                             | Stock compensation                                                                        |   |        | 24     |        |       |       |       |         |             |    |    |   |   |        |        |     
|                             | Contribution from parent for acquisition                                                  |   |        |       |        | 7      |       |       |         |             |    |    |   |   |        |        |     
|                             | Cash transfers to parent, net                                                             |   |        |       |        | (2,496 | )     |       |         |             |    |    |   |   |        |        |     
|                             | Intercompany interest allocation                                                          |   |        |       |        | (156   | )     |       |         |             |    |    |   |   |        |        |     
|                             | Other                                                                                     |   |        | (12    | )      |       |       |       |         |             |    |    |   |   |        |        |     
|                             |                                                                                           |   |        |        |        |        |       |        |         |              |    |     |   |    |        |         |     
|Balance at December 31, 2007 |                                                                                           | $ | 29,084 |        | (3,624 | )      | 4,073 |        | (10,017 | )            |   |     |  |    |       |         |    
|                             |                                                                                           |   |        |        |        |        |       |        |         |              |    |     |   |    |        |         |     

See accompanying notes to consolidated financial statements.

II-24

---





LIBERTY MEDIA LLC AND SUBSIDIARIES        Notes to Consolidated Financial Statements        December 31, 2007, 2006 and 2005

(1) Basis of Presentation

On May 9, 2006, Liberty Media Corporation ("New Liberty") completed a restructuring (the "Restructuring") pursuant to which New Liberty was organized as a
new holding company. In the Restructuring, New Liberty issued shares of its two newly created tracking stocks, Liberty Capital and Liberty Interactive, in exchange for outstanding shares of Liberty
Media LLC (formerly known as Liberty Media Corporation, "Liberty" or the "Company") and became the new publicly traded parent company of Liberty. Immediately prior to the Restructuring, New
Liberty was a direct, wholly-owned subsidiary of Liberty. Also on May 9, 2006, in connection with and immediately subsequent to the
Restructuring, Liberty converted from a Delaware corporation into a Delaware limited liability company.

The
accompanying consolidated financial statements include the accounts of Liberty and its controlled subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.

Liberty,
through its ownership of interests in subsidiaries and other companies, is primarily engaged in the video and on-line commerce, media, communications and
entertainment industries in North America, Europe and Asia.

(2) Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash equivalents consist of investments which are readily convertible into cash and have maturities of three months or less at the time of acquisition.

Receivables

Receivables are reflected net of an allowance for doubtful accounts. Such allowance aggregated $80 million and $72 million at December 31,
2007 and 2006, respectively. A summary of activity in the allowance for doubtful accounts is as follows:

AdditionsBalance
beginning of year

Charged
to expense

Acquisitions

Deductions-
write-offs

Balance
end of
yearamounts in millions2007

$
72

41

1

(34
)
802006

$
66

27

14

(35
)
722005

$
63

37



(34
)
66


Inventory

Inventory, consisting primarily of products held for sale, is stated at the lower of cost or market. Cost is determined by the average cost method, which
approximates the first-in, first-out method.

II-25

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Program Rights

Program rights are amortized on a film-by-film basis over the anticipated number of exhibitions. Program rights payable are initially
recorded at the estimated cost of the programs when the film is available for airing.

Investment in Films and Television Programs

Investment in films and television programs generally includes the cost of proprietary films and television programs that have been released, completed and not
released, in production, and in development or pre-production. Capitalized costs include the acquisition of story rights, the development of stories, production labor, postproduction costs
and allocable overhead and interest costs. Investment in films and television programs is stated at the lower of unamortized cost or estimated fair value on an individual film basis. Investment in
films and television programs is amortized using the individual-film-forecast method, whereby the costs are charged to expense and participation and residual costs are accrued
based on the proportion that current revenue from the films bear to an estimate of total revenue anticipated from all markets
(ultimate revenue). Ultimate revenue estimates generally may not exceed ten years following the date of initial release or from the date of delivery of the first episode for episodic television
series.

Estimates
of ultimate revenue involve uncertainty and it is therefore possible that reductions in the carrying value of investment in films and television programs may be required as a
consequence of changes in management's future revenue estimates.

Investment
in films and television programs in development or pre-production is periodically reviewed to determine whether they will ultimately be used in the production of a
film. Costs of films in development or pre-production are charged to expense if the project is abandoned, or if the film has not been set for production within three years from the time of
the first capitalized transaction.

The
investment in films and television programs is reviewed for impairment on a title-by-title basis when an event or change in circumstances indicates that a
film should be assessed. If the estimated fair value of a film is less than its unamortized cost, then the excess of unamortized costs over the estimated fair value is charged to expense.

Investments

All marketable equity and debt securities held by the Company are classified as available-for-sale ("AFS") and are carried at fair value
generally based on quoted market prices. Unrealized holding gains and losses on AFS securities are carried net of taxes as a component of accumulated other comprehensive earnings in stockholders'
equity. Realized gains and losses are determined on an average cost basis. Other investments in which the Company's ownership interest is less than 20% and are not considered marketable securities are
carried at cost.

For
those investments in affiliates in which the Company has the ability to exercise significant influence, the equity method of accounting is used. Under this method, the investment,
originally recorded at cost, is adjusted to recognize the Company's share of net earnings or losses of the affiliate as they occur rather than as dividends or other distributions are received. Losses
are limited to the extent of the Company's investment in, advances to and commitments for the investee. The Company's share of net earnings or loss of affiliates also includes any other than temporary
declines in fair value recognized during the period.

II-26

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Changes
in the Company's proportionate share of the underlying equity of a subsidiary or equity method investee, which result from the issuance of additional equity securities by such
subsidiary or equity investee, are recognized as increases or decreases in stockholders' equity.

The
Company continually reviews its investments to determine whether a decline in fair value below the cost basis is other than temporary. The primary factors the Company considers in
its determination are the length of time that the fair value of the investment is below the Company's carrying value; and the financial condition, operating performance and near term prospects of the
investee. In addition, the Company considers the reason for the decline in fair value, be it general market conditions, industry specific or investee specific; analysts' ratings and estimates of
12 month share price targets for the investee; changes in stock price or valuation subsequent to the balance sheet date; and the Company's intent and ability to hold the investment for a period
of time sufficient to allow for a recovery in fair value. If the decline in fair value is deemed to be other than temporary, the cost basis of the security is written down to fair value. In situations
where the fair value of an investment is not evident due to a lack of a public market price or other factors, the Company uses its best estimates and assumptions to arrive at the estimated fair value
of such investment. The Company's assessment of the foregoing factors involves a high degree of judgment and accordingly, actual results may differ materially from the Company's estimates and
judgments. Writedowns for cost investments and AFS securities are included in the consolidated statements of operations as other than temporary declines in fair values of investments. Writedowns for
equity method investments are included in share of earnings (losses) of affiliates.

Derivative Instruments and Hedging Activities

The Company uses various derivative instruments including equity collars, bond swaps and interest rate swaps to manage fair value and cash flow risk associated
with many of its investments and some of its variable rate debt. Liberty's derivative instruments are executed with counterparties who are well known major financial institutions. While Liberty
believes these derivative instruments effectively manage the risks highlighted above, they are subject to counterparty credit risk. Counterparty credit risk is the risk that the counterparty is unable
to perform under the terms of the derivative instrument upon settlement of the derivative instrument. To protect itself against credit risk associated with these counterparties the Company generally:



Due
to the importance of these derivative instruments to its risk management strategy, Liberty actively monitors the creditworthiness of each of its counterparties. Based on its
analysis, the Company currently considers nonperformance by any of its counterparties to be unlikely.

Liberty
accounts for its derivatives pursuant to Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("Statement 133") and related amendments and interpretations. All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet
at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings.
If the derivative is designated as a cash flow hedge, the effective portions of

II-27

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

changes
in the fair value of the derivative are recorded in other comprehensive earnings and are recognized in the statement of operations when the hedged item affects earnings. Ineffective portions
of changes in the fair value of cash flow hedges are recognized in earnings. If the derivative is not designated as a hedge, changes in the fair value of the derivative are recognized in earnings. The
Company has entered into several interest rate swap agreements to mitigate the cash flow risk associated with interest payments related to certain of its variable rate debt. These interest rate swap
arrangements have been designated as cash flow hedges. The Company assesses the effectiveness of its interest rate swaps using the hypothetical derivative method. Hedge ineffectiveness had no impact
on earnings for the years ended December 31, 2007 and 2006. None of the Company's other derivatives have been designated as hedges.

The
fair value of the Company's equity collars and other similar derivative instruments is estimated using third party estimates or the Black-Scholes model. The Black-Scholes model
incorporates a number of variables in determining such fair values, including expected volatility of the underlying security and an appropriate discount rate. The Company obtains volatility rates from
independent sources based on the expected volatility of the underlying security over the remaining term of the derivative instrument. The volatility assumption is evaluated annually to determine if it
should be adjusted, or more often if there are indications that it should be adjusted. A discount rate is obtained at the inception of the derivative instrument and updated each reporting period based
on the Company's estimate of the discount rate at which it could currently settle the derivative instrument. Considerable management judgment is required in estimating the Black-Scholes variables.
Actual results upon settlement or unwinding of derivative instruments may differ materially from these estimates.

Effective
January 1, 2007, Liberty adopted Statement of Financial Accounting Standards No. 155,"Accounting for Certain Hybrid Financial
Instruments, an amendment of FASB Statements No. 133 and 140"("Statement 155"). Statement 155, among other things, amends Statement 133 and permits fair value
remeasurement of hybrid financial instruments that contain an embedded derivative that otherwise would require bifurcation. Under Statement 133, Liberty reported the fair value of the call option
feature of its senior exchangeable debentures separate from the long-term debt. The long-term debt portion was reported as the difference between the face amount of
the debenture and the fair value of the call option feature on the date of issuance and was accreted through interest expense to its face amount over the expected term of the debenture. Pursuant to
the provisions of Statement 155, Liberty now accounts for its senior exchangeable debentures at fair value rather than bifurcating such instruments into a debt instrument and a derivative instrument.
Decreases in the fair value of the exchangeable debentures are included in realized and unrealized gains on financial instruments in the accompanying consolidated statements of operations and
aggregated $541 million for the year ended December 31, 2007.

The
impactincrease/(decrease)on Liberty's balance sheet of the adoption of Statement 155 is as follows (amounts in millions):

Other assets

$
(47
)Long-term financial instrument liabilities

$
(1,280
)Long-term debt

$
1,848Deferred income tax liabilities

$
(234
)Accumulated deficit

$
381


II-28

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Property and Equipment

Property and equipment, including significant improvements, is stated at cost. Depreciation is computed using the straight-line method using estimated
useful lives of 3 to 20 years for support equipment and 10 to 40 years for buildings and improvements.

Intangible Assets

The Company accounts for its intangible assets pursuant to Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("Statement 142"). Statement 142 requires that goodwill and other intangible assets with indefinite useful lives (collectively, "indefinite lived intangible
assets") not be amortized, but instead be tested for impairment at least annually. Equity method goodwill is also not amortized, but is considered for impairment pursuant to Accounting Principles
Board Opinion No. 18. Statement 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual
values, and reviewed for impairment in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets"("Statement 144").

Statement
142 requires the Company to perform an annual assessment of whether there is an indication that goodwill is impaired. To accomplish this, the Company identifies its reporting
units and determines the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units. Statement 142
requires the Company to consider equity method affiliates as separate reporting units. As a result, a portion of the Company's enterprise-level goodwill balance is allocated to various reporting units
which include a single equity method investment as its only asset. To the extent that all or a portion of an equity method investment which is part of a reporting unit containing allocated goodwill is
disposed of in the future, the allocated portion of goodwill will be relieved and included in the calculation of the gain or loss on disposal.

The
Company determines the fair value of its reporting units using independent appraisals, public trading prices and other means. The Company then compares the fair value of each
reporting unit to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, the Company compares the implied fair value of the reporting unit's
goodwill, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation, to its
carrying amount, and records an impairment charge to the extent the carrying amount exceeds the implied fair value.

II-29

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Goodwill

Changes in the carrying amount of goodwill are as follows:

|                             |                                          | QVC, Inc. |       | Starz
Entertainment, LLC |       | Starz
Media LLC |     | Other |     | Total |      
|---------------------------- | ---------------------------------------- | --------- | ----- | ------------------------ | ----- | --------------- | --- | ----- | --- | ----- | -----
|
|Balance at January 1, 2006   |                                          | $         | 5,273 |                          | 1,383 |                 |    |       | 153 |       | 6,809
|                             | Acquisitions(1)                          |           |       | 5                        |       |                |     | 357   |     | 521   |      
|                             | Disposition(2)                           |           |       |                         |       |                |     |      |     | (124  | )    
|                             | Impairment(3)                            |           |       |                         |       |                |     |      |     | (111  | )    
|                             | Foreign currency translation adjustments |           |       | 60                       |       |                |     |      |     |      |      
|                             | Other(4)                                 |           |       | 78                       |       | (12             | )   |      |     | 5     |      
|                             |                                          |           |       |                          |       |                 |     |       |     |       |      
|Balance at December 31, 2006 |                                          |           | 5,416 |                          | 1,371 |                 | 357 |       | 444 |       | 7,588
|                             | Acquisitions(1)                          |           |       |                         |       |                |     |      |     | 466   |      
|                             | Impairment(3)                            |           |       |                         |       |                |     | (182  | )   | (32   | )    
|                             | Foreign currency translation adjustments |           |       | 44                       |       |                |     | 14    |     |      |      
|                             | Other(5)                                 |           |       | (41                      | )     |                |     | 5     |     | (7    | )    
|                             |                                          |           |       |                          |       |                 |     |       |     |       |      
|Balance at December 31, 2007 |                                          | $         | 5,419 |                          | 1,371 |                 | 194 |       | 871 |       | 7,855
|                             |                                          |           |       |                          |       |                 |     |       |     |       |      

---

II-30

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)



Intangible Assets Subject to Amortization

Intangible assets subject to amortization are comprised of the following:

|                       |  | December 31, 2007 |       | December 31, 2006
|---------------------- |  | ----------------- | ----- | -----------------
|
|
|Distribution rights    |  | $                 | 2,326 |                  
|Customer relationships |  |                   | 2,669 |                  
|Other                  |  |                   | 911   |                  
|                       |  |                   |       |                  
|Total                  |  | $                 | 5,906 |                  
|                       |  |                   |       |                  

Distribution
rights and customer relationships are amortized primarily over 14 years and 10-14 years, respectively. Amortization expense was
$512 million, $463 million and $453 million for the years ended December 31, 2007, 2006 and 2005, respectively. Based on its amortizable intangible assets as of
December 31, 2007, Liberty expects that amortization expense will be as follows for the next five years (amounts in millions):

2008

$
5082009

$
4582010

$
4222011

$
3882012

$
369


Impairment of Long-lived Assets

Statement 144 requires that the Company periodically review the carrying amounts of its property and equipment and its intangible assets (other than goodwill) to
determine whether current events or circumstances indicate that such carrying amounts may not be recoverable. If the carrying amount of the asset is greater than the expected undiscounted cash flows
to be generated by such asset, an impairment adjustment is to be recognized. Such adjustment is measured by the amount that the carrying value of such assets exceeds their fair value. The Company
generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows using an appropriate discount rate. Considerable management judgment is
necessary to estimate the fair value of

II-31

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

assets.
Accordingly, actual results could vary significantly from such estimates. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value less
costs to sell.

Minority Interests

Recognition of minority interests' share of losses of subsidiaries is generally limited to the amount of such minority interests' allocable portion of the common
equity of those subsidiaries. Further, the minority interests' share of losses is not recognized if the minority holders of common equity of subsidiaries have the right to cause the Company to
repurchase such holders' common equity.

Foreign Currency Translation

The functional currency of the Company is the United States ("U.S.") dollar. The functional currency of the Company's foreign operations generally is the
applicable local currency for each foreign subsidiary. Assets and liabilities of foreign subsidiaries are translated at the spot rate in effect at the applicable reporting date, and the consolidated
statements of operations are translated at the average exchange rates in effect during the applicable period. The resulting unrealized cumulative translation adjustment, net of applicable income
taxes, is recorded as a component of accumulated other comprehensive earnings in stockholders' equity.

Transactions
denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates
result in transaction gains and losses which are reflected in the accompanying consolidated statements of operations and comprehensive earnings as unrealized (based on the applicable
period-end exchange rate) or realized upon settlement of the transactions.

Revenue Recognition

Revenue is recognized as follows:



II-32

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)



Cost of Sales

Cost of sales primarily includes actual product cost, provision for obsolete inventory, buying allowances received from suppliers, shipping and handling costs and
warehouse costs.

Advertising Costs

Advertising costs generally are expensed as incurred. Advertising expense aggregated $169 million, $112 million and $45 million for the years
ended December 31, 2007, 2006 and 2005, respectively. Co-operative marketing costs are recognized as advertising expense to the extent an identifiable benefit is received and fair
value of the benefit can be reasonably measured. Otherwise, such costs are recorded as a reduction of revenue.

Stock-Based Compensation

FASB Statement 123R

As more fully described in note 12, certain employees of the Company and employees of its subsidiaries hold options, stock appreciation rights ("SARs") and
options with tandem SARs to purchase shares of New Liberty common stock (collectively, "Awards"). In addition, QVC had granted combination stock options/SARs ("QVC Awards") to certain of its
employees. In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based
Payment" ("Statement 123R"). Statement 123R, which is a revision of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("Statement 123") and supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB Opinion No. 25"), establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services,
primarily focusing on transactions in which an entity obtains employee services. Statement 123R generally requires companies to measure the cost of employee services received in exchange for an award
of equity instruments (such as stock options and restricted stock) based on the grant-date fair value of the award, and to recognize that cost over the period during which the employee is
required to provide service (usually the vesting period of the award). Statement 123R also requires companies to measure the cost of employee services received in exchange for an award of liability
instruments (such as stock appreciation rights that will be settled in cash) based on the current fair value of the award, and to remeasure the fair value of the award at each reporting date.

The
Company adopted Statement 123R effective January 1, 2006. In connection with such adoption, the Company recorded an $89 million transition adjustment loss, which is net
of related income taxes of $31 million. Under Statement 123R, the QVC Awards were required to be bifurcated into a liability award and an equity award. Previously, under APB Opinion
No. 25, no liability was recorded. The transition adjustment primarily represents the fair value of the liability portion of the QVC Awards at January 1, 2006. The transition adjustment
is reflected in the accompanying consolidated statement of operations as the cumulative effect of accounting change.

Included
in selling, general and administrative expenses in the accompanying consolidated statements of operations are the following amounts of stock-based compensation (amounts in
millions):

Years ended:December 31, 2007

$
93December 31, 2006

$
67December 31, 2005

$
52


II-33

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

As of December 31, 2007, the total unrecognized compensation cost related to unvested New Liberty equity awards was approximately $81 million. Such
amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately 2 years.

Pro Forma Disclosure

Prior to adoption of Statement 123R, the Company accounted for compensation expense related to its Awards pursuant to the recognition and measurement provisions
of APB Opinion No. 25. All of the Company's Awards were accounted for as variable plan awards, and compensation was recognized based upon the percentage of the options that were vested and the
intrinsic value of the options at the balance sheet date. The Company accounted for QVC Awards using fixed-plan accounting. The following table illustrates the effect on earnings from
continuing operations and earnings per share for the year ended December 31, 2005 as if the Company had applied the fair value recognition provisions of Statement 123 to its options.
Compensation expense for SARs and options with tandem SARs was the same under APB Opinion No. 25 and Statement 123.

Accordingly,
no pro forma adjustment for such Awards is included in the following table (amounts in millions).

Year ended
December 31, 2005Loss from continuing operations

$
(43
)Add stock compensation as determined under the intrinsic value method, net of taxes


2Deduct stock compensation as determined under the fair value method, net of taxes


(42
)Pro forma loss from continuing operations

$
(83
)


Impact of Spin Off Transactions

In connection with the spin off of Liberty subsidiaries Liberty Media International ("LMI") and Discovery Holding Company ("DHC") in 2004 and 2005, respectively,
certain employees of Liberty received LMI and DHC options. Liberty records compensation expense related to these awards based on the grant date fair value over the remaining vesting period.

Income Taxes

The Company is a single member limited liability company, which is treated as a disregarded entity for federal income tax purposes. As such, the Company is
included in New Liberty's consolidated federal income tax return. The Company has calculated its stand-alone tax provision on a separate return basis, and accounts for income taxes using the asset and
liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying value amounts and income tax
bases of assets and liabilities and the expected benefits of utilizing net operating loss and tax credit carryforwards. The deferred tax assets and liabilities are calculated using enacted tax rates
in effect for each taxing jurisdiction in which the company operates for the year in which those temporary differences are expected to be recovered or settled. Net deferred tax assets are then reduced
by a valuation allowance if the Company believes it more-likely-than-not such net deferred tax assets will not be realized. The effect on deferred tax assets

II-34

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

and
liabilities of an enacted change in tax rates is recognized in income in the period that includes the enactment date.

Effective
January 1, 2007, Liberty adopted FASB Interpretation No. 48,"Accounting for Uncertainty in Income Taxes, an interpretation of FASB
Statement No. 109"("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements and
prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In instances where
the Company has taken or expects to take a tax position in its tax return and the Company believes it is more likely than not that such tax position will be upheld by the relevant taxing authority,
the Company may record a benefit for such tax position in its consolidated financial statements.

The
impactincrease/(decrease)on Liberty's balance sheet of the January 1, 2007 adoption of FIN 48 is as follows (amounts in millions):

Tax liabilities (including interest and penalties)

$
(634
)Goodwill

$
(31
)Deferred tax liabilities

$
36Accumulated deficit

$
(574
)Other assets

$
7


When
the tax law requires interest to be paid on an underpayment of income taxes, the Company recognizes interest expense from the first period the interest would begin accruing
according to the relevant tax law. Such interest expense is included in interest expense in the accompanying consolidated statements of operations. Any accrual of penalties related to underpayment of
income taxes on uncertain tax positions is included in other income (expense) in the accompanying consolidated statements of operations.

Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. Liberty considers (i) the estimate of the fair value of its long-lived assets (including goodwill) and any resulting impairment charges,
(ii) its accounting for income taxes, (iii) its assessment of other than temporary declines in value of its investments and (iv) its estimates of retail related adjustments and
allowances to be its most significant estimates.

Liberty
holds investments that are accounted for using the equity method. Liberty does not control the decision making process or business management practices of these affiliates.
Accordingly, Liberty relies on management of these affiliates to provide it with accurate financial information prepared in accordance with GAAP that Liberty uses in the application of the equity
method. In addition, Liberty relies on audit reports that are provided by the affiliates' independent auditors on the financial statements of such affiliates. The Company is not aware, however, of any
errors in or possible misstatements of the financial information provided by its equity affiliates that would have a material effect on Liberty's consolidated financial statements.

II-35

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Recent Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157,"Fair Value
Measurements"("Statement 157"), which defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements.
Statement 157 applies to other accounting pronouncements that require or permit fair value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and for interim periods within those fiscal years. Liberty does not expect that its adoption of Statement 157 will have a significant impact on the reported amounts of the
assets and liabilities that it reports at fair value in its consolidated balance sheet.

In
February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities, including an amendment of FASB Statement No. 115"("Statement 159"). Statement 159 permits entities to choose to measure many financial instruments, such as
AFS securities, and certain other items at fair value and to recognize the changes in fair value of such instruments in the entity's statement of operations. Currently under Statement of Financial
Accounting Standards No. 115, entities are required to recognize changes in fair value of AFS securities in the balance sheet in accumulated other comprehensive earnings. Statement 159
is effective as of the beginning of an entity's fiscal year that begins after November 15, 2007. Effective January 1, 2008, Liberty plans to apply the provisions of Statement 159 to
certain of its AFS securities which it considers non-strategic. As a result, changes in the fair value of the subject securities will be reported in unrealized gains/losses in its
consolidated statement of operations, rather than a component of accumulated other comprehensive earnings in its consolidated balance sheet. The fair value of such securities was $4,839 million
at December 31, 2007, and the amount of unrealized gains included in other comprehensive earnings that will be included in Liberty's cumulative effect of accounting change and reclassified to
retained earnings upon adoption of Statement 159 is $1,039 million.

In
December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007),"Business Combinations"("Statement 141R"). Statement 141R replaces Statement of Financial Accounting Standards No. 141,"Business Combinations"("Statement 141"),
although it retains the fundamental requirement in Statement 141 that the acquisition method of accounting be used for all business combinations. Statement 141R establishes principles and requirements
for how the acquirer in a business combination (a) recognizes and measures the assets acquired, liabilities assumed and any noncontrolling interest in the acquiree, (b) recognizes and
measures the goodwill acquired in a business combination or a gain from a bargain purchase and (c) determines what information to disclose regarding the business combination. Statement 141R
applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first fiscal year after December 15, 2008.

In
December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial
Statements"("Statement 160"). Statement 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary, commonly referred to as minority
interest. Among other matters, Statement 160 requires (a) the noncontrolling interest be reported within equity in the balance sheet and (b) the amount of consolidated net income
attributable to the parent and to the noncontrolling interest to be clearly presented in the statement of
income. Statement 160 is effective for fiscal years beginning after December 15, 2008. Statement 160 is to be applied prospectively, except for the presentation and disclosure requirements,
which shall be applied retrospectively for all periods presented. Liberty expects that its adoption of Statement 160 in 2009 will impact the accounting for the purchase and sale and the presentation
of the noncontrolling interests in its subsidiaries.

II-36

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(3) Supplemental Disclosures to Consolidated Statements of Cash Flows

Years ended December 31,2007

2006

2005amounts in millionsCash paid for acquisitions:Fair value of assets acquired

$
365

1,494

1Net liabilities assumed


(41
)
(227
)
Deferred tax liabilities


(4
)
(48
)
Minority interest


35

259

95Exchange of cost investment




(235
)
Common stock issued


(7
)
(36
)
Cash paid for acquisitions, net of cash acquired

$
348

1,207

96Available-for-sale securities exchanged for consolidated subsidiaries and cash

$
1,718



Cash paid for interest

$
607

510

477Cash paid for income taxes

$
195

152

161


(4) Discontinued Operations

Sale of OpenTV Corp.

On January 16, 2007, Liberty completed the sale of its controlling interest in OpenTV Corp. ("OPTV") to an unaffiliated third party for cash consideration
of $132 million, $20 million of which was deposited in an escrow account to fund potential indemnification claims by the third party made prior to the first anniversary of the closing.
Pursuant to an agreement between Liberty and OPTV, $5.4 million of the amount received by Liberty at closing was remitted to OPTV, and OPTV received 71.4% of the escrow account in the first
quarter of 2008. Liberty recognized a pre-tax gain of $65 million upon consummation of the sale. Such gain is included in earnings from discontinued operations in the accompanying
consolidated statement of operations.

Sale of Ascent Entertainment Group, Inc.

On April 4, 2007, Liberty consummated a transaction with an unaffiliated third party pursuant to which Liberty sold its 100% ownership interest in Ascent
Entertainment Group, Inc. ("AEG") for $332 million in cash and 2.05 million shares of common stock of the buyer valued at approximately $50 million. Liberty recognized a
pre-tax gain of $163 million upon consummation of the sale. Such gain is included in earnings from discontinued operations. AEG's primary operating subsidiary is On Command
Corporation.

Spin Off of Discovery Holding Company

On July 21, 2005 (the "DHC Spin Off Date"), Liberty completed the spin off (the "DHC Spin Off") of DHC to its shareholders. The DHC Spin Off was effected
as a dividend by Liberty to holders of its Series A and Series B common stock of shares of DHC Series A and Series B common stock, respectively. The DHC Spin Off did not
involve the payment of any consideration by the holders of Liberty common stock and is intended to qualify as a tax-free transaction. At the time of the DHC

II-37

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Spin
Off, DHC's assets were comprised of Liberty's 100% ownership interest in Ascent Media Group, LLC, Liberty's 50% ownership interest in Discovery Communications, Inc. and
$200 million in cash.

Following
the DHC Spin Off, DHC and Liberty operate independently, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the DHC Spin Off, DHC
and Liberty entered into certain agreements in order to govern certain of the ongoing relationships between Liberty and DHC after the DHC Spin Off and to provide for an orderly transition. These
agreements include a Reorganization Agreement, a Facilities and Services Agreement and a Tax Sharing Agreement.

The
DHC Reorganization Agreement provides for, among other things, the principal corporate transactions required to effect the DHC Spin Off and cross indemnities. Pursuant to the DHC
Facilities and Services Agreement, Liberty provides DHC with office space and certain general and administrative services including legal, tax, accounting, treasury and investor relations support. DHC
reimburses Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services and for DHC's allocable portion of facilities costs and costs associated
with any shared services or personnel.

Under
the DHC Tax Sharing Agreement, Liberty generally is responsible for U.S. federal, state and local and foreign income taxes owing with respect to consolidated returns which include
both Liberty and DHC. DHC is responsible for all other taxes with respect to returns which include DHC, but do not include Liberty whether accruing before, on or after the DHC Spin Off. The DHC Tax
Sharing Agreement requires that DHC will not take, or fail to take, any action where such action, or failure to act, would be inconsistent with or prohibit the DHC Spin Off from qualifying as a
tax-free transaction. Moreover, DHC has indemnified Liberty for any loss resulting from such action or failure to act, if such action or failure to act precludes the DHC Spin Off from
qualifying as a tax-free transaction.

The
consolidated financial statements and accompanying notes of Liberty have been prepared reflecting OPTV, AEG and DHC as discontinued operations. Accordingly, the assets and
liabilities, revenue, costs and expenses, and cash flows of these subsidiaries have been excluded from the respective captions in the accompanying consolidated balance sheets, statements of
operations, statements of comprehensive earnings (loss) and statements of cash flows and have been reported separately in such consolidated financial statements.

Certain
combined statement of operations information for OPTV, AEG and DHC, which is included in earnings (loss) from discontinued operations, is as follows:

Years ended December 31,2007

2006

2005amounts in millionsRevenue

$
59

335

704Earnings (loss) before income taxes and minority interests

$
160

(30
)
(1
)


II-38

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(5) Investments in Available-for-Sale Securities and Other Cost Investments

Investments in AFS securities, which are recorded at their respective fair market values, and other cost investments are summarized as follows:

December 31,2007

2006amounts in millionsNews Corporation

$
10,647

11,158IAC/InterActiveCorp ("IAC")


1,863

2,572Time Warner Inc. ("Time Warner")(1)


1,695

3,728Sprint Nextel Corporation ("Sprint")(2)


1,150

1,651Motorola, Inc. ("Motorola")(3)


1,187

1,522Other AFS equity securities(4)


655

830Other AFS debt securities


337

135Other cost investments and related receivables


35

34Consolidated Liberty


17,569

21,630Less short-term investments




(8
)$
17,569

21,622




Time Warner

On May 17, 2007, Liberty completed a transaction (the "Time Warner Exchange") with Time Warner in which Liberty exchanged approximately 68.5 million
shares of Time Warner common stock valued at $1,479 million for a subsidiary of Time Warner which holds ANLBC, Leisure Arts and $984 million in cash. Liberty recognized a
pre-tax gain of $582 million based on the difference between the fair value and the weighted average cost basis of the Time Warner shares exchanged.

CBS Corporation

On April 16, 2007, Liberty completed a transaction (the "CBS Exchange") with CBS Corporation pursuant to which Liberty exchanged all of its
7.6 million shares of CBS Class B common stock valued at $239 million for a subsidiary of CBS that holds WFRV TV Station and approximately $170 million in cash. Liberty
recognized a pre-tax gain of $31 million based on the difference between the fair value and the weighted average cost basis of the CBS shares exchanged.

On
a pro forma basis, the results of operations of ANLBC, Leisure Arts and WFRV TV Station are not significant to those of Liberty for the years ended December 31, 2007 and 2006.

II-39

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

News Corporation

Subsequent to December 31, 2007, Liberty completed an exchange transaction (the "News Corporation Exchange") with News Corporation pursuant to which
Liberty exchanged its approximate 16% ownership interest in News Corporation valued at approximately $10.1 billion on the closing date for a subsidiary of News Corporation, which owns News
Corporation's approximate 41% interest in The DIRECTV Group, Inc., three regional sports television networks and approximately $465 million in cash.

IAC/InterActiveCorp

Effective August 9, 2005, IAC completed the spin-off of its subsidiary, Expedia, Inc. ("Expedia"). Each share of IAC common stock and
IAC Class B common stock owned at the time of the spin-off, including those owned by Liberty, was recapitalized as 1/2 of a share of the same class of IAC common
stock and 1/2 of a share of the corresponding class of Expedia common stock. Immediately subsequent to the spin-off of Expedia, Liberty owned approximately 20% of the
outstanding Expedia common stock representing an approximate 52% voting interest. However, under governance arrangements between Liberty and Mr. Barry Diller, the Chairman of Expedia, entered
into in connection with the Expedia spin off Mr. Diller voted Liberty's shares of Expedia, subject to certain limitations. As Liberty has the right to and has appointed 20% of the members of
Expedia's board of directors, which is currently comprised of 10 members, Liberty accounts for this investment using the equity method of accounting. Liberty allocated its pre-spin off
carrying value in IAC between IAC and Expedia based on the relative trading prices of IAC and
Expedia. Unrealized holding gains included in the carrying value allocated to Expedia were reversed as part of this allocation.

At
December 31, 2007, Liberty owned approximately 25% of IAC common stock representing an approximate 59% voting interest. However, under governance arrangements existing at
December 31, 2007, Mr. Barry Diller, the Chairman of IAC, voted Liberty's shares, subject to certain limitations. Due to this and the fact that Liberty had rights to appoint only two of
the twelve members of the IAC board of directors, Liberty's ability to exert significant influence over IAC was limited. Accordingly, Liberty accounted for this investment as an AFS security.

Subsequent
to December 31, 2007, Liberty increased its ownership interest in IAC to an approximate 30% equity interest and a 62% voting interest. On January 22, 2008, IAC
and Mr. Diller filed a complaint styledIAC/InteractiveCorp, et al. v. Liberty Media Corporation, C.A. No. 3486 in the Delaware Chancery
Court seeking a declaratory judgment that, among other things, a proposed spin off transaction by IAC and Mr. Diller's actions in respect thereof do not breach the foregoing governance
arrangements. On January 24, 2008, we filed a complaint styledLiberty Media Corporation, et al. v. Diller, et al., C.A. No. 3491 in the
Delaware Chancery Court against IAC, Mr. Diller and certain other members of IAC's board of directors seeking a judgment that, among other things, the proposed spin off transaction constitutes
a violation of IAC's charter and breaches the foregoing governance arrangements. As a result of Mr. Diller's breach of these governance arrangements, his right to vote Liberty's shares has
terminated, and the record holders of a majority of the voting power in IAC have, among other things, (a) acted by written consent to remove Mr. Diller and certain other members of the
IAC board and appoint three of Liberty's officers to serve on the board of IAC, along with Liberty's two existing designees and (b) filed a complaint styledLMC Silver
King, Inc., et al. v. IAC/InterActiveCorp, et al., C.A. No. 3501 in the Chancery Court seeking, among other things, a declaratory judgment that this written
consent by those record holders was duly and validly executed and was effective upon delivery to IAC. The three actions referenced in this section have been consolidated by the court into an action
styledIn re IAC/InterActiveCorp C.A. No. 3486-VCL.Pursuant to a status-quo

II-40

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

order
entered by the Delaware Chancery Court, IAC is required to give Liberty advance notice of numerous actions and potential transactions, and the persons serving as directors of IAC prior to the
delivery of the IAC majority stockholders' written consent will remain in office pending the outcome of the litigation. Liberty will continue to account for its investment in IAC as an AFS security
pending the resolution of this litigation.

Other Than Temporary Declines in Fair Value of Investments

During the years ended December 31, 2007, 2006 and 2005, Liberty determined that certain of its AFS securities and cost investments experienced other than
temporary declines in value. The primary factors considered by Liberty in determining the timing of the recognition for the majority of these impairments was the length of time the investments traded
below Liberty's cost bases and the lack of
near-term prospects for recovery in the stock prices. As a result, the carrying amounts of such investments were adjusted to their respective fair values based primarily on quoted market
prices at the balance sheet date. These adjustments are reflected as other than temporary declines in fair value of investments in the consolidated statements of operations.

Unrealized Holdings Gains and Losses

Unrealized holding gains and losses related to investments in AFS securities are summarized below.

December 31, 2007

December 31, 2006Equity
securities

Debt
securities

Equity
securities

Debt
securitiesamounts in millionsGross unrealized holding gains

$
6,249



9,335

Gross unrealized holding losses

$


(12
)
(1
)



The
aggregate fair value of securities with unrealized holding losses at December 31, 2007 was $131 million. None of these securities had unrealized losses for more than 12
continuous months.

(6) Investment in Special Purpose Entity

In April 2007, Liberty and a third party financial institution (the "Financial Institution") jointly created a series of special purpose entities (the "Investment
Fund"). Pursuant to the terms of the Investment Fund, a Liberty subsidiary borrowed $750 million from the Financial Institution with the intent to invest such proceeds in a portfolio of
selected debt and mezzanine-level instruments of companies in the telecommunications, media and technology sectors (the "Debt Securities"). One of the special purpose entities in the Investment Fund
("MFC") is a variable interest entity of which the Financial Institution has been deemed the primary beneficiary and thus its parent for consolidation purposes. Liberty contributed the borrowed funds
to MFC in exchange for a mandatorily redeemable preferred stock interest. MFC subsequently invested the proceeds as an equity investment in another special purpose entity ("LCAP
Investments LLC") which will make and hold the investments in the Debt Securities. A Liberty subsidiary separately made a nominal investment in LCAP Investments LLC which allows it to
serve as its Managing Member. LCAP Investments LLC is considered a variable interest entity of which Liberty is deemed the primary beneficiary as a result of various special profit and loss
allocations set forth in the governing agreements. As a result, LCAP Investments LLC is treated as a consolidated subsidiary of Liberty. Liberty is required to post cash collateral for the
benefit of the Financial Institution of up to 20% of the cost of the Debt Securities.

II-41

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The
various accounting treatment determinations noted above for MFC and LCAP Investments LLC, as prescribed by FIN 46,"Consolidation of Variable
Interest Entities,"and Statement of Financial Accounting Standards No. 150,"Accounting for Certain Financial Instruments with Characteristics
of Both Liabilities and Equity,"and related interpretations, have resulted in Liberty recording a balance sheet gross-up of the elements in the Investment Fund.
The cash balances and Debt Securities held by LCAP Investments LLC are consolidated with Liberty and included in restricted cash and available-for-sale securities,
respectively. The $750 million of bank financing held by the Liberty subsidiary is included in Liberty's consolidated debt balance. In addition, the preferred stock interest in MFC is presented
separately as a long-term asset, and the equity interest held by MFC in LCAP Investments LLC is reflected as minority interest in Liberty's condensed consolidated balance sheet. The
structural form of the Investment Fund does not meet the GAAP requirements necessary to offset, net or otherwise eliminate the gross-up of balance sheet accounts.

The
amount of restricted cash in the Investment Fund at December 31, 2007 is $692 million and is reflected in other long-term assets in Liberty's consolidated
balance sheet.

Subsequent
to December 31, 2007 and as a result of the occurrence of certain triggering events contained in the terms of the Investment Fund, a portion of the Investment Fund
structure was unwound, and MFC was liquidated. Accordingly, Liberty's preferred stock investment in MFC and the
minority interest in LCAP Investments LLC were eliminated in equal amounts in the first quarter of 2008.

(7) Financial Instruments

Equity Collars and Put Options

The Company has entered into equity collars, written put and call options and other financial instruments to manage market risk associated with its investments in
certain marketable securities. These instruments are recorded at fair value based on option pricing models. Equity collars provide the Company with a put option that gives the Company the right to
require the counterparty to purchase a specified number of shares of the underlying security at a specified price at a specified date in the future. Equity collars also provide the counterparty with a
call option that gives the counterparty the right to purchase the same securities at a specified price at a specified date in the future. The put option and the call option generally have equal fair
values at the time of origination resulting in no cash receipts or payments.

II-42

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Borrowed Shares

From time to time and in connection with certain of its derivative instruments, Liberty borrows shares of the underlying securities from a counterparty and
delivers these borrowed shares in settlement of maturing derivative positions. In these transactions, a similar number of shares that are owned by Liberty have been posted as collateral with the
counterparty. These share borrowing arrangements can be terminated at any time at Liberty's option by delivering shares to the counterparty. The counterparty can terminate these arrangements at any
time. The liability under these share borrowing arrangements is marked to market each reporting period with changes in value recorded in unrealized gains or losses in the consolidated statement of
operations. The recorded amount of this liability as of December 31, 2007 and 2006 was $1,183 million and $1,482 million, respectively, and is included in other current
liabilities in the accompanying consolidated balance sheets. The shares posted as collateral under these arrangements continue to be treated as AFS securities and are marked to market each reporting
period with changes in value recorded as unrealized gains or losses in other comprehensive earnings.

Exchangeable Debenture Call Option Obligations

Liberty has issued senior exchangeable debentures which are exchangeable for the value of a specified number of shares of Sprint and Embarq Corporation common
stock, Motorola common stock, Viacom Class B and CBS Corporation Class B common stock or Time Warner common stock, as applicable. (See note 9 for a more complete description of
the exchangeable debentures and the related accounting treatment.)

Realized and Unrealized Gains (Losses) on Financial Instruments

Realized and unrealized gains (losses) on financial instruments are comprised of changes in the fair value of the following:

Years ended December 31,2007

2006

2005amounts in millionsSenior exchangeable debentures

$
541



Equity collars


527

(59
)
311Borrowed shares


298

(32
)
(205
)Exchangeable debenture call option obligations




(353
)
172Other derivatives


(97
)
165

(21
)$
1,269

(279
)
257


(8) Investments in Affiliates Accounted for Using the Equity Method

Liberty's most significant equity method investment is Expedia in which it has an approximate 24% economic interest as of December 31, 2007 and which had a
carrying value of $1,301 million and $1,254 million as of December 31, 2007 and 2006, respectively. The fair value of the Company's

II-43

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

investment
in Expedia was $2,189 million and $1,452 million at December 31, 2007 and 2006, respectively. Summarized unaudited financial information for Expedia is as follows:



December 31,2007

2006amounts in millionsCurrent assets

$
1,046

1,178Property and equipment


179

137Goodwill


6,006

5,861Intangible assets


971

1,029Other assets


93

59Total assets

$
8,295

8,264Current liabilities

$
1,774

1,402Deferred income taxes


351

362Long-term debt


1,085

500Other liabilities


205

34Minority interest


62

62Stockholders' equity


4,818

5,904Total liabilities and equity

$
8,295

8,264




Years ended December 31,2007

2006

2005amounts in millionsRevenue

$
2,665

2,238

2,119Cost of revenue


(562
)
(503
)
(480
)Gross profit


2,103

1,735

1,639Selling, general and administrative expenses


(1,496
)
(1,273
)
(1,116
)Amortization


(78
)
(111
)
(126
)Operating income


529

351

397Interest expense


(53
)
(17
)
(2
)Interest income


39

32

51Other income (expense)


(16
)
18

(31
)Income tax expense


(203
)
(139
)
(186
)Net earnings

$
296

245

229


II-44

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(9) Long-Term Debt

Debt is summarized as follows:

Carrying value December 31,Outstanding principal December 31,
20072007

2006amounts in millionsSenior notes and debentures7.875% Senior Notes due 2009

$
670


668

6677.75% Senior Notes due 2009


233


234

2345.7% Senior Notes due 2013


803


801

8008.5% Senior Debentures due 2029


500


495

4958.25% Senior Debentures due 2030


902


895

895Senior exchangeable debentures0.75% Senior Exchangeable Debentures due 2023


1,750


1,820

1,6374% Senior Exchangeable Debentures due 2029


869


556

2543.75% Senior Exchangeable Debentures due 2030


810


463

2343.5% Senior Exchangeable Debentures due 2031


501


432

2383.25% Senior Exchangeable Debentures due 2031


551


419

119Liberty bank facility


750


750

QVC bank credit facilities


4,023


4,023

3,225Other subsidiary debt


159


159

225Total consolidated Liberty debt

$
12,521


11,715

9,023Less current maturities





(191
)
(114
)Total long-term debt




$
11,524

8,909


Senior Notes and Debentures

Interest on the Senior Notes and Senior Debentures is payable semi-annually based on the date of issuance.

The
Senior Notes and Senior Debentures are stated net of an aggregate unamortized discount of $15 million and $17 million at December 31, 2007 and 2006,
respectively. Such discount is being amortized to interest expense in the accompanying consolidated statements of operations.

Senior Exchangeable Debentures

Each $1,000 debenture of Liberty's 0.75% Senior Exchangeable Debentures is exchangeable at the holder's option for the value of 57.4079 shares of Time Warner
common stock. Liberty may, at its election, pay the exchange value in cash, Time Warner common stock, shares of Liberty common stock or a combination thereof. On or after April 5, 2008,
Liberty, at its option, may redeem the debentures, in whole or in part, for shares of Time Warner common stock, cash or any combination thereof equal to the face amount of the debentures plus accrued
interest. On March 30, 2008, March 30, 2013 or March 30, 2018, each holder may cause Liberty to purchase its exchangeable debentures, and Liberty, at its election, may pay the
purchase price in shares of Time Warner common stock, cash, Liberty common stock, or any combination thereof.

The
holders of Liberty's 0.75% Senior Exchangeable Debentures due 2023, which have an aggregate principal amount of approximately $1.75 billion, have the right to put such
debentures to Liberty at 100% of par during the period from February 25, 2008 to March 24, 2008 for payment on

II-45

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

March 31,
2008. Subsequent to December 31, 2007, Liberty notified its bondholders that it will pay cash for any debentures that are validly tendered pursuant to the put right. Liberty
intends to fund the cash purchase price with committed funds obtained from financing involving certain of its equity derivatives.

Each
$1,000 debenture of Liberty's 4% Senior Exchangeable Debentures is exchangeable at the holder's option for the value of 11.4743 shares of Sprint common stock and .5737 shares of
Embarq Corporation ("Embarq"), which Sprint spun off to its shareholders in May 2006. Liberty may, at its election, pay the exchange value in cash, Sprint and Embarq common stock or a combination
thereof. Liberty, at its option, may redeem the debentures, in whole or in part, for cash generally equal to the face amount of the debentures plus accrued interest.

Each
$1,000 debenture of Liberty's 3.75% Senior Exchangeable Debentures is exchangeable at the holder's option for the value of 8.3882 shares of Sprint common stock and .4194 shares of
Embarq common stock. Liberty may, at its election, pay the exchange value in cash, Sprint and Embarq common stock or a combination thereof. Liberty, at its option, may redeem the debentures, in whole
or in part, for cash equal to the face amount of the debentures plus accrued interest.

Each
$1,000 debenture of Liberty's 3.5% Senior Exchangeable Debentures (the "Motorola Exchangeables") is exchangeable at the holder's option for the value of 36.8189 shares of Motorola
common stock and, prior to the cash distribution described below, 4.0654 shares of Freescale Semiconductor, Inc. ("Freescale"), which Motorola spun off to its shareholders in December 2004.
Such exchange value is payable, at Liberty's option, in cash, Motorola stock or a combination thereof. Liberty, at its option, may redeem the debentures, in whole or in part, for cash generally equal
to the adjusted principal amount of the debentures plus accrued interest. As a result of the cash distribution described below, the adjusted principal amount of each $1,000 debenture is $837.38.
Effective December 1, 2006, a consortium of private equity firms purchased all of the common stock of Freescale, including the Freescale common stock owned by Liberty. Pursuant to the terms of
the indenture covering the Motorola Exchangeables, Liberty announced that it would make a cash distribution of $162.62 per $1,000 bond to holders of such bonds. Such distribution was made in January
2007, and Liberty reduced its outstanding debt by $97.6 million.

Each
$1,000 debenture of Liberty's 3.25% Senior Exchangeable Debentures is exchangeable at the holder's option for the value of 9.2833 shares of Viacom Class B common stock and
9.2833 shares of CBS Corporation ("CBS") Class B common stock, which Viacom spun off to its shareholders in December 2005. Such exchange value is payable at Liberty's option in cash, Viacom and
CBS stock or a combination thereof. Liberty, at its option, may redeem the debentures, in whole or in part, for cash equal to the face amount of the debentures plus accrued interest.

Interest
on the Company's exchangeable debentures is payable semi-annually based on the date of issuance. At maturity, all of the Company's exchangeable debentures are
payable in cash.

Liberty Bank Facility

Represents borrowings related to the Investment Fund described in note 6 above. Borrowings accrue interest at a rate of LIBOR plus an applicable margin
(5.43% at December 31, 2007).

QVC Bank Credit Facilities

QVC is party to an unsecured $3.5 billion bank credit facility dated March 3, 2006 (the "March 2006 Credit Agreement"). The March 2006 Credit
Agreement is comprised of two $800 million U.S. dollar term loans, a $600 million multi-currency term loan that was drawn in U.S. dollars, a $650 million U.S. dollar revolving
loan and a $650 million multi-currency revolving loan. The foregoing multi-currency loans can be made, at QVC's option, in U.S. dollars, Japanese yen, U.K. pound sterling or euros. All loans
are due and payable on March 3, 2011.

II-46

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

QVC
is party to a second credit agreement dated October 4, 2006, as amended on March 20, 2007 (the "October 2006 Credit Agreement"), which provides for an additional
unsecured $1.75 billion credit facility, consisting of an $800 million initial term loan and $950 million of delayed draw term loans, all of which has been drawn. The loans are
scheduled to mature on October 4, 2011.

All
loans under the March 2006 Credit Agreement and the October 2006 Credit Agreement bear interest at a rate equal to (i) LIBOR for the interest period selected by QVC plus a
margin that varies based on QVC's leverage ratio or (ii) the higher of the Federal Funds Rate plus 0.50% or the prime rate announced by the respective Administrative Agent from time to time.
The weighted average interest rate for all borrowings under QVC's Credit Agreements at December 31, 2007 was 5.65%. QVC is required to pay a commitment fee quarterly in arrears on the unused
portion of the commitments. Such fees were not significant in 2007 or 2006.

The
March 2006 Credit Agreement and the October 2006 Credit Agreement contain restrictive covenants, which require among other things, the maintenance of certain financial ratios and
include limitations on indebtedness, liens, encumbrances, dispositions, guarantees and dividends. QVC was in compliance with its debt covenants at December 31, 2007. QVC's ability to borrow the
unused portion of its credit agreements is dependent on its continuing compliance with such covenants both before and after giving effect to such additional borrowing.

QVC Interest Rate Swap Arrangements

QVC is party to ten separate interest rate swap arrangements with an aggregate notional amount of $2,200 million to manage the cash flow risk associated
with interest payments on its variable rate debt. The swap arrangements provide for QVC to make fixed payments at rates ranging from 4.9575% to
5.2928% and to receive variable payments at 3 month LIBOR. All of the swap arrangements expire in March 2011 contemporaneously with the maturity of the March 2006 Credit Agreement. QVC is also
party to an interest rate swap arrangement with a notional amount of $500 million. This swap arrangement, which expires in September 2008, provides for QVC to make fixed payments at 4.76% and
to receive variable payments at 3 month LIBOR through March 18, 2008. Thereafter, QVC is to make fixed payments at 4.71% and to receive variable payments at 1 month LIBOR. Liberty
accounts for the swap arrangements as cash flow hedges with the effective portions of changes in the fair value reflected in other comprehensive earnings in the accompanying consolidated balance
sheet.

Other Subsidiary Debt

Other subsidiary debt at December 31, 2007 is comprised of capitalized satellite transponder lease obligations and bank debt of certain subsidiaries.

Five Year Maturities

The U.S. dollar equivalent of the annual principal maturities of Liberty's debt for each of the next five years is as follows (amounts in millions):

2008

$
522009

$
9232010

$
202011

$
4,0482012

$
762


The
foregoing principal maturities for 2008 do not include any amounts for Liberty's 0.75% Senior Exchangeable Debentures that may be put to the Company in March 2008.

II-47

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Fair Value of Debt

Liberty estimates the fair value of its debt based on the quoted market prices for the same or similar issues or on the current rate offered to Liberty for debt
of the same remaining maturities. The fair value of Liberty's publicly traded debt is as follows:

December 31,2007

2006amounts in millionsFixed rate senior notes

$
1,655

1,678Senior debentures

$
1,323

1,422Senior exchangeable debentures, including call option obligation

$
3,690

4,361


Liberty
believes that the carrying amount of its subsidiary debt, which is primarily variable rate debt, approximated fair value at December 31, 2007.

(10) Income Taxes

Income tax benefit (expense) consists of:

Years ended December 31,2007

2006

2005amounts in millionsCurrent:Federal

$
(91
)
(513
)
(100
)State and local


(81
)
(92
)
(75
)Foreign


(93
)
(112
)
(88
)(265
)
(717
)
(263
)Deferred:Federal


(141
)
352

219State and local


24

99

172Foreign


1

4

(2
)(116
)
455

389Income tax benefit (expense)

$
(381
)
(262
)
126


Income
tax benefit (expense) differs from the amounts computed by applying the U.S. federal income tax rate of 35% as a result of the following:

|                                                                                      |                              | Years ended December 31, |     
|------------------------------------------------------------------------------------- | ---------------------------- | ------------------------ | ----
|
|
|Computed expected tax benefit (expense)                                               |                              | $                        | (855
|Nontaxable exchange of investments for subsidiaries and cash                          |                              |                          | 541 
|Change in estimated foreign and state tax rates                                       |                              |                          | (4  
|State and local income taxes, net of federal income taxes                             |                              |                          | (40 
|Foreign taxes, net of foreign tax credits                                             |                              |                          | (1  
|Change in valuation allowance affecting tax expense                                   |                              |                          | (9  
|Impairment of goodwill not deductible for tax purposes                                |                              |                          | (11 
|Disposition of nondeductible goodwill in sales transaction                            |                              |                          |    
|Minority interest                                                                     |                              |                          | (3  
|Dividends received deduction                                                          |                              |                          | 12  
|Disqualifying disposition of incentive stock options not deductible for book purposes |                              |                          |    
|Other, net                                                                            |                              |                          | (11 
|                                                                                      |                              |                          |     
|                                                                                      | Income tax benefit (expense) |                          | $   
|                                                                                      |                              |                          |     

II-48

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The
tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:

December 31,2007

2006amounts in millionsDeferred tax assets:Net operating and capital loss carryforwards

$
310

460Accrued stock compensation


90

79Other accrued liabilities


206

214Deferred revenue


316

231Other future deductible amounts


117

117Deferred tax assets


1,039

1,101Valuation allowance


(63
)
(47
)Net deferred tax assets


976

1,054Deferred tax liabilities:Investments


5,972

6,885Intangible assets


2,284

2,362Discount on exchangeable debentures


1,167

981Other


109

369Deferred tax liabilities


9,532

10,597Net deferred tax liabilities

$
8,556

9,543


The
Company's deferred tax assets and liabilities are reported in the accompanying consolidated balance sheets as follows:

December 31,2007

2006amounts in millionsCurrent deferred tax assets

$


(128
)Current deferred tax liabilities


93

Long-term deferred tax liabilities


8,463

9,671Net deferred tax liabilities

$
8,556

9,543


The
Company's valuation allowance increased $16 million in 2007. Such increase is due to a $9 million increase that affected tax expense and a $7 million increase
for acquisitions.

At
December 31, 2007, Liberty had net operating and capital loss carryforwards for income tax purposes aggregating approximately $652 million which, if not utilized to
reduce taxable income in future periods, will expire as follows: 2009: $329 million; 2011: $110 million; 2012: $92 million and beyond 2012: $121 million. Of the foregoing
net operating and capital loss carryforward amount, approximately $263 million is subject to certain limitations and may not be currently utilized. The remaining $389 million is
currently available to be utilized to offset future taxable income of Liberty's consolidated tax group.

Since
the date Liberty issued its exchangeable debentures, it has claimed interest deductions on such exchangeable debentures for federal income tax purposes based on the "comparable
yield" at

II-49

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

which
it could have issued a fixed-rate debenture with similar terms and conditions. In all instances, this policy has resulted in Liberty claiming interest deductions significantly in
excess of the cash interest currently paid on its exchangeable debentures. In this regard, Liberty has deducted $2,847 million in cumulative interest expense associated with the exchangeable
debentures since the Company's 2001 split off from AT&T Corp. ("AT&T"). Of that amount, $844 million represents cash interest payments. Interest deducted in prior years on its exchangeable
debentures has contributed to net operating losses ("NOLs") or offset taxable income earned in prior taxable years and is offsetting taxable income earned in the current year.

In
connection with the IRS' examination of Liberty's 2003 through 2007 tax returns, and consistent with the position espoused in the previously issued Technical Advice Memorandums to
other taxpayers, the IRS notified Liberty during the third quarter of 2007 that it believed the interest expense on Liberty's exchangeable debentures was not deductible for the period following
Liberty's split-off from AT&T. In February 2008, Liberty reached a settlement with the IRS, which stipulates that interest deductions claimed on a portion of the exchangeable debentures
will be disallowed and instead will reduce Liberty's gain on the future redemption or other retirement of such debt. The cumulative amount of interest deductions disallowed through December 31,
2007 under the settlement is $546 million. As a result, a portion of Liberty's NOLs were eliminated and Liberty had net taxable income in 2006 and 2007. Consequently, Liberty expects to remit
federal income tax payments in 2008 and beyond.

Because
the settlement was reached after December 31, 2007, its effects will not be reflected for financial statement purposes until the first quarter of 2008. Liberty does not
expect there will be a material impact on its total tax expense as the resulting increase in current tax expense will be largely offset by a decrease in deferred tax expense.

A
reconciliation of unrecognized tax benefits is as follows (amounts in millions):

Balance at January 1, 2007

$
422Additions based on tax positions related to the current year


45Additions for tax positions of prior years


9Reductions for tax positions of prior years


(7
)Settlements


(7
)Balance at December 31, 2007

$
462


As
of December 31, 2007, the Company had recorded tax reserves of $462 million related to unrecognized tax benefits for uncertain tax positions. If such tax benefits were
to be recognized for financial statement purposes, $447 million would be reflected in the Company's tax expense and affect its effective tax rate. Liberty's estimate of its unrecognized tax
benefits related to uncertain tax positions requires a high degree of judgment.

As
of December 31, 2007, the Company's 2001 and 2002 tax years are closed for federal income tax purposes, although tax loss carryforwards from those years are still subject to
adjustment. The Company's tax years 2003 through 2006 are under IRS examination, and its 2007 tax year is being examined currently as part of the IRS's Compliance Assurance Process ("CAP") program. In
conjunction with the CAP program, the Company expects the IRS to complete its examination of the 2003 through 2007 tax years by the end of 2008. In January 2008, the Company was notified by the states
of California and New York that they intend to audit the Company's 2003 through 2005 tax years. The Company is currently under audit in the UK, Japan, and Germany. It is reasonably possible that the
amount of the Company's gross unrecognized tax benefits may decrease within the next twelve

II-50

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LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

months
by up to $55 million, due to the potential resolution of certain disputes with the taxing authorities and the expiration of various statutes of limitation.

During
the year ended December 31, 2007, the Company recognized $6 million and $3 million of interest and penalties, respectively, related to uncertain tax
positions. As of December 31, 2007, the Company had recorded $27 million of accrued interest and penalties related to uncertain tax positions.

(11) Transactions with Officers and Directors

Chairman's Employment Agreement

The Chairman's employment agreement provides for, among other things, deferral of a portion (not in excess of 40%) of the monthly compensation payable to him for
all employment years commencing on or after January 1, 1993. The deferred amounts will be payable in monthly installments over a 20-year period commencing on the termination of the
Chairman's employment, together with interest thereon at the rate of 8% per annum compounded annually from the date of deferral to the date of payment. The aggregate liability under this arrangement
at December 31, 2007 is $2 million, and is included in other liabilities in the accompanying consolidated balance sheet.

The
Chairman's employment agreement also provides that in the event of termination of his employment with Liberty, he will be entitled to receive 240 consecutive monthly payments equal
to $15,000 increased at the rate of 12% per annum compounded annually from January 1, 1988 to the date payment commences ($129,192 per month as of December 31, 2007). Such payments would
commence on the first day of the month succeeding the termination of employment. In the event of the Chairman's death, his beneficiaries would be entitled to receive the foregoing monthly payments.
The aggregate liability under this arrangement at December 31, 2007 is $31 million, and is included in other liabilities in the accompanying consolidated balance sheet.

The
Company's Chairman deferred a portion of his monthly compensation under his previous employment agreement with Tele-Communications, Inc. ("TCI"). The Company
assumed the obligation to pay that deferred compensation in connection with the TCI/AT&T Merger in 1999. The deferred obligation (together with interest at the rate of 13% per annum compounded
annually), which aggregated $18 million at December 31, 2007 and is included in other liabilities in the accompanying consolidated balance sheets, is payable on a monthly basis,
following the occurrence of specified events, under the terms of the previous employment agreement. The rate at which interest accrues on the deferred obligation was established in 1983 pursuant to
the previous employment agreement.

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LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(12) Stock Options and Stock Appreciation Rights

New LibertyIncentive Plans

Pursuant to the Liberty Media Corporation 2000 Incentive Plan, as amended from time to time (the "2000 Liberty Incentive Plan"), certain employees of the Company
hold stock options, SARs and stock options with tandem SARs (collectively, "Awards") to purchase shares of Series A and Series B Liberty Capital and Liberty Interactive common stock. The
2000 Liberty Incentive Plan provides for Awards to be made in respect of a maximum of 48 million shares of Liberty common stock. On May 1, 2007, shareholders of New Liberty approved the
Liberty Media Corporation 2007 Incentive Plan, which provides for Awards to be made in respect of a maximum of 30 million shares of New Liberty common stock. New Liberty issues new shares upon
exercise of equity awards.

On
December 17, 2002, shareholders of New Liberty approved the Liberty Media Corporation 2002 Nonemployee Director Incentive Plan, as amended from time to time (the "NDIP"). Under
the NDIP, the New Liberty Board of Directors (the "New Liberty Board") has the full power and authority to grant eligible nonemployee directors stock options, SARs, stock options with tandem SARs, and
restricted stock.

New LibertyGrants

Awards granted pursuant to the Liberty Incentive Plan and the NDIP during 2005 through the Restructuring in 2006 are provided in the table below. The exercise
prices in the table represent the exercise price on the date of grant and have not been adjusted for the effects of the DHC Spin Off or the Restructuring, as applicable.

|Grant
year      |  | Grant
group            |  | Grant
type |  | Number
of awards
granted |  | Weighted
average exercise price |       | Vesting
period |         | Term |          | Weighted
average
grant date
fair value
|--------------- |  | ---------------------- |  | ---------- |  | ------------------------ |  | ------------------------------- | ----- | -------------- | ------- | ---- | -------- | --------------------------------------
|Series A Awards |  |                        |  |            |  |                          |  |                                 |       |                |         |     
|2005            |  | Employees              |  | Options    |  | 9,076,750                |  | $                               | 8.26  |                | 4 years |      | 7 years  |                                       
|2005            |  | Non-employee directors |  | SARs       |  | 55,000                   |  | $                               | 10.36 |                | 1 year  |      | 10 years |                                       
|2006            |  | Employees              |  | Options    |  | 2,473,275                |  | $                               | 8.24  |                | 4 years |      | 7 years  |                                       
|2006            |  | Non-employee directors |  | Options    |  | 150,000                  |  | $                               | 8.70  |                | 1 year  |      | 10 years |                                       
|Series B Awards |  |                        |  |            |  |                          |  |                                 |       |                |         |     
|2005            |  | Employees              |  | Options    |  | 1,800,000                |  | $                               | 9.21  |                | 3 years |      | 10 years |                                       

During
the year ended December 31, 2007, New Liberty granted 739,681 options to purchase shares of Series A Liberty Capital common stock and 6,093,384 shares of
Series A Liberty Interactive common stock to certain of its directors, officers and employees and officers and employees of certain subsidiaries. New Liberty used the Black-Scholes Model to
estimate the grant date fair value of such options. The Series A Liberty Capital options and the Series A Liberty Interactive options granted in 2007 had a weighted average grant date
fair value of $28.78 and $5.88, respectively.

In
2006, subsequent to the Restructuring, New Liberty granted 10,018,000 options to purchase Series A Liberty Interactive stock to officers and employees of certain of its
subsidiaries. Such options had an estimated weighted average grant-date fair value of $4.94 per share.

II-52

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LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The
Company has calculated the grant-date fair value for all of its equity classified awards and any subsequent remeasurement of its liability classified awards using the
Black-Scholes Model. Prior to 2007, the Company calculated the expected term of the Awards using the methodology included in SEC Staff Accounting Bulletin No. 107. In 2007, the Company
estimated the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards granted in 2007 ranged from 20.8% to 25.3% for Liberty
Interactive Awards and from 17.5% to 19.7% for Liberty Capital Awards and is based on the historical volatility of New Liberty's stocks and the implied volatility of publicly traded New Liberty
options. The Company uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.

New LibertyOutstanding Awards

The following tables present the number and weighted average exercise price ("WAEP") of certain options, SARs and options with tandem SARs to purchase New Liberty
common stock granted to certain officers, employees and directors of the Company.

|                                 |             | Liberty Capital common stock |      | Liberty Interactive common stock
|-------------------------------- | ----------- | ---------------------------- | ---- | --------------------------------
|
|
|Outstanding at January 1, 2007   |             | 2,318                        |      | $                               
|                                 | Granted     |                              | 740  |                                 
|                                 | Exercised   |                              | (255 | )                               
|                                 | Forfeited   |                              | (16  | )                               
|                                 | Repurchased |                              |     |                                 
|                                 |             |                              |      |                                 
|Outstanding at December 31, 2007 |             | 2,787                        |      | $                               
|                                 |             |                              |      |                                 
|Exercisable at December 31, 2007 |             | 1,734                        |      | $                               
|                                 |             |                              |      |                                 

The
following table provides additional information about outstanding options to purchase New Liberty common stock at December 31, 2007.

|                     |  | No. of
outstanding options (000's) |  | WAEP of
outstanding options |        | Weighted
average remaining life |           | Aggregate
intrinsic value (000's) |   | No. of
exercisable options (000's) |  | WAEP of
exercisable options |  | Aggregate
intrinsic value (000's)
|-------------------- |  | ---------------------------------- |  | --------------------------- | ------ | ------------------------------- | --------- | --------------------------------- | - | ---------------------------------- |  | --------------------------- |  | ---------------------------------
|Series A Capital     |  | 2,787                              |  | $                           | 97.21  |                                 | 4.8 years |                                   | $ | 59,623                             |  | 1,734                       |  | $                                
|Series B Capital     |  | 1,498                              |  | $                           | 101.37 |                                 | 3.4 years |                                   | $ | 23,335                             |  | 1,468                       |  | $                                
|Series A Interactive |  | 24,811                             |  | $                           | 19.97  |                                 | 5.2 years |                                   | $ | 16,466                             |  | 11,290                      |  | $                                
|Series B Interactive |  | 7,491                              |  | $                           | 23.41  |                                 | 3.4 years |                                   | $ |                                   |  | 7,341                       |  | $                                

New LibertyExercises

The aggregate intrinsic value of all options exercised during the years ended December 31, 2007, 2006 and 2005 was $16 million, $52 million
and $109 million, respectively.

II-53

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LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

New LibertyRestricted Stock

The following table presents the number and weighted average grant-date fair value ("WAFV") of unvested restricted shares of New Liberty common stock
held by certain officers and employees of the Company as of December 31, 2007 (numbers of shares in thousands).

Number
of shares

WAFVSeries A Liberty Capital

57

$
104.68Series A Liberty Interactive

222

$
20.96


The
aggregate fair value of all restricted shares of New Liberty common stock that vested during the years ended December 31, 2007, 2006 and 2005 was $28 million,
$30 million and $35 million, respectively.

QVC Awards

QVC had a qualified and nonqualified combination stock option/stock appreciation rights plan (collectively, the "Tandem Plan") for employees, officers, directors
and other persons designated by the Stock Option Committee of QVC's board of directors. Under the Tandem Plan, the option price was generally equal to the fair market value, as determined by an
independent appraisal, of a share of the underlying common stock of QVC at the date of the grant. If the eligible participant elected the SAR feature of the Tandem Plan, the participant received 75%
of the excess of the fair market value of a share of QVC common stock over the exercise price of the option to which it was attached at the exercise date. QVC applied fixed plan accounting in
accordance with APB Opinion No. 25. Under the Tandem Plan, option/SAR terms were ten years from the date of grant, with options/SARs generally becoming exercisable over four years from the date
of grant. During the years ended December 31, 2006 and 2005, QVC received cash proceeds from the exercise of options aggregating $48 million and $46 million, respectively. In
2005, QVC also repurchased shares of common stock issued upon exercise of stock options in prior years. Cash payments aggregated $71 million for these repurchases.

On
August 14, 2006, QVC terminated the Tandem Plan and offered to exchange Liberty Interactive Share Units, as defined below, for all outstanding unvested QVC Awards as of
September 30, 2006 (the "Exchange Offer"). At the time of the Exchange Offer, there were 150,234 outstanding options to purchase QVC common stock. Of those outstanding options, 70,168 were
vested and exercisable and 80,066 were unvested. Each holder of unvested QVC options who accepted the Exchange Offer received Liberty Interactive Share Units in an amount equal to the
in-the-money value of the exchanged QVC options divided by the closing market price of Series A Liberty Interactive common stock on the trading day preceding
commencement of the Exchange Offer. Liberty Interactive Share Units vest on the same vesting schedule as the unvested QVC Awards and represent the right to receive a cash payment equal to the value of
Liberty Interactive common stock on the vesting date. All unvested QVC Awards were exchanged for approximately 2,348,000 Liberty Interactive Share Units. Liberty accounted for the Exchange Offer as a
settlement of the outstanding unvested QVC Awards. The difference between the fair value of the Liberty Interactive Share Units and the fair value of unvested QVC Awards was reflected as a reduction
to 2006 stock-based compensation.

Also
on August 14, 2006, a subsidiary of Liberty offered to purchase for cash all outstanding shares of QVC common stock owned by officers and employees of QVC and all vested QVC
Awards (the "Tender Offer"). Officers and employees of QVC owned 54,973 shares or 1.09% of QVC common stock at the time of the Tender Offer. The Exchange Offer and the Tender Offer both expired on

II-54

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LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

September 30,
2006. All vested QVC Awards and 49,575 outstanding shares of QVC common stock were tendered as of September 30, 2006 resulting in cash payments aggregating approximately
$258 million. The remaining 5,398 shares of QVC common stock were redeemed subsequent to September 30, 2006 for additional aggregate cash payments of approximately $17 million.
Liberty accounted for the cash paid for outstanding shares of QVC common stock as the acquisition of a minority interest. The difference between the cash paid and the carrying value of the minority
interest was allocated to intangible assets using a purchase accounting model. The cash paid for vested options was less than the carrying value of the related liability. Such difference was reflected
as a reduction to 2006 stock-based compensation. The aggregate credit to stock-based compensation for the Exchange Offer and the Tender Offer was $24 million. Subsequent to the completion of
the foregoing transactions, Liberty owns 100% of the equity of QVC.

Starz Entertainment

Starz Entertainment has outstanding Phantom Stock Appreciation Rights ("PSARS") held by its former chief executive officer. Such PSARs are fully vested and expire
on October 17, 2011, and Starz Entertainment has accrued $136 million as of December 31, 2007 related to the PSARs. Such amount is payable in cash, Liberty common stock or a
combination thereof.

Other

Certain of the Company's other subsidiaries have stock based compensation plans under which employees and non-employees are granted options or similar
stock based awards. Awards made under these plans vest and become exercisable over various terms. The awards and compensation recorded, if any, under these plans is not significant to Liberty.

(13) Employee Benefit Plans

New Liberty is the sponsor of the Liberty Media 401(k) Savings Plan (the "Liberty 401(k) Plan"), which provides its employees and the employees of certain of its
subsidiaries an opportunity for ownership in New Liberty and creates a retirement fund. The Liberty 401(k) Plan provides for
employees to make contributions to a trust for investment in Liberty common stock, as well as several mutual funds. The Company and its subsidiaries make matching contributions to the Liberty 401(k)
Plan based on a percentage of the amount contributed by employees. In addition, certain of the Company's subsidiaries have similar employee benefit plans. Employer cash contributions to all plans
aggregated $26 million, $27 million and $22 million for the years ended December 31, 2007, 2006 and 2005, respectively.

(14) Other Comprehensive Earnings (Loss)

Accumulated other comprehensive earnings (loss) included in Liberty's consolidated balance sheets and consolidated statements of stockholders' equity reflect the
aggregate of foreign currency translation adjustments and unrealized holding gains and losses on AFS securities.

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LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The
change in the components of accumulated other comprehensive earnings (loss), net of taxes, is summarized as follows:

|                             |                                     | Foreign
currency translation adjustments |      | Unrealized
holding
gains (losses) on securities |       | Discontinued
operations |    | Accumulated
other
comprehensive
earnings (loss),
net of taxes |      
|---------------------------- | ----------------------------------- | ---------------------------------------- | ---- | ----------------------------------------------- | ----- | ----------------------- | -- | ------------------------------------------------------------- | -----
|
|Balance at January 1, 2005   |                                     | $                                        | (257 | )                                               | 4,463 |                         | 21 |                                                               | 4,227
|                             | Other comprehensive earnings (loss) |                                          |      | 307                                             |       | (1,101                  | )  | (7                                                            | )    
|                             | Other activity                      |                                          |      |                                                |       |                        |    | (5                                                            | )    
|                             |                                     |                                          |      |                                                 |       |                         |    |                                                               |      
|Balance at December 31, 2005 |                                     |                                          | 50   |                                                 | 3,362 |                         | 9  |                                                               | 3,421
|                             | Other comprehensive earnings        |                                          |      | 111                                             |       | 2,420                   |    |                                                              |      
|                             |                                     |                                          |      |                                                 |       |                         |    |                                                               |      
|Balance at December 31, 2006 |                                     |                                          | 161  |                                                 | 5,782 |                         | 9  |                                                               | 5,952
|                             | Other comprehensive earnings        |                                          |      | 107                                             |       | (1,977                  | )  | (9                                                            | )    
|                             |                                     |                                          |      |                                                 |       |                         |    |                                                               |      
|Balance at December 31, 2007 |                                     | $                                        | 268  |                                                 | 3,805 |                         |   |                                                               | 4,073
|                             |                                     |                                          |      |                                                 |       |                         |    |                                                               |      

Included
in Liberty's accumulated other comprehensive earnings (loss) at January 1, 2005 was $123 million, net of income taxes, of foreign currency translation losses
related to Cablevisión, S.A. ("Cablevisión"), a former equity method investment of Liberty, and $186 million, net of income taxes, of foreign currency
translation losses related to Telewest Global, Inc. ("Telewest"), another former equity method investment of Liberty. In the first quarter of 2005, Liberty disposed of its interests in
Cablevisión and Telewest. Accordingly, Liberty recognized in its statement of operations $488 million of foreign currency translation losses (before income tax benefits) related
to Cablevisión and Telewest that were previously included in accumulated other comprehensive earnings (loss).

II-56

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LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The
components of other comprehensive earnings (loss) are reflected in Liberty's consolidated statements of comprehensive earnings (loss) net of taxes. The following table summarizes the
tax effects related to each component of other comprehensive earnings (loss).

|                                                                         |                              | Before-tax
amount |        | Tax (expense)
benefit |        | Net-of-tax
amount |       
|------------------------------------------------------------------------ | ---------------------------- | ----------------- | ------ | --------------------- | ------ | ----------------- | ------
|
|Year ended December 31, 2007:                                            |                              |                   |        |                       |        |                   |       
|Foreign currency translation adjustments                                 |                              | $                 | 172    |                       | (65    | )                 | 107   
|Unrealized holding losses on securities arising during period            |                              |                   | (2,598 | )                     | 987    |                   | (1,611
|Reclassification adjustment for holding gains realized in net earnings   |                              |                   | (605   | )                     | 230    |                   | (375  
|                                                                         |                              |                   |        |                       |        |                   |       
|                                                                         | Other comprehensive earnings |                   | $      | (3,031                | )      | 1,152             |       
|                                                                         |                              |                   |        |                       |        |                   |       
|Year ended December 31, 2006:                                            |                              |                   |        |                       |        |                   |       
|Foreign currency translation adjustments                                 |                              | $                 | 179    |                       | (68    | )                 | 111   
|Unrealized holding gains on securities arising during period             |                              |                   | 4,202  |                       | (1,597 | )                 | 2,605 
|Reclassification adjustment for holding gains realized in net loss       |                              |                   | (298   | )                     | 113    |                   | (185  
|                                                                         |                              |                   |        |                       |        |                   |       
|                                                                         | Other comprehensive earnings |                   | $      | 4,083                 |        | (1,552            | )     
|                                                                         |                              |                   |        |                       |        |                   |       
|Year ended December 31, 2005:                                            |                              |                   |        |                       |        |                   |       
|Foreign currency translation adjustments                                 |                              | $                 | (8     | )                     | 3      |                   | (5    
|Reclassification adjustment for currency losses realized in net earnings |                              |                   | 503    |                       | (191   | )                 | 312   
|Unrealized holding losses on securities arising during period            |                              |                   | (1,808 | )                     | 687    |                   | (1,121
|Reclassification adjustment for holding gains realized in net earnings   |                              |                   | 350    |                       | (133   | )                 | 217   
|Reclass unrealized gain on AFS security                                  |                              |                   | (318   | )                     | 121    |                   | (197  
|Discontinued operations                                                  |                              |                   | (11    | )                     | 4      |                   | (7    
|                                                                         |                              |                   |        |                       |        |                   |       
|                                                                         | Other comprehensive loss     |                   | $      | (1,292                | )      | 491               |       
|                                                                         |                              |                   |        |                       |        |                   |       

(15) Transactions with Related Parties

The company has made interest-bearing cash advances to New Liberty. Such advances aggregated $3,624 million as of December 31, 2007. Interest, which
accrues daily at 1-year LIBOR plus 1.35% (6.67% at December 31, 2007), aggregated $156 million and $26 million for the year ended December 31, 2007 and for the period from
the Restructuring to December 31, 2006, respectively.

Starz
Entertainment pays Revolution Studios ("Revolution"), an equity affiliate, fees for the rights to exhibit films produced by Revolution. Payments aggregated $58 million,
$69 million and $84 million in 2007, 2006 and 2005, respectively.

(16) Commitments and Contingencies

Film Rights

Starz Entertainment, a wholly-owned subsidiary of Liberty, provides premium video programming distributed by cable operators,
direct-to-home satellite providers and other distributors throughout the United States. Starz Entertainment has entered into agreements with a number of motion picture
producers which obligate Starz Entertainment to pay fees ("Programming Fees") for the rights to exhibit certain films that are released by these producers. The unpaid balance of Programming Fees for
films that were available for exhibition by Starz Entertainment at December 31, 2007 is reflected as a

II-57

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LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

liability
in the accompanying consolidated balance sheet. The balance due as of December 31, 2007 is payable as follows: $99 million in 2008; $13 million in 2009; and
$6 million thereafter.

Starz
Entertainment has also contracted to pay Programming Fees for films that have been released theatrically, but are not available for exhibition by Starz Entertainment until some
future date. These amounts have not been accrued at December 31, 2007. Starz Entertainment's estimate of amounts payable under these agreements is as follows: $482 million in 2008;
$158 million in 2009; $102 million in 2010; $101 million in 2011; $94 million in 2012 and $178 million thereafter.

In
addition, Starz Entertainment is also obligated to pay Programming Fees for all qualifying films that are released theatrically in the United States by studios owned by The Walt
Disney Company through 2012 and all qualifying films that are released theatrically in the United States by studios owned by Sony Pictures Entertainment ("Sony") through 2013. Films are generally
available to Starz Entertainment for exhibition 10-12 months after their theatrical release. The Programming Fees to be paid by Starz Entertainment are based on the quantity and the
domestic theatrical exhibition receipts of qualifying films. As these films have not yet been released in theatres, Starz Entertainment is unable to estimate the amounts to be paid under these output
agreements. However, such amounts are expected to be significant.

In
connection with an option exercised by Sony to extend the Sony contract through 2013, Starz Entertainment has agreed to pay Sony a total of $190 million in four annual
installments of $47.5 million beginning in 2011. Starz Entertainment's payments to Sony will be amortized ratably as programming expense over the three-year period beginning in
2012.

Guarantees

Liberty guarantees Starz Entertainment's obligations under certain of its studio output agreements. At December 31, 2007, Liberty's guarantees for
obligations for films released by such date aggregated $793 million. While the guarantee amount for films not yet released is not determinable, such amount is expected to be significant. As
noted above, Starz Entertainment has recognized the liability for a portion of its obligations under the output agreements. As this represents a commitment of Starz Entertainment, a consolidated
subsidiary of Liberty, Liberty has not recorded a separate liability for its guarantee of these obligations.

In
connection with agreements for the sale of certain assets, Liberty typically retains liabilities that relate to events occurring prior to its sale, such as tax, environmental,
litigation and employment matters. Liberty generally indemnifies the purchaser in the event that a third party asserts a claim against the purchaser that relates to a liability retained by Liberty.
These types of indemnification guarantees typically extend for a number of years. Liberty is unable to estimate the maximum potential liability for these types of indemnification guarantees as the
sale agreements typically do not specify a maximum amount and the amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this
time. Historically, Liberty has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with
respect to these indemnification guarantees.

Employment Contracts

The Atlanta Braves and certain of their players and coaches have entered into long-term employment contracts whereby such individuals' compensation is
guaranteed. Amounts due under guaranteed contracts as of December 31, 2007 aggregated $125 million, which is payable as follows: $63 million in 2008, $31 million in 2009
and $31 million thereafter. In addition to the foregoing

II-58

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LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

amounts,
certain players and coaches may earn incentive compensation under the terms of their employment contracts.

Operating Leases

Liberty leases business offices, has entered into satellite transponder lease agreements and uses certain equipment under lease arrangements. Rental expense under
such arrangements amounted to $45 million, $32 million and $33 million for the years ended December 31, 2007, 2006 and 2005, respectively.

A
summary of future minimum lease payments under noncancelable operating leases as of December 31, 2007 follows (amounts in millions):

Years ending December 31:2008

$
372009

$
332010

$
282011

$
212012

$
13Thereafter

$
38


It
is expected that in the normal course of business, leases that expire generally will be renewed or replaced by leases on other properties; thus, it is anticipated that future lease
commitments will not be less than the amount shown for 2007.

Litigation

Liberty has contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Although it is reasonably
possible Liberty may incur losses upon conclusion
of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will
not be material in relation to the accompanying consolidated financial statements.

Other

During the period from March 9, 1999 to August 10, 2001, Liberty was included in the consolidated federal income tax return of AT&T and was a party
to a tax sharing agreement with AT&T (the "AT&T Tax Sharing Agreement"). Pursuant to the AT&T Tax Sharing Agreement and in connection with Liberty's split off from AT&T in 2001, AT&T was required to
pay Liberty an amount equal to 35% of the amount of the net operating losses reflected in TCI's final federal income tax return ("TCI NOLs") that had not been used as an offset to Liberty's
obligations under the AT&T Tax Sharing Agreement and that had been, or were reasonably expected to be, utilized by AT&T. In connection with the split off, Liberty received an $803 million
payment for TCI's NOLs and recorded such payment as an increase to additional paid-in capital. Liberty was not paid for certain of TCI's NOLs ("SRLY NOLs") due to limitations and
uncertainty regarding AT&T's ability to use them to offset taxable income in the future. In the event AT&T was ultimately able to use any of the SRLY NOLs, they would be required to pay Liberty 35% of
the amount of the SRLY NOLs used.

In
the fourth quarter of 2004, AT&T requested a refund from Liberty of $70 million, plus accrued interest, relating to losses that it generated in 2002 and 2003 and was able to
carry back to offset taxable income previously offset by Liberty's losses. AT&T has asserted that Liberty's losses caused

II-59

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LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

AT&T
to pay $70 million in alternative minimum tax ("AMT") that it would not have been otherwise required to pay had Liberty's losses not been included in its return.

In
the fourth quarter of 2005, AT&T requested an additional $21 million relating to additional losses it generated and was able to carry back to offset taxable income previously
offset by Liberty's losses. Liberty has accrued approximately $70 million representing its estimate of the amount it may ultimately pay (excluding accrued interest, if any) to AT&T as a result
of these requests. Although Liberty has not reduced its accrual for any future refunds, Liberty believes it is entitled to a refund when AT&T is able to realize a benefit in the form of a credit for
the AMT previously paid.

Although
for accounting purposes Liberty has accrued a portion of the amounts claimed by AT&T to be owed by Liberty under the AT&T Tax Sharing Agreement, Liberty believes there are valid
defenses or set-off or similar rights in its favor that may cause the total amount that it owes AT&T to be less than the amounts accrued; and under certain interpretations of the AT&T Tax
Sharing Agreement, Liberty may be entitled to further reimbursements from AT&T.

(17) Information About Liberty's Operating Segments

Liberty is a holding company, which through its ownership of interests in subsidiaries and other companies, is primarily engaged in the video and
on-line commerce, media, communications and entertainment industries. Each of Liberty's businesses is separately managed. Liberty identifies its reportable segments as (A) those
consolidated subsidiaries that represent 10% or more of its consolidated revenue, earnings before income taxes or total assets and (B) those equity method affiliates whose share of earnings
represent 10% or more of Liberty's pre-tax earnings. The segment presentation for prior periods has been conformed to the current period segment presentation.

Liberty
evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue, operating cash flow, gross margin,
average sales price per unit, number of units shipped and revenue or sales per customer equivalent.

Liberty
defines operating cash flow as revenue less cost of sales, operating expenses, and selling, general and administrative expenses (excluding stock-based compensation). Liberty
believes this is an important indicator of the operational strength and performance of its businesses, including each business's ability to service debt and fund capital expenditures. In addition,
this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of
performance excludes depreciation and amortization, stock-based compensation, litigation settlements and restructuring and impairment charges that are included in the measurement of operating income
pursuant to GAAP. Accordingly, operating cash flow should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other
measures of financial performance prepared in accordance with GAAP. Liberty generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at
current prices.

For
the year ended December 31, 2007, Liberty has identified the following consolidated subsidiaries as its reportable segments:



II-60

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)



Liberty's
reportable segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies,
distribution channels and marketing strategies. The accounting policies of the segments that are also consolidated subsidiaries are the same as those described in the summary of significant policies.

Performance Measures

|                     |  | Years ended December 31, |      
|-------------------- |  | ------------------------ | -----
|
|
|
|QVC                  |  | $                        | 7,397
|Starz Entertainment  |  |                          | 1,066
|Starz Media          |  |                          | 254  
|Corporate and other  |  |                          | 706  
|                     |  |                          |      
|Consolidated Liberty |  | $                        | 9,423
|                     |  |                          |      

Other Information

|                                  |  | December 31,
|--------------------------------- |  | ------------
|
|
|
|QVC                               |  | $           
|Starz Entertainment               |  |             
|Starz Media                       |  |             
|Corporate and other               |  |             
|Assets of discontinued operations |  |             
|                                  |  |             
|                                  |  |             
|Intercompany eliminations         |  |             
|                                  |  |             
|Consolidated Liberty              |  | $           
|                                  |  |             

II-61

---



LIBERTY MEDIA LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The
following table provides a reconciliation of segment operating cash flow to earnings (loss) from continuing operations before income taxes and minority interest:

Years ended December 31,2007

2006

2005amounts in millionsConsolidated segment operating cash flow

$
1,731

1,783

1,541Stock-based compensation


(93
)
(67
)
(52
)Depreciation and amortization


(675
)
(582
)
(545
)Impairment of long-lived assets


(223
)
(113
)
Interest expense


(641
)
(680
)
(626
)Realized and unrealized gains (losses) on derivative instruments, net


1,269

(279
)
257Gains (losses) on dispositions, net


646

607

(361
)Other than temporary declines in fair value of investments


(33
)
(4
)
(449
)Other, net


498

349

117Earnings (loss) from continuing operations before income taxes and minority interest

$
2,479

1,014

(118
)


Revenue by Geographic Area

Revenue by geographic area based on the location of customers is as follows:

Years ended December 31,2007

2006

2005amounts in millionsUnited States

$
7,183

6,504

5,784Germany


870

848

781Other foreign countries


1,370

1,261

1,081Consolidated Liberty

$
9,423

8,613

7,646


Long-lived Assets by Geographic Area

December 31,2007

2006amounts in millionsUnited States

$
803

678Germany


263

119Other foreign countries


285

349Consolidated Liberty

$
1,351

1,146


II-62

---





PART III.

Item 10.    Directors, Executive Officers and Corporate Governance

Omitted pursuant to General Instruction I(2)(c) of Form 10-K

Item 11.    Executive Compensation

Omitted pursuant to General Instruction I(2)(c) of Form 10-K

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Omitted pursuant to General Instruction I(2)(c) of Form 10-K

Item 13.    Certain Relationships and Related Transactions, and Director Independence

Omitted pursuant to General Instruction I(2)(c) of Form 10-K

Item 14.    Principal Accountant Fees and Services

The following table presents fees for professional audit services rendered by KPMG LLP for the audit of our annual financial statements, including our
consolidated subsidiaries, for 2007 and 2006, and fees billed for other services rendered by KPMG LLP:

2007

2006Audit fees

$
5,816,000

4,929,000Audit related fees(1)


236,000

315,000Audit and audit related fees


6,052,000

5,244,000Tax fees(2)


1,914,000

1,100,000Total fees

$
7,966,000

6,344,000




New
Liberty's audit committee has considered whether the provision of services by KPMG LLP to our company other than auditing is compatible with KPMG LLP maintaining its
independence and does not believe that the provision of such other services is incompatible with KPMG LLP maintaining its independence.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor

We are a wholly owned subsidiary of New Liberty, which is our sole member-manager. Accordingly, we do not have a separate board of directors or audit committee.
The audit committee of New Liberty's board of directors acts on our behalf. We and New Liberty share the same independent auditor, KPMG LLP.

On
May 5, 2006, the audit committee of New Liberty adopted a policy regarding the pre-approval of all audit and permissible non-audit services provided by
the independent auditor. Pursuant to this

III-1

---



policy,
New Liberty's audit committee has approved the engagement of the independent auditor to provide the following services (collectively the pre-approved services):



Notwithstanding
the foregoing general pre-approval, any individual project involving the provision of pre-approved services that is expected to result in fees in
excess of $100,000 requires the specific pre-approval of New Liberty's audit committee. In addition, any engagement of independent auditors for services other than the
pre-approved services requires the specific approval of New Liberty's audit committee. New Liberty's audit committee has delegated the authority for the foregoing approvals to the chairman
of the audit committee, subject to his subsequent disclosure to the entire audit committee of the granting of any such approval. Donne F. Fisher currently serves as the chairman of New Liberty' audit
committee.

The
pre-approval policy prohibits the engagement of the independent auditor to provide any services that are subject to the prohibition imposed by Section 201 of the
Sarbanes-Oxley Act.

All
services provided to us by the independent auditor during 2007 were approved in accordance with the terms of the policy.

III-2

---





PART IV.

Item 15.    Exhibits and Financial Statement Schedules.

Included
in Part II of this Report:

Liberty
Media LLC:

Page No.Report of Independent Registered Public Accounting Firm

II-18Consolidated Balance Sheets, December 31, 2007 and 2006

II-19Consolidated Statements of Operations, Years ended December 31, 2007, 2006 and 2005

II-21Consolidated Statements of Comprehensive Earnings (Loss), Years ended December 31, 2007, 2006 and 2005

II-22Consolidated Statements of Cash Flows, Years Ended December 31, 2007, 2006 and 2005

II-23Consolidated Statements of Member's Equity, Years ended December 31, 2007, 2006 and 2005

II-24Notes to Consolidated Financial Statements, December 31, 2007, 2006 and 2005

II-25


Listed
below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):

|3Articles of Incorporation and Bylaws:                                       
|------------------------------------------------------------------------------
|                                                                              
|                                                                              
|                                                                              
|4Instruments Defining the Rights of Securities Holders, including Indentures:
|                                                                              

IV-1

---



|                       | 4.2  |  | Liberty undertakes to furnish the Securities and Exchange Commission, upon request, a copy of all instruments with respect to long-term debt not filed herewith.                                                                                                                                                                                                                                                                                                                                  
|---------------------- | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10Material Contracts:
|                       | 10.1 |  | Inter-Group Agreement dated as of March 9, 1999, between AT&T Corp. and Liberty, Liberty Media Group LLC and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.2 to the Liberty S-4
Registration Statement).                                                                                                                                                                                                                                     
|                       | 10.2 |  | Ninth Supplement to Inter-Group Agreement dated as of June 14, 2001, between and among AT&T Corp., on the one hand, and Liberty, Liberty Media Group LLC, AGI LLC, Liberty SP, Inc., LMC Interactive, Inc. and Liberty AGI,
 Inc., on the other hand (incorporated by reference to Exhibit 10.25 to the Registration Statement on Form S-1 of Liberty (File No. 333-66034) as filed on July 27, 2001).                                                                                            
|                       | 10.3 |  | Intercompany Agreement dated as of March 9, 1999, between Liberty and AT&T Corp. (incorporated by reference to Exhibit 10.3 to the Liberty S-4 Registration Statement).                                                                                                                                                                                                                                                                                                                           
|                       | 10.4 |  | Tax Sharing Agreement dated as of March 9, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each
Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.4 to the Liberty S-4 Registration Statement).                                                                                                                                    
|                       | 10.5 |  | First Amendment to Tax Sharing Agreement dated as of May 28, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.5 to the Liberty S-4 Registration Statement).                                                                                                                 
|                       | 10.6 |  | Second Amendment to Tax Sharing Agreement dated as of September 24, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1/A of Liberty (File No. 333-93917) as filed on February 9, 2000 (the
"Liberty S-1 Registration Statement")).
|                       | 10.7 |  | Third Amendment to Tax Sharing Agreement dated as of October 20, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.7 to the Liberty S-l Registration Statement).                                                                                                             
|                       | 10.8 |  | Fourth Amendment to Tax Sharing Agreement dated as of October 28, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.8 to the Liberty S-l Registration Statement).                                                                                                            
|                       | 10.9 |  | Fifth Amendment to Tax Sharing Agreement dated as of December 6, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.9 to the Liberty S-l Registration Statement).                                                                                                             

IV-2

---



| | 10.10 |  | Sixth Amendment to Tax Sharing Agreement dated as of December 10, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.10 to the Liberty S-l Registration Statement).                                                                                                 
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.11 |  | Seventh Amendment to Tax Sharing Agreement dated as of December 30, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.11 to the Liberty S-l Registration Statement).                                                                                               
| | 10.12 |  | Eighth Amendment to Tax Sharing Agreement dated as of July 25, 2000, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 of Liberty (File No. 333-55998) as filed on February 21,
2001).                                      
| | 10.13 |  | Instrument dated January 14, 2000, adding The Associated Group, Inc. as a party to the Tax Sharing Agreement dated as of March 9, 1999, as amended, among The Associated Group, Inc., AT&T Corp., Liberty, Tele-Communications,
 Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.12 to the Liberty
S-1 Registration Statement).
| | 10.14 |  | Restated and Amended Employment Agreement dated November 1, 1992, between Tele-Communications, Inc. and John C. Malone (assumed by Liberty as of March 9, 1999), and the amendment thereto dated June 30, 1999 and effective as of
March 9, 1999, between Liberty and John C. Malone (collectively, the "Malone Employment Agreement") (incorporated by reference to Exhibit 10.6 to the Liberty S-4 Registration Statement).                                                           
| | 10.15 |  | Second Amendment to Malone Employment Agreement effective January 1, 2003 (incorporated by reference to Exhibit 10.15 to Liberty's Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 001-16615) as filed
on March 15, 2004 (the "Liberty 2003 10-K")).                                                                                                                                                                                                          
| | 10.16 |  | Employment Agreement, dated as of December 28, 2005, between Liberty and Mr. Bennett (incorporated by reference to Exhibit 99.1 to Liberty's Current Report on Form 8-K (File No. 001-16615) as filed on December 30, 2005
(the "Liberty December 2005 8-K")).                                                                                                                                                                                                                          
| | 10.17 |  | Amended and Restated Deferred Compensation Agreement, dated as of December 28, 2005, between Liberty and Mr. Bennett (incorporated by reference to Exhibit 99.2 to the Liberty December 2005 8-K).                                                                                                                                                                                                                                                                                      
| | 10.18 |  | Amended and Restated Deferred Compensation Agreement, dated as of December 28, 2005, between Mr. Bennett and Liberty (incorporated by reference to Exhibit 99.3 to the Liberty December 2005 8-K).                                                                                                                                                                                                                                                                                      
| | 10.19 |  | Deferred Compensation Agreement, dated as of July 1, 2005, between Mr. Bennett and Liberty (incorporated by reference to Exhibit 99.4 to the Liberty December 2005 8-K).                                                                                                                                                                                                                                                                                                                

IV-3

---



|     | 10.20 |                                          | $3,500,000,000 Credit Agreement, dated as of March 3, 2006, among QVC, Inc., as Borrower; the Lenders party hereto; JP Morgan Chase Bank, N.A., as Administrative Agent; and Wachovia Capital Markets, LLC, as Syndication Agent (the
"March 2006 Credit Agreement") (incorporated by reference to Exhibit 10.1 to Liberty's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (File No. 001-16615) as filed on May 8, 2006).
|---- | ----- | ---------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 10.21 |                                          | Amendment dated October 4, 2006 to the March 2006 Credit Agreement (incorporated by reference to Exhibit 99.2 to Liberty's Current Report on Form 8-K (File No.001-16615) as filed on October 10, 2006 (the "October 2006
8-K")).                                                                                                                                                                                                             
|     | 10.22 |                                          | $1,750,000,000 Credit Agreement, dated as of October 4, 2006 among QVC, Wachovia Bank, N.A., as Administrative Agent, Bank of America N.A. and J.P. Morgan Securities Inc., as Syndication Agents, and the lenders party thereto from time to
time (incorporated by reference to Exhibit 99.1 to the October 2006 8-K).                                                                                                                       
|     | 10.23 |                                          | Share Exchange Agreement, dated as of December 22, 2006, by and between News Corporation and Liberty (the "News Agreement") (incorporated by reference to Exhibit 10.38 to the Annual Report on Form 10-K of Liberty Media Corporation
("New Liberty") for the year ended December 31, 2006 (File No. 000-51990) as filed on March 1, 2007 (the "New Liberty 2006 10-K")).                                                                    
|     | 10.24 |                                          | Tax Matters Agreement, dated as of December 22, 2006, by and between News Corporation and Liberty (which is Exhibit A-I to the News Agreement) (incorporated by reference to Exhibit 10.39 to the New Liberty 2006 10-K).                                                                                                                                                                                                                     
|31.1 |       | Rule 13a-14(a)/15d14(a) Certification.*
|31.2 |       | Rule 13a-14(a)/15d14(a) Certification.*
|31.3 |       | Rule 13a-14(a)/15d14(a) Certification.*
|32   |       | Section 1350 Certification.*            

---

IV-4

---





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.

|                      |  | LIBERTY MEDIA LLC
|--------------------- |  | -----------------
|Dated: March 25, 2008 |  | By:              

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the date indicated.

|Signature                                   |  | Title                                                                                         |  | Date          
|------------------------------------------- |  | --------------------------------------------------------------------------------------------- |  | --------------
|                                            |  |                                                                                               |  |               
|/s/GREGORY B. MAFFEIGregory B. Maffei       |  | Chief Executive Officer and President
(Principal Executive Officer)                           |  | March 25, 2008
|/s/DAVID J.A. FLOWERSDavid J.A. Flowers     |  | Senior Vice President and Treasurer (Principal Financial Officer)                             |  | March 25, 2008
|/s/CHRISTOPHER W. SHEANChristopher W. Shean |  | Senior Vice President and Controller (Principal Accounting Officer)                           |  | March 25, 2008
|Liberty Media Corporation                   |  | Sole Member-Manager of the Registrant                                                         |  | March 25, 2008
|By:                                         |  | /s/CHARLES Y. TANABECharles Y. Tanabe
Executive Vice President,
Secretary and General Counsel |  |               

IV-5

---





EXHIBIT INDEX

Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of
Regulation S-K):

|3Articles of Incorporation and Bylaws:                                       
|------------------------------------------------------------------------------
|                                                                              
|                                                                              
|                                                                              
|4Instruments Defining the Rights of Securities Holders, including Indentures:
|                                                                              
|                                                                              
|10Material Contracts:                                                        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                              

---



| | 10.7  |  | Third Amendment to Tax Sharing Agreement dated as of October 20, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.7 to the Liberty S-l Registration Statement).                                                                                                   
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.8  |  | Fourth Amendment to Tax Sharing Agreement dated as of October 28, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.8 to the Liberty S-l Registration Statement).                                                                                                  
| | 10.9  |  | Fifth Amendment to Tax Sharing Agreement dated as of December 6, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.9 to the Liberty S-l Registration Statement).                                                                                                   
| | 10.10 |  | Sixth Amendment to Tax Sharing Agreement dated as of December 10, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.10 to the Liberty S-l Registration Statement).                                                                                                 
| | 10.11 |  | Seventh Amendment to Tax Sharing Agreement dated as of December 30, 1999, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.11 to the Liberty S-l Registration Statement).                                                                                               
| | 10.12 |  | Eighth Amendment to Tax Sharing Agreement dated as of July 25, 2000, by and among AT&T Corp., Liberty, Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings,
 Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 of Liberty (File No. 333-55998) as filed on February 21,
2001).                                      
| | 10.13 |  | Instrument dated January 14, 2000, adding The Associated Group, Inc. as a party to the Tax Sharing Agreement dated as of March 9, 1999, as amended, among The Associated Group, Inc., AT&T Corp., Liberty, Tele-Communications,
 Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity listed on the signature pages thereof (incorporated by reference to Exhibit 10.12 to the Liberty
S-1 Registration Statement).
| | 10.14 |  | Restated and Amended Employment Agreement dated November 1, 1992, between Tele-Communications, Inc. and John C. Malone (assumed by Liberty as of March 9, 1999), and the amendment thereto dated June 30, 1999 and effective as of
March 9, 1999, between Liberty and John C. Malone (collectively, the "Malone Employment Agreement") (incorporated by reference to Exhibit 10.6 to the Liberty S-4 Registration Statement).                                                           
| | 10.15 |  | Second Amendment to Malone Employment Agreement effective January 1, 2003 (incorporated by reference to Exhibit 10.15 to Liberty's Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 001-16615) as filed
on March 15, 2004 (the "Liberty 2003 10-K")).                                                                                                                                                                                                          

---



|     | 10.16 |                                          | Employment Agreement, dated as of December 28, 2005, between Liberty and Mr. Bennett (incorporated by reference to Exhibit 99.1 to Liberty's Current Report on Form 8-K (File No. 001-16615) as filed on December 30, 2005
(the "Liberty December 2005 8-K")).                                                                                                                                                                                
|---- | ----- | ---------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 10.17 |                                          | Amended and Restated Deferred Compensation Agreement, dated as of December 28, 2005, between Liberty and Mr. Bennett (incorporated by reference to Exhibit 99.2 to the Liberty December 2005 8-K).                                                                                                                                                                                                                                            
|     | 10.18 |                                          | Amended and Restated Deferred Compensation Agreement, dated as of December 28, 2005, between Mr. Bennett and Liberty (incorporated by reference to Exhibit 99.3 to the Liberty December 2005 8-K).                                                                                                                                                                                                                                            
|     | 10.19 |                                          | Deferred Compensation Agreement, dated as of July 1, 2005, between Mr. Bennett and Liberty (incorporated by reference to Exhibit 99.4 to the Liberty December 2005 8-K).                                                                                                                                                                                                                                                                      
|     | 10.20 |                                          | $3,500,000,000 Credit Agreement, dated as of March 3, 2006, among QVC, Inc., as Borrower; the Lenders party hereto; JP Morgan Chase Bank, N.A., as Administrative Agent; and Wachovia Capital Markets, LLC, as Syndication Agent (the
"March 2006 Credit Agreement") (incorporated by reference to Exhibit 10.1 to Liberty's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (File No. 001-16615) as filed on May 8, 2006).
|     | 10.21 |                                          | Amendment dated October 4, 2006 to the March 2006 Credit Agreement (incorporated by reference to Exhibit 99.2 to Liberty's Current Report on Form 8-K (File No.001-16615) as filed on October 10, 2006 (the "October 2006
8-K")).                                                                                                                                                                                                             
|     | 10.22 |                                          | $1,750,000,000 Credit Agreement, dated as of October 4, 2006 among QVC, Wachovia Bank, N.A., as Administrative Agent, Bank of America N.A. and J.P. Morgan Securities Inc., as Syndication Agents, and the lenders party thereto from time to
time (incorporated by reference to Exhibit 99.1 to the October 2006 8-K).                                                                                                                       
|     | 10.23 |                                          | Share Exchange Agreement, dated as of December 22, 2006, by and between News Corporation and Liberty (the "News Agreement") (incorporated by reference to Exhibit 10.38 to the Annual Report on Form 10-K of Liberty Media Corporation
("New Liberty") for the year ended December 31, 2006 (File No. 000-51990) as filed on March 1, 2007 (the "New Liberty 2006 10-K")).                                                                    
|     | 10.24 |                                          | Tax Matters Agreement, dated as of December 22, 2006, by and between News Corporation and Liberty (which is Exhibit A-I to the News Agreement) (incorporated by reference to Exhibit 10.39 to the New Liberty 2006 10-K).                                                                                                                                                                                                                     
|31.1 |       | Rule 13a-14(a)/15d14(a) Certification.*
|31.2 |       | Rule 13a-14(a)/15d14(a) Certification.*
|31.3 |       | Rule 13a-14(a)/15d14(a) Certification.*
|32   |       | Section 1350 Certification.*            

---

---