<PAGE>


                     SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                    FORM 10-Q


[ X ]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities 
Exchange Act of 1934

                   FOR THE PERIOD ENDED SEPTEMBER 30, 1996

Commission File Number 0-22334


                      LODGENET ENTERTAINMENT CORPORATION
                      ----------------------------------
            (Exact name of registrant as specified in its charter)


               DELAWARE                                     46-0371161
     -------------------------------                 --------------------------
     (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                  Identification Number    )


             808 WEST AVENUE NORTH, SIOUX FALLS, SOUTH DAKOTA 57104
             ------------------------------------------------------
            (Address of Principal Executive Offices)     (ZIP code)


                                (605)  330-1330
                       -------------------------------
                       (Registrant's telephone number,
                              including area code)


                                (not applicable)
              ------------------------------------------------
                       (Former name, former address and
              former fiscal year, if changed since last report)


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

     At  November 1, 1996, there were 11,045,369 shares outstanding of the 
Registrant's common stock, $.01 par value.

<PAGE>

                      LODGENET ENTERTAINMENT CORPORATION

                                 Form 10-Q
                                   Index


                                                                      Page
                                                                       No.

PART I.  FINANCIAL INFORMATION

     Item 1 -- Financial Statements:
     
          Consolidated Balance Sheets as of  December 31, 1995
          and September 30, 1996 (unaudited))                            3
     
          Consolidated Statements of Operations (unaudited) for
          the Three Months Ended September 30, 1995 and 1996.            4
     
          Consolidated Statements of Operations (unaudited) for
          the Nine Months Ended September 30, 1995 and 1996.             5
     
          Consolidated Statements of Cash Flows (unaudited) for
          the Nine Months Ended September 30, 1995 and 1996.             6
     
          Notes to Consolidated Financial Statements.                    7
     
     Item 2 -- Management's Discussion and Analysis of the Results
          of Operations.                                                 9


PART II.  OTHER INFORMATION                                           

     Item 1 -- Legal Proceedings.                                       20
     
     Item 2 -- Changes in Securities.                                   20
     
     Item 3 -- Defaults Upon Senior Securities.                         20
     
     Item 4 -- Submission of Matters to a Vote of Security Holders.     20
     
     Item 5 -- Other Information.                                       20
     
     Item 6 -- Exhibits and Reports on Form 8-K.                        22


SIGNATURES                                                              23

-----------
    As used herein (unless the context otherwise requires) "LodgeNet",  
"the Company" and/or "the Registrant" means LodgeNet Entertainment 
Corporation and its majority-owned subsidiaries.

LodgeNet Entertainment Corporation   Page 2               September 30, 1996

<PAGE>

                                  PART I - FINANCIAL INFORMATION

                                LODGENET ENTERTAINMENT CORPORATION
                                   CONSOLIDATED BALANCE SHEETS
                                  (Dollar amounts in thousands)

<TABLE>
<CAPTION>
 
                                                                                           December 31,           September 30,
                                                                                              1995                    1996
                                                                                       --------------------    --------------------
                                           Assets                                                                  (unaudited)
<S>                                                                                    <C>                     <C>
Current assets:
   Cash and cash equivalents                                                                         $2,252                  $2,083
   Accounts receivable, net of allowance for doubtful accounts                                       11,355                  17,729
   Prepaid expenses and other                                                                         1,462                   2,634
                                                                                       --------------------    --------------------
      Total current assets                                                                           15,069                  22,446
                                                                                       --------------------    --------------------
Property and equipment:
   Land, building and equipment                                                                       8,976                  14,361
   Free-to-guest equipment                                                                            5,068                   6,353
   Cable television equipment                                                                             0                   3,445
   Guest Pay systems:
      Installed                                                                                     119,354                 160,890
      System components                                                                              13,468                  18,895
      Software costs                                                                                  4,078                   5,886
                                                                                       --------------------    --------------------
         Total property and equipment                                                               150,944                 209,830
   Less - accumulated depreciation and amortization                                                 (42,838)                (61,111)
                                                                                       --------------------    --------------------
      Property and equipment, net                                                                   108,106                 148,719
                                                                                       --------------------    --------------------

Debt issuance costs, net of accumulated amortization                                                  1,537                   2,308
                                                                                       --------------------    --------------------
Other assets, net                                                                                         0                     895
                                                                                       --------------------    --------------------
                                                                                                   $124,712                $174,368
                                                                                       --------------------    --------------------
                                                                                       --------------------    --------------------


                         Liabilities and Stockholders' Equity
Current liabilities
   Accounts payable                                                                                 $15,222                 $19,347
   Current maturities of long-term debt                                                               4,254                   4,479
   Accrued expenses                                                                                   3,434                   4,367
                                                                                       --------------------    --------------------
      Total current liabilities                                                                      22,910                  28,193
                                                                                       --------------------    --------------------
Deferred revenue                                                                                      1,579                   3,052
                                                                                       --------------------    --------------------
Long-term debt                                                                                       57,497                  63,847
                                                                                       --------------------    --------------------

Stockholders' equity:
   Common stock, $.01 par value, 20 million shares authorized;
      7,352,113 and 11,045,369 shares outstanding at December 31,
      1995 and September 30, 1996, respectively                                                          74                     110
   Additional paid-in capital                                                                        71,234                 115,874
   Accumulated deficit                                                                              (28,582)                (36,708)
                                                                                       --------------------    --------------------
      Total stockholders' equity                                                                     42,726                  79,276
                                                                                       --------------------    --------------------
                                                                                                   $124,712                $174,368
                                                                                       --------------------    --------------------
                                                                                       --------------------    --------------------

</TABLE>

                    The accompanying notes are an integral part of these
                             consolidated balance sheets.
LodgeNet Entertainment Corporation        Page 3             September 30, 1996


<PAGE>

                          LODGENET ENTERTAINMENT CORPORATION
                  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
               (Dollar amounts, except per share amounts, in thousands)

<TABLE>
<CAPTION>

                                                                              
                                                                                                       Three Months Ended
                                                                                                         September 30,
                                                                                                ---------------------------------
                                                                                                      1995                 1996
                                                                                                ---------------------------------
<S>                                                                                                 <C>                   <C>
Revenues:
   Guest Pay                                                                                        $14,196               $23,349
   Free-to-guest                                                                                      2,038                 2,422
   Other                                                                                              1,180                 1,345
                                                                                                -----------             ---------
      Total revenues                                                                                 17,414                27,116
                                                                                                -----------             ---------

Direct costs:
   Guest Pay                                                                                          5,369                 9,655
   Free-to-guest                                                                                      1,498                 1,862
   Other                                                                                              1,063                 1,174
                                                                                                -----------             ---------
      Total direct costs                                                                              7,930                12,691
                                                                                                -----------             ---------

Gross profit                                                                                          9,484                14,425
                                                                                                -----------             ---------

Operating expenses:
   Guest Pay operations                                                                               2,522                 3,876
   Selling and marketing                                                                                459                   545
   General and administrative                                                                         1,740                 2,523
   Depreciation and amortization                                                                      4,827                 7,560
                                                                                                -----------             ---------
      Total operating expenses                                                                        9,548                14,504
                                                                                                -----------             ---------

Operating loss                                                                                          (64)                  (79)

Interest expense                                                                                      1,228                 1,769
                                                                                                -----------             ---------

Loss before income taxes                                                                             (1,292)               (1,848)
Provision for income taxes                                                                               --                     9
                                                                                                -----------             ---------

Net loss                                                                                            $(1,292)              $(1,857)
                                                                                                -----------             ----------
                                                                                                -----------             ----------

Per common share:
   Net loss attributable to common stock                                                             $(0.17)                $(0.17)
                                                                                                -----------             -----------
                                                                                                -----------             -----------

Weighted average shares outstanding                                                               7,396,151              11,093,655
                                                                                                -----------             -----------
                                                                                                -----------             -----------
     
</TABLE>

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

LodgeNet Entertainment Corporation    Page 4              September 30, 1996
<PAGE>

<PAGE>

                              LODGENET ENTERTAINMENT CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                   (Dollar amounts, except per share amounts, in thousands)

<TABLE>
<CAPTION>

                                                                                                        Nine Months Ended
                                                                                                         September 30,
                                                                                                --------------------------------
                                                                                                      1995            1996
                                                                                                --------------------------------
<S>                                                                                             <C>                     <C> 
Revenues:
   Guest Pay                                                                                       $36,397            $60,912
   Free-to-guest                                                                                     6,033              6,709
   Other                                                                                             2,957              3,068
                                                                                                ----------           -----------
      Total revenues                                                                                45,387             70,689
                                                                                                ----------           -----------
Direct costs:
   Guest Pay                                                                                        13,511             24,438
   Free-to-guest                                                                                     4,573              5,200
   Other                                                                                             2,574              2,591
                                                                                                ----------           -----------
      Total direct costs                                                                            20,658             32,229
                                                                                                ----------           -----------
Gross profit                                                                                        24,729             38,460
                                                                                                ----------           -----------

Operating expenses:
   Guest Pay operations                                                                              7,092             10,614
   Selling and marketing                                                                             1,503              2,105
   General and administrative                                                                        4,596              7,175
   Depreciation and amortization                                                                    12,883             20,891
                                                                                                -----------          -----------
      Total operating expenses                                                                      26,074             40,785
                                                                                                ----------           -----------

Operating loss                                                                                      (1,345)            (2,325)

Interest expense                                                                                     2,870              5,769
                                                                                                -----------          -----------

Loss before income taxes                                                                            (4,215)            (8,094)
Provision for income taxes                                                                              --                 31
                                                                                                -----------          -----------

Net loss                                                                                           $(4,215)            $(8,125)
                                                                                                -----------          -----------
                                                                                                -----------          -----------
Per common share:
   Net loss attributable to common stock                                                            $(0.57)             $(0.89)
                                                                                                -----------          -----------
                                                                                                -----------          -----------

Weighted average shares outstanding                                                              7,375,866           9,125,970
                                                                                                -----------          -----------
                                                                                                -----------          -----------

</TABLE>

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

LodgeNet Entertainment Corporation           Page 5          September 30, 1996


<PAGE>

                                 LODGENET ENTERTAINMENT CORPORATION
                         CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                  (Dollar amounts in thousands)

<TABLE>
<CAPTION>

                                                                                                       Nine Months Ended
                                                                                                         September 30,
                                                                                                --------------------------------
                                                                                                    1995                 1996
                                                                                                --------------------------------
<S>                                                                                               <C>                <C>
Operating activities:
   Net loss                                                                                       $(4,215)           $(8,125)
   Adjustments to reconcile net loss to net
      cash provided by operating activities:
         Depreciation and amortization                                                             12,883             20,891
         Change in operating assets and liabilities:
            Accounts receivable                                                                    (3,622)            (6,374)
            Prepaid expenses and other                                                               (547)            (2,067)
            Accounts payable                                                                        4,817              4,125
            Accrued expenses and deferred revenue                                                     664              2,406
                                                                                                -----------          ----------
Net cash provided by operating activities                                                           9,980             10,856
                                                                                                -----------          ----------

Investing activities:
   Property and equipment additions                                                               (34,383)           (61,106)
                                                                                                -----------          ----------
Net cash used for investing activities                                                            (34,383)           (61,106)

Financing activities:
   Proceeds from long-term debt                                                                    24,294                901
   Debt issuance costs                                                                             (1,072)            (1,169)
   Repayments of long-term debt                                                                      (139)            (4,327)
   Borrowings under revolving credit facility                                                      10,000             35,858
   Repayments of revolving credit facility                                                        (10,000)           (25,858)
   Proceeds from issuance of common stock                                                              --             44,635
   Proceeds from issuance of common stock warrants                                                  1,095                 -- 
   Stock option activity                                                                               41                 42
                                                                                                -----------          ----------
Net cash provided by financing activities                                                          24,219             50,082
                                                                                                -----------          ----------

Effect of exchange rates on cash                                                                      135                 (1)
                                                                                                -----------          ----------

Increase (decrease) in cash and cash equivalents                                                      (49)              (169)

Cash and cash equivalents at beginning of period                                                    4,302              2,252
                                                                                                -----------          ----------

Cash and cash equivalents at end of period                                                         $4,253             $2,083
                                                                                                -----------          ----------
                                                                                                -----------          ----------

Supplemental cash flow information:
   Cash paid for interest                                                                          $2,463              $6,246
                                                                                                -----------          ----------
                                                                                                -----------          ----------
</TABLE>

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

LodgeNet Entertainment Corporation           Page 6          September 30, 1996


<PAGE>

                                LODGENET ENTERTAINMENT CORPORATION
                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Basis of Presentation

     The  accompanying consolidated financial statements as of September 30,
1996 and for the three and nine month periods ended September 30, 1995 and 1996,
have been prepared by LodgeNet Entertainment Corporation (the "Company"),
without audit, pursuant to the rules and regulations of the Securities and 
Exchange Commission (the "Commission").  The information furnished in the 
accompanying consolidated financial statements  reflects all adjustments,
consisting only of normal recurring adjustments, which, in the opinion of
management, are necessary for a fair presentation of such financial statements.

     Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to the rules and regulations
of the Commission.   Although the Company believes that the disclosures are
adequate to make the information presented herein not misleading, it is
recommended that these unaudited consolidated financial statements be read in
conjunction with the more detailed information contained in the Company's Annual
Report on Form 10-K for 1995, as filed with the Commission. 

     The consolidated financial statements  include the accounts  of LodgeNet
Entertainment Corporation and its majority-owned subsidiaries.  All significant
inter-company accounts and transactions have been eliminated in consolidation.


Note 2 -- Net Loss Per Common Share

     The net loss per common share was computed using the weighted average
number of shares outstanding and, where applicable, outstanding warrants and
options.


Note 3 -- Issuance of Common Stock

     On May 23, 1996, the Company sold 3,200,000 new shares of common stock at
$13.00 per share in a public offering.  On June 10, 1996, the Company sold an
additional 480,000 new shares of common stock, representing the underwriters'
exercise of their over-allotment option in accordance with the underwriting
agreement.  Net proceeds to the Company from these issuances, after deducting
underwriters' commissions and other offering expenses, were approximately $44.6
million.  Such proceeds were used to repay borrowings under the Company's
revolving credit facility, approximately $25.9 million, and to provide working
capital for the Company's expansion of its lodging and residential businesses.


Note 4 -- Subsequent Event - Sale of Equity Interest in Subsidiary

     On October 21, 1996, the Company and its subsidiary, ResNet Communications,
Inc. ("ResNet") entered into agreements with TCI Satellite Entertainment, Inc.
("TCI") under which ResNet sold a 4.99% equity interest in ResNet to TCI  in
exchange for $5.4 million in cash.  In addition, TCI agreed to advance up to
$34.6 million to ResNet during the five years ending October 21, 2001, under a
convertible note agreement (the "Convertible Note").

     The Convertible Note matures on October 21, 2001, subject to a one-year
extension at the election of the Company, and on that date is subject to
mandatory conversion into a maximum 32.0% equity interest in ResNet.  The
Convertible Note is unsecured, is not subject to prepayment, has no recourse to
the Company, and is subordinated to all present and future borrowings by the
Company, to the extent that the proceeds thereof are advanced to ResNet, and/or
ResNet.  Interest accrues (generally at TCI's average borrowing rate) on amounts
outstanding under the Convertible Note, but such interest is not paid in cash
(and does not increase the equity interest into which  the Convertible Note will
be converted) and accrues only until maturity or such time as the balance of
outstanding principal and accrued interest is $34.6 million, whichever is
sooner.  The proceeds of the Convertible Note are to be used to purchase
satellite receiving equipment in accordance with agreements with TCI.  In
addition,

LodgeNet Entertainment Corporation        Page 7           September 30, 1996



<PAGE>

pursuant to a signal carriage agreement, TCI has agreed to provide
ResNet with nationwide access to certain satellite programming signals.

     In connection with the aforementioned agreements, the Company granted TCI
an option to acquire an additional 13.01% equity interest in ResNet, first
exercisable 60 days following October 21, 1999, in return for an additional cash
investment in ResNet based on ResNet's then fair market value.  Such option will
expire, subject to certain limitations, coincident with the maturity of the
Convertible Note.


Note 5 -- Subsequent Event - Long-term Debt

     Effective November 1, 1996, the Company's 1996 Revolving Facility with
National Westminster Bank Plc and three other banks was amended to increase the
amount available under the facility from $45 million to $60 million.


Note 6 -- Reclassifications

     Certain amounts have been reclassified to conform to the 1996 presentation.
Such reclassifications had no effect on previously reported results of
operations or stockholders' equity.




LodgeNet Entertainment Corporation            Page 8          September 30, 1996

<PAGE>

                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     THIS REPORT CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-
LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL
RESULTS COULD  DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-
LOOKING STATEMENTS.   THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) INCLUDED ELSEWHERE HEREIN, AND
WITH THE CONSOLIDATED FINANCIAL STATEMENTS, NOTES THERETO AND MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTAINED THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 1995, AS FILED WITH THE
COMMISSION.

                                  OVERVIEW

LODGING INDUSTRY SERVICES

     Guest Pay Services -- The growth that the Company has experienced has 
principally resulted from its rapid expansion of guest pay-per-view 
services, which the Company began installing in 1986.  In May 1992, the 
Company introduced and began installing its on-demand Guest Pay service.  It 
has been the Company's experience that rooms featuring the "on-demand" Guest 
Pay service generate significantly more revenue and gross profit per room 
than comparable rooms having only the scheduled format.

     The Company's Guest Pay revenues depend on a number of factors, 
including the number of rooms equipped with the Company's systems, Guest Pay 
buy rates, hotel occupancy rates, the popularity, selection and pricing of 
the Company's program offerings and the length of time programming is 
available to the Company prior to its release to the home video and cable 
television markets.  The primary costs of providing Guest Pay services are 
(i) license fees paid to studios for non-exclusive distribution rights to 
recently-released major motion pictures, generally ranging from 35% to 50% 
of gross revenues, (ii) nominal one-time license fees paid for independent 
films, which are duplicated by the Company for distribution to its operating 
sites, (iii) license fees for video games and other services and (iv) the 
commission retained by the hotel, generally 10% to 15% of gross revenues, 
depending on the services provided and other factors.  Guest Pay operating 
expenses include costs of system maintenance and support, in-room marketing, 
video tape duplication and distribution, data retrieval, insurance and 
personal property taxes.

     The Company also provides video games and interactive multimedia 
entertainment and information services through its Guest Pay systems.  
Services include folio review, video check-out, in-room printers and guest 
satisfaction surveys. In 1993 the Company entered into a seven-year 
non-exclusive license agreement with Nintendo of America to provide hotels 
with a network-based Super Nintendo-Registered Trademark- video game playing 
system.

     Free-to-guest Services --  In addition to Guest Pay services, the 
Company provides cable television programming for which the hotel, rather 
than its guests, pays the charges.  Free-to-guest services include the 
satellite delivery of various programming channels through a satellite earth 
station, which generally is owned or leased by the hotel.  For free-to-guest 
services the hotel pays the Company a fixed monthly charge per room for each 
programming channel provided.  Such monthly charges range generally from 
$2.75 to $3.50 per room per month for premium channels and from $0.15 to 
$0.85 per room per month for non-premium channels.  The Company obtains its 
free-to-guest programming pursuant to multi-year agreements and pays a fixed 
monthly fee per room, which ranges generally from 75% to 80% of revenues, 
depending on incentive programs in effect from time to time from the 
programming networks.

LodgeNet Entertainment Corporation       Page 9             September 30, 1996
<PAGE>

Installed Room Base

     During the three months ended September 30, 1996, the Company installed 
34,359 new Guest Pay rooms, equipped 44,750 rooms with its Nintendo game 
system, and installed 16,487 free-to-guest rooms.  From September 30, 1995 
through September 30, 1996, the Company has installed 127,641 new Guest Pay 
rooms, equipped 152,783 rooms with its Nintendo game system, and installed 
44,261 free-to-guest rooms; representing increases of 52.7%, 112.7% and 
18.6%, respectively, in its installed room bases.  The Company's base of 
installed rooms was comprised as follows at September 30:

                                          1995                1996
                                   ----------------     ----------------
                                    Rooms       %        Rooms      %
                                   -------   ------     -------   ------
    Guest Pay rooms:
         Scheduled                  60,933    25.1%      44,497    12.0%
         On-demand                 181,408    74.9%     325,485    88.0%
                                   -------   ------     -------   ------
                                   242,341   100.0%     369,982   100.0%
                                   -------   ------     -------   ------
                                   -------   ------     -------   ------
    Nintendo game system rooms     135,625              288,408
                                   -------              -------
                                   -------              -------
    Free-to-guest rooms            238,376              282,637
                                   -------              -------
                                   -------              -------


RESIDENTIAL INDUSTRY SERVICES

     In February 1996, the Company entered into an exclusive contract with 
GE ResCom, a unit of General Electric Corporation, under which the Company 
will design, install and operate interactive cable television systems in 
large, multi-family residential complexes throughout the United States. 
This new business, which will be conducted by ResNet Communications, Inc. 
("ResNet"), a majority-owned subsidiary of the Company, is expected to have 
financial and technological requirements similar to those of the Company's 
lodging industry operations.

     ResNet began installation of its first systems during the quarter ended 
September 30, 1996, but its operations did not have a material effect on the 
consolidated results of the Company for the quarter.

                            RESULTS OF OPERATIONS
               THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996

Revenue Analysis

     The Company's total revenue for the third quarter of 1996 increased 
55.7%, or $9.7 million, in comparison to the third quarter of 1995.  The 
following table sets forth the components of the Company's revenue for the 
quarter ending September 30 (dollar amounts in thousands):

                               1995                    1996
                        --------------------     --------------------
                                  Percent of               Percent of
                                     Total                   Total
                         Amount    Revenues      Amount     Revenues
                        -------    ---------     -------   ---------
     Guest Pay          $14,196      81.5%       $23,349     86.1%
     Free-to-guest        2,038      11.7%         2,422      8.9%
     Other                1,180       6.8%         1,345      5.0%
                        -------      -----       -------    ------
     Total revenue      $17,414      100.0%      $27,116    100.0%
                        -------      -----       -------    ------
                        -------      -----       -------    ------

LodgeNet Entertainment Corporation       Page 10             September 30, 1996
<PAGE>

     Guest Pay Revenue -- Guest Pay revenues increased 64.5%, or $9.2 
million, in the third quarter of 1996 in comparison to the same quarter of 
1995.  This increase was the result of (i) a 53.3% increase in the average 
number of installed Guest Pay rooms, all of which installations were the 
Company's on-demand room technology, and (ii) a 7.5% increase in average 
monthly revenue per Guest Pay room.

     The following table sets forth information in regard to (i) average 
monthly revenue per installed Guest Pay room; and average movie buy rates,  
average movie prices, and average hotel occupancy rates for (ii) all Guest 
Pay rooms and (iii) for on-demand Guest Pay rooms; each for the quarter 
ending September 30:

                                              1995      1996
                                             ------    ------
     Average monthly revenue per room:
          Movie revenue                      $18.06    $18.80
          Video game/information service       2.70      3.51
                                             ------    ------
             Total per Guest Pay room        $20.76    $22.31
                                             ------    ------
                                             ------    ------

     For all Guest Pay rooms:
          Average movie buy rates               9.5%      10.1%
          Average movie price                 $8.30      $8.22
          Average hotel occupancy rate         75.6%      75.3%

     For on-demand Guest Pay rooms:
          Average movie buy rates              10.5%      10.6%
          Average movie price                 $8.37      $8.27
          Average hotel occupancy rate         75.6%      75.5%


     Average movie revenue per room, for all Guest Pay rooms, was favorably 
impacted by higher average buy rates and by the comparative increase in the 
proportion of on-demand rooms; which combined to offset the effect of lower 
average movie prices and slightly lower occupancy rates.  The comparative 
increase in buy rates, for both all and on-demand Guest Pay rooms, is 
attributed to a relatively more popular selection of newly-released major 
motion pictures in the current quarter as compared to the year earlier 
period. Movie prices in certain Guest Pay rooms were increased effective 
February 1, 1995; the Company's movie prices are generally $7.95 or $8.95.  
The decline in average movie prices between the comparative periods is the 
result of an increase in the proportion of limited service hotel rooms, in 
the installed room base, in which rooms movie prices are generally $7.95.

     Average video game and information service revenue per room, for all 
Guest Pay rooms, increased primarily as a result of the increase in the 
average number of rooms with video game services installed.  On a per-room 
basis for all Guest Pay rooms, average monthly video game revenues were 
$2.86 and $2.23 during the quarters ended September 30, 1996 and 1995, 
respectively.  The Company had installed its video game service in 288,408 
and 135,625 Guest Pay rooms as of September 30, 1996 and 1995, respectively.

     Free-to-guest Revenue -- Free-to-guest revenues increased 18.8%, or 
$384,000, in the third quarter of 1996 as compared to the same quarter of 
1995. The comparative increase in revenues resulted from the 18.6% increase 
in the number of installed free-to-guest rooms since September 30, 1995.  
The Company had 282,637 and 238,376 free-to-guest rooms installed at 
September 30, 1996 and 1995, respectively. 

     Other Revenue -- Revenue from other sources, such as the sale of 
televisions, system equipment, service parts and labor, and miscellaneous 
free-to-guest programming materials, increased by $165,000, or 14.0%, in the 
third quarter of 1996 as compared to the same quarter of 1995.  The increase 
was primarily attributable to increased sales of systems and equipment to 
foreign licensees, which offset a decrease in television sales.

LodgeNet Entertainment Corporation       Page 11             September 30, 1996
<PAGE>


Expense Analysis

     Direct Costs -- The following table sets forth information in regard to 
the Company's direct costs and gross profit margin for the quarter ending 
September 30 (dollar amounts in thousands):

                                1995       1996
                               ------    -------
     Direct costs:
          Guest Pay            $5,369    $ 9,655
          Free-to-guest         1,498      1,862
          Other revenue         1,063      1,174
                               ------    ------
     Total direct costs        $7,930    $12,691
                               ------    ------
                               ------    ------

     Gross profit margin:
          Guest Pay              62.2%      58.6%
          Free-to-guest          26.5%      23.1%
          Other revenue           9.9%      12.7%
     Overall (composite)         54.5%      53.2%

     Guest Pay direct costs increased 79.8%, or $4.3 million, in the third 
quarter of 1996 as compared to the year earlier quarter.  Since Guest Pay 
direct costs (primarily: studio license fees, video game license fees and 
the commission retained by the hotel) are primarily based on related 
revenue, such direct costs tend to vary more or less directly with revenue.  
As a percentage of revenue, such costs increased from 37.8% in the third 
quarter of 1995 to 41.4% in the current quarter.  The relative increase in 
Guest Pay direct costs (as a percentage of revenue) reflects higher 
movie-related costs due to proportionately higher revenue from 
newly-released motion pictures and the cost-related effect of increased 
video game revenue (which generally has a higher direct cost on a percentage 
of revenue basis than movies) in the Guest Pay revenue mix, both of which 
combined to offset slightly lower hotel commissions; all in the current 
quarter as compared to the year-earlier quarter.

     Free-to-guest direct costs increased 24.3% to $1.9 million in the third
quarter of 1996 from $1.5 million in the year-earlier quarter.  As a percentage
of free-to-guest revenue, free-to-guest direct costs increased to 76.9% from
73.5% in the year-earlier quarter.  The relative increase in free-to-guest
direct costs (as a percentage of revenue) resulted from higher costs for both
premium and non-premium programming in the third quarter of 1996, in comparison
to the same quarter in the prior year, and to a lesser extent to a slightly
higher proportion of non-premium programming in the mix of programming services
delivered.

     Direct costs associated with other revenue increased $111,000, in the 
third quarter of 1996 as compared to the same quarter of the prior year.  As 
a percentage of related revenues, such direct costs decreased to 87.3% of 
other revenue in the current quarter versus 90.1% in the third quarter of 
1995, reflecting the effect of the increased equipment and service part 
sales, previously discussed, which have slightly higher margins than the 
other sources of other revenue.

     The Company's overall gross profit increased 52.1%, or $4.9 million, to
$14.4 million in the third quarter of 1996 on a 55.7% increase in revenues in
comparison to the same period in the prior year.  The Company's overall gross
profit margin was 53.2% in the current quarter, as compared to the year earlier
54.5%.

LodgeNet Entertainment Corporation       Page 12             September 30, 1996

<PAGE>

     Operating Expenses -- The following table sets forth information in 
regard to the Company's operating expenses for the quarter ending September 
30 (dollar amounts in thousands):

                                           1995                   1996
                                      ------------------   --------------------
                                              Percent of            Percent of
                                                 Total                 Total
                                      Amount   Revenues     Amount   Revenues
                                      ------   ---------   -------  -----------
    Guest Pay operations             $2,522     14.5%      $ 3,876      14.3%
    Selling and marketing               459      2.6%          545       2.0%
    General and administrative        1,740     10.0%        2,523       9.3%
    Depreciation and amortization     4,827     27.7%        7,560      27.9%
                                     ------                -------
        Total operating expenses     $9,548     54.8%      $14,504      53.5%
                                     ------                -------
                                     ------                -------

     Guest Pay operations expense increased 53.7%, or $1.4 million, from 
$2.5 million in the comparable quarter of the previous year.  This increase 
is primarily attributable to the 53.3% increase in the average number of 
installed Guest Pay rooms in the current period as compared to the year 
earlier quarter. Per average installed Guest Pay room, such expenses 
averaged $3.72 per month in the current quarter as compared to $3.68 per 
month in the same quarter of 1995. The slight comparative increase on a 
per-room basis was primarily the result of higher marketing, and service and 
support expenses.

     Selling and marketing expenses increased 18.7%, or $86,000, from 
$459,000 in the third quarter of 1995.  The increase primarily reflects the 
effect of additional sales and marketing personnel.  As a percentage of 
revenue, such expenses were 2.0% in the current quarter as compared to 2.6% 
in the year earlier period.

     General and administrative expenses increased 45.0%, or $783,000, from 
$1.7 million in the year-earlier quarter.  This increase reflects the effect 
of an increase in the number of development and administrative personnel, 
increased facilities-related expenses, and increased legal expenses.  As a 
percentage of revenue, such expenses represented 9.3% of total revenue in 
the current quarter as compared to 10.0% a year earlier.

     Depreciation and amortization expenses increased 56.6% to $7.6 million 
in the third quarter of 1996 from $4.8 million in the year earlier quarter.  
This increase is directly attributable to the increases in the number of 
installed Guest Pay and game service equipped rooms previously discussed, 
associated software; and other capitalized costs such as service vans, 
equipment and computers that are related to the increased number of rooms in 
service since the year-earlier quarter.

     Operating Loss -- The Company's operating loss, as a result of the 
factors previously discussed, was $(79,000) in the current quarter as 
compared to $(64,000) in the same quarter of 1995.

     Interest Expense -- Interest expense increased to $1.8 million in the 
current quarter from $1.2 million in the comparable quarter of 1995 due to 
increases in long-term debt to fund the Company's continuing expansion of 
its businesses.  Long-term debt increased from $52.1 million at September 
30, 1995 to $63.8 million at September 30, 1996.  Average principal amount 
of long-term debt (excluding amounts under the revolving facility) 
outstanding, during the quarter ended September 30, 1996, was approximately 
$60 million (at an average interest rate of approximately 10.7%) as compared 
to an average principal amount outstanding of approximately $42 million (at 
an average interest rate of approximately 10.3%) during the comparable 
period of 1995.

     Net Loss -- For the reasons previously discussed, the Company's net 
loss increased to $(1.9) million in the third quarter of 1996 from a net 
loss of $(1.3) million in the same quarter a year earlier.

LodgeNet Entertainment Corporation       Page 13             September 30, 1996
<PAGE>

     EBITDA -- As a result of increasing revenues from Guest Pay services, 
and the other factors previously discussed, EBITDA (defined as "earnings 
before interest, income taxes, depreciation and amortization") increased 
57.1% to $7.5 million in the third quarter of 1996 as compared to $4.8 
million in the third quarter of 1995.  EBITDA as a percentage of total 
revenues was 27.6% in the current quarter as compared to 27.4% in the same 
quarter of 1995.  EBITDA is included herein because it is a widely accepted 
financial indicator used by certain investors and financial analysts to 
assess and compare companies on the basis of operating performance.  EBITDA 
is not intended to represent an alternative to net income (as determined in 
accordance with generally accepted accounting principles) as a measure of 
performance, but management believes that it does provide an important 
additional perspective on the Company's operating results and the Company's 
ability to service its long-term debt and to fund the Company's continuing 
growth.

                            RESULTS OF OPERATIONS
                NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996

Revenue Analysis

     The Company's total revenue for the first nine months of 1996 increased 
55.7%, or $25.3 million, in comparison to the first nine months of 1995.  
The following table sets forth the components of the Company's revenue for 
the nine months ending September 30 (dollar amounts in thousands):

                                1995                     1996
                         --------------------    -------------------
                                   Percent of             Percent of
                                      Total                   Total
                          Amount    Revenues      Amount    Revenues
                         -------    --------      -------  ----------
     Guest Pay           $36,397      80.2%       $60,912      86.2%
     Free-to-guest         6,033      13.3%         6,709       9.5%
     Other                 2,957       6.5%         3,068       4.3%
                         -------     ------       -------     ------
     Total revenue       $45,387     100.0%       $70,689     100.0%
                         -------     ------       -------     ------
                         -------     ------       -------     ------

     Guest Pay Revenue -- Guest Pay revenues increased 67.4%, or $24.5 
million, in the first nine months of 1996 in comparison to the same nine 
months of 1995. This increase was the result of (i) a 50.6% increase in the 
average number of installed Guest Pay rooms, all of which installations were 
the Company's on-demand room technology, and (ii) a 9.8% increase in average 
monthly revenue per Guest Pay room.

     The following table sets forth information in regard to (i) average 
monthly revenue per installed Guest Pay room; and average movie buy rates,  
average movie prices, and average hotel occupancy rates for (ii) all Guest 
Pay rooms and (iii) for on-demand Guest Pay rooms; each for the nine months 
ending September 30:

                                               1995      1996
                                              ------    ------
   Average monthly revenue per room:
      Movie revenue                           $17.18    $18.37
      Video game/information service            2.22      2.93
                                              ------    ------
          Total per Guest Pay room            $19.40    $21.30
                                              ------    ------
                                              ------    ------

   For all Guest Pay rooms:
      Average movie buy rates                    9.9%     10.6%
      Average movie price                     $ 8.26    $ 8.27
      Average hotel occupancy rate              71.1%     71.7%

   For on-demand Guest Pay rooms:
      Average movie buy rates                   11.0%     11.3%
      Average movie price                      $8.33      $8.30
      Average hotel occupancy rate              72.1%      72.4%
     
LodgeNet Entertainment Corporation       Page 14             September 30, 1996

<PAGE>

     Average movie revenue per room, for all Guest Pay rooms, was favorably 
impacted by a combination of higher average buy rates, higher average movie 
prices, and higher average occupancies,  all in comparison to the year 
earlier nine months; and by the comparative increase in the proportion of 
on-demand rooms.  It has been the Company's experience that buy rates are 
higher in rooms featuring the on-demand service than in those with the 
scheduled service. The comparative increase in buy rates, for both all and 
on-demand Guest Pay rooms, is attributed to a relatively more popular 
selection of newly-released major motion pictures in the current nine months 
as compared to the year earlier period.  The slight decrease in average 
movie prices for on-demand rooms between the comparative periods is the 
result of an increase in the proportion of limited service hotel rooms, in 
the installed room base, in which rooms movie prices are generally $7.95.  
Movie prices in certain Guest Pay rooms were increased effective February 1, 
1995.  The Company's movie prices are generally $7.95 or $8.95.

     Average video game and information service revenue per room, for all 
Guest Pay rooms, increased primarily as a result of the increase in the 
average number of rooms with video game services installed.  On a per-room 
basis, average monthly video game revenues were $2.31 and $1.73 during the 
nine months ended September 30, 1996 and 1995, respectively.

     Free-to-guest Revenue -- Free-to-guest revenues increased 11.2%, or 
$676,000, in the first nine months of 1996 as compared to the same nine 
months of 1995.  The comparative increase in revenues resulted from the 
18.6% increase in the number of installed free-to-guest rooms since 
September 30, 1995, which installed room increase mitigated a decline in 
per-room revenues resulting from a relatively lower proportion of rooms 
receiving premium services in the current period.

     Other Revenue -- Revenue from other sources, such as the sale of 
televisions, system equipment, service parts and labor, and miscellaneous 
free-to-guest programming materials, increased by $111,000, or 3.8%, in the 
first nine months of 1996 as compared to the same nine months of 1995; all 
of which increase was attributable to sales of systems and equipment to 
foreign licensees.

Expense Analysis

     Direct Costs -- The following table sets forth information in regard to 
the Company's direct costs and gross profit margin for the nine months 
ending September 30 (dollar amounts in thousands):

                              1995        1996
                             -------    -------
     Direct costs:
        Guest Pay            $13,511    $24,438
        Free-to-guest          4,573      5,200
        Other revenue          2,574      2,591
                             -------    -------
     Total direct costs      $20,658    $32,229
                             -------    -------
                             -------    -------
     Gross profit margin:
        Guest Pay               62.9%      59.9%
        Free-to-guest           24.2%      22.5%
        Other revenue           13.0%      15.5%
     Overall (composite)        54.5%      54.4%

     Guest Pay direct costs increased 80.9%, or $10.9 million, in the first 
nine months of 1996 as compared to the year earlier nine months.  Since 
Guest Pay direct costs (primarily: studio license fees, video game license 
fees and the commission retained by the hotel) are primarily based on 
related revenue, such direct costs tend to vary more or less directly with 
revenue.   As a percentage of revenue, such costs increased from 37.1% in 
the first nine months of 1995 to 40.1% in the current nine months.  The 
relative increase in Guest Pay direct costs (as a percentage of revenue) 
reflects higher movie-related costs due to proportionately higher revenue 
from newly-released motion pictures, substantially increased video game 
revenue in the Guest Pay revenue mix and to a lesser extent, increased hotel 
commissions; all in the current nine months as compared to the year-earlier 
nine months.

     Free-to-guest direct costs increased 13.7% to $5.2 million in the first 
nine months of 1996 from $4.6 million in the year-earlier nine months.  As a 
percentage of free-to-guest revenue, free-to-guest direct costs increased to 
77.5% from 75.8% in the year-earlier nine months.  The relative increase in 
free-to-guest direct costs (as a

LodgeNet Entertainment Corporation       Page 15             September 30, 1996

<PAGE>

percentage of revenue) resulted primarily from higher costs for non-premium 
programming in the first nine months of 1996, in comparison to the same nine 
months in the prior year, and to a lesser extent to slightly higher 
proportion of non-premium programming in the mix of programming services 
delivered.

     Direct costs associated with other revenue increased $17,000, or .7%, 
in the first nine months of 1996 as compared to the same nine months of the 
prior year.  This decrease is directly attributable to the increased sales 
of systems and equipment to licensees as discussed above.  As a percentage 
of related revenues, such direct costs decreased to 84.5% of other revenue 
in the current nine months versus 87.0% in the first nine months of 1995, 
reflecting the effect of increased system and equipment sales which have 
slightly higher margins than the other sources of other revenue.

     The Company's overall gross profit increased 55.5%, or $13.7 million, 
to $38.5 million in the first nine months of 1996 on a 55.7% increase in 
revenues in comparison to the same period in the prior year.  The Company's 
overall gross profit margin was 54.4% in the current nine months and 54.5% 
in the year earlier period.

     Operating Expenses -- The following table sets forth information in 
regard to the Company's operating expenses for the nine months ending 
September 30 (dollar amounts in thousands):

                                         1995                  1996
                                    ------------------  --------------------
                                            Percent of            Percent of
                                               Total                 Total
                                    Amount    Revenues    Amount    Revenues
                                    -------  ----------  -------   ---------
    Guest Pay operations            $ 7,092    15.6%     $10,614      15.0%
    Selling and marketing             1,503     3.3%       2,105       3.0%
    General and administrative        4,596    10.1%       7,175      10.2%
    Depreciation and amortization    12,883    28.4%      20,891      29.6%
                                    -------              -------
      Total operating expenses      $26,074    57.4%     $40,785      57.7%
                                    -------              -------
                                    -------              -------

     Guest Pay operations expense increased 49.7%, or $3.5 million, from 
$7.1 million in the comparable nine months of the previous year.  This 
increase is primarily attributable to the 50.6% increase in the average 
number of installed Guest Pay rooms in the current period as compared to the 
year earlier nine months.  Per average installed Guest Pay room, such 
expenses averaged $3.78 and $3.77 per month in the nine months ended 
September 30 1996 and 1995, respectively.

     Selling and marketing expenses increased 40.0%, or $602,000, from $1.5 
million in the third quarter of 1995.  This increase primarily reflects the 
effect of additional sales and marketing personnel.  As a percentage of 
revenue, such expenses were 3.3% and 3.0% for the nine months ended 
September 30, 1995 and 1996, respectively.

     General and administrative expenses increased 56.1%, or $2.6 million, 
from $4.6 million in the year-earlier nine months.   This increase reflects 
the effect of an increase in the number of development and administrative 
personnel, increased facilities-related expenses, and increased legal 
expenses. As a percentage of revenue, general and administrative expenses 
represented 10.2% of total revenue in the current nine months as compared to 
10.1% in the year earlier period.

     Depreciation and amortization expenses increased 62.2% to $20.9 million 
in the first nine months of 1996 from $12.9 million in the year earlier nine 
months.  This increase is directly attributable to the increases in the 
number of installed Guest Pay and game service equipped rooms previously 
discussed, associated software; and other capitalized costs such as service 
vans, equipment and computers that are related to the increased number of 
rooms in service since the year-earlier nine months.

     Operating Loss -- The Company's operating loss, as a result of the 
factors previously discussed, increased to $(2.3) million in the current 
nine months from $(1.3) million in the same nine months of 1995.

     Interest Expense -- Interest expense increased to $5.8 million in the 
current nine months from $2.9 million in the comparable nine months of 1995 
due to increases in long-term debt to fund the Company's continuing 
expansion of its businesses.  Long-term debt increased from $52.1 million at 
September 30, 1995 to $63.8 million at September 30, 1996, primarily 
reflecting the Company's issuance of $30 million, principal amount, of 11.5% 

LodgeNet Entertainment Corporation       Page 16             September 30, 1996
<PAGE>

Senior Subordinated Notes in two separate private placements during 1995; 
and increased borrowings under the Company's bank credit facility.  Average 
principal amount of long-term debt (excluding amounts outstanding under the 
revolving facility) outstanding, during the nine months ended September 30, 
1996, was approximately $62 million (at an average interest rate of 
approximately 10.7%) as compared to an average principal amount outstanding 
of approximately $35 million (at an average interest rate of approximately 
10.1%) during the comparable period of 1995.

     Net Loss -- For the reasons previously discussed, the Company's net 
loss increased to $(8.1) million in the first nine months of 1996 from a net 
loss of $(4.2) million in the same nine months a year earlier.

     EBITDA -- As a result of increasing revenues from Guest Pay services, 
and the other factors previously discussed, EBITDA (defined as "earnings 
before interest, income taxes, depreciation and amortization") increased 
60.9% to $18.6 million in the first nine months of 1996 as compared to $11.5 
million in the first nine months of 1995.  EBITDA as a percentage of total 
revenues was 26.3% in the current nine months as compared to 25.4% in the 
same nine months of 1995.

                                  SEASONALITY

     The Company's operating results are subject to fluctuation depending 
upon hotel occupancy rates and buy rates, among other factors.  Typically, 
occupancy rates are higher during the second and third calendar quarters due 
to seasonal travel patterns.  Buy rates are influenced by the relative 
popularity and selection of the movie titles available to the Company, the 
length of time programming is available and other factors.

              FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

     On September 15, 1994, the Company issued $28 million, principal 
amount, of 9.95% Senior Notes to three insurance companies in a private 
placement.  On April 13, 1995, the Company and the holders of the 9.95% 
Senior Notes amended the Note Purchase Agreement and concurrently the 
Company issued $5 million, principal amount, of 10.35% Senior Notes (the 
9.95% Senior Notes and the 10.35% Senior Notes are collectively referred to 
as the "Senior Notes"), under the Note Purchase Agreement, in a private 
placement to certain holders of the 9.95% Senior Notes.  The Senior Notes 
are unsecured and mature on August 1, 2003. Interest on the Senior Notes is 
fixed and is payable nine monthly, and mandatory annual principal payments 
of $4.125 million commenced August 1, 1996.  The Senior Notes contain 
covenants which require the maintenance of certain financial ratios, limit 
the incurrence of additional indebtedness, limit the incurrence of certain 
liens, limit certain payments or distributions in respect of the common 
stock of the Company, provide for acceleration of principal repayment in 
certain circumstances, and permit early retirement of principal subject to 
minimum rate of return provisions.  At September 30, 1996 the Company was in 
compliance with all such covenants.

     On August 9, 1995, the Company issued $20 million, principal amount, of 
11.5% Senior Subordinated Notes due July 15, 2005 (the "Subordinated Notes") 
to three insurance companies in a private placement.  On October 4, 1995, 
the Company issued an additional $10 million, principal amount, of such 
Subordinated Notes to the same purchasers and under identical terms and 
conditions.  The Subordinated Notes are unsecured and bear interest at the 
fixed rate of 11.5%, payable semi-annually.  Mandatory annual principal 
payments of $6 million commence July 15, 2001.

     Net proceeds of the August 9, 1995 issue of the Subordinated Notes, net 
of original issue discount and issuance-related expenses, were approximately 
$18.1 million, and were used to (i) repay $10.0 million outstanding under 
the Company's then existing revolving facility and (ii) provide funding for 
capital expenditures to expand the Company's Guest Pay services business.  
The net proceeds from the October 4, 1995 issue of Subordinated Notes, net 
of original issue discount and issuance-related expenses, were approximately 
$9.2 million and provided additional capital to fund the expansion of the 
Company's Guest Pay services business.  The Subordinated Notes include 
covenants which require the maintenance of certain financial ratios, limit 
the incurrence of additional indebtedness, limit the incurrence of certain 
liens, limit certain payments or distributions in respect of the common 
stock of the Company, provide for acceleration of principal repayment in 
certain circumstances, and permit early retirement of principal subject to 
minimum rate of return provisions.  At September 30, 1996 the Company was in 
compliance with all such covenants.

LodgeNet Entertainment Corporation       Page 17             September 30, 1996
<PAGE>

     The Company issued a total of 480,000 warrants to purchase common stock 
of the Company in connection with the issuance of the Subordinated Notes.  
Net proceeds attributable to the warrants were approximately $1.6 million 
and provided additional capital to fund the expansion of the Company's Guest 
Pay services business. Each warrant permits the holder to purchase one share 
of common stock at an exercise price of $7.00.  The warrants include demand 
registration rights and anti-dilution provisions and expire on July 15, 2005.

     On March 11, 1996, the Company entered into the 1996 Revolving Facility 
with National Westminster Bank Plc and three other banks, under which the 
Company could borrow up to $45 million.  The 1996 Revolving Facility is 
unsecured and amounts thereunder bear interest at either (i) LIBOR (London 
Interbank Offered Rate) plus from 2.00% to 2.625% or (ii) prime rate plus 
from 1.00% to 1.625%, both depending on the Company's total leverage, as 
defined in the agreement.  The banks' commitment under the 1996 Revolving 
Facility is subject to a scheduled reduction of 15% beginning in September 
1997 and annually thereafter as follows:  September 1998 - 20%, September 
1999 - 20%, September 2000 - 20% and September 2001 - 25%.  The 1996 
Revolving Facility provides for the issuance of letters of credit, subject 
to customary terms and conditions, and includes terms and conditions which 
require the maintenance of certain financial ratios, limit the incurrence of 
additional indebtedness, limit the incurrence of certain liens, limit 
certain payments or distributions in respect of the common stock of the 
Company, provide for acceleration of principal repayment in certain 
circumstances.  As of September 30, 1996, the Company was in compliance with 
all such covenants.  At September 30, 1996, there was $10.0 million 
outstanding under the 1996 Revolving Facility.

     Effective November 1, 1996, the banks' commitments under the 1996 
Revolving Facility were increased from $45 to $60 million.  

     On May 23, 1996 the Company sold 3,680,000 new shares of common stock 
(including 480,000 shares representing the exercise of the underwriters' 
over-allotment option)  at a price of $13.00 per share in a public offering. 
 Net proceeds to the Company from the sales of such shares, after 
underwriters' commissions and other expenses related to the sale, were 
approximately $44.6 million.  Such proceeds were used to repay amounts then 
outstanding under the 1996 Revolving Facility, approximately $25.9 million, 
and to provide working capital for the continuing expansion of the Company's 
lodging and residential businesses.

     On October 21, 1996, the Company and its subsidiary, ResNet 
Communications, Inc. ("ResNet") entered into agreements with TCI Satellite 
Entertainment, Inc. ("TCI") under which ResNet sold a 4.99% equity interest 
in ResNet to TCI  in exchange for $5.4 million in cash.  In addition, TCI 
agreed to advance up to $34.6 million to ResNet during the five years ending 
October 21, 2001, under a convertible note agreement (the "Convertible 
Note"). The Convertible Note is subject to mandatory conversion into a 
maximum 32.0% equity interest in ResNet. The Convertible Note is unsecured, 
is payable solely in shares of ResNet's common stock, is non-recourse to the 
Company, and is subordinated to all present and future borrowings by ResNet 
and/or the Company, to the extent that the proceeds thereof are advanced to 
ResNet.  Interest accrues (generally at TCI's average borrowing rate) on 
amounts outstanding under the Convertible Note, but such interest is not 
paid in cash (and does not increase the equity interest into which  the 
Convertible Note will be converted).  See "Part II - Item 5 -Other 
Information."

     The growth of the Company's business requires substantial capital 
investment on a continuing basis to finance expansion of its lodging and 
multi-family residential businesses.  Historically, cash flow from 
operations has not been sufficient to fund the cost of expanding the 
Company's business and to service existing indebtedness.  Capital 
expenditures were approximately $61.1 million during the nine months ended 
September 30, 1996, net cash provided by operating activities was 
approximately $10.9 million, and financing activities provided approximately 
$50.1 million.  Depending on the rate of growth of its lodging and 
residential businesses and other factors, the Company expects to incur 
capital expenditures of between approximately $17.5 to $25.0 million during 
the remainder of 1996.  The Company expects to incur in 1997 capital 
expenditures of between approximately $125 to $145 million; and, depending 
the amount of such capital expenditures and the financing sources utilized, 
principal payments of approximately $4.3 and interest payments of between 
approximately $16.5 to $18.0 million.  The actual amount and timing of the 
Company's capital expenditures will vary (and such variations could be 
material) depending on the number of new contracts for services entered into 
by the Company, the costs of installations, and other factors.

     The Company believes that its operating cash flows, working capital, 
the proceeds of the sale of the 4.99% equity interest in ResNet, and the 
1996 Revolving Facility will be sufficient to fund the Company's growth for 
the remainder of 1996.  Depending on the Company's rate of growth, the 
Company intends to seek additional financing

LodgeNet Entertainment Corporation       Page 18             September 30, 1996

<PAGE>

to fund its capital expenditures for 1997. The Company believes that such 
financing is available from a number of sources. However, if such financing 
should not be available at reasonable cost to the Company, the Company could 
modify its expansion plans and reduce its capital expenditures necessary for 
the installation of the Company's systems in the lodging and multi-family 
residential markets.



LodgeNet Entertainment Corporation       Page 19             September 30, 1996

<PAGE>

                         PART II - OTHER INFORMATION

ITEM 1 -- LEGAL PROCEEDINGS

      As previously reported, on February 16, 1995 On Command Video 
Corporation filed a lawsuit in Federal District Court in Northern California 
asserting patent infringement by the Company.  The complaint requests an 
unspecified amount of damages and injunctive relief.  The Company has 
carefully reviewed the allegations of infringement and is of the opinion 
that the Company does not infringe on the patent and the allegations are 
without merit.  The Company filed an answer and counterclaim to the lawsuit 
on April 17, 1995, denying the claims, asserting affirmative defenses and 
asserting a counterclaim for declaratory relief.  The Company is currently 
engaged in litigation with respect to this matter and intends to vigorously 
defend itself.  Although the outcome of any litigation cannot be predicted 
with certainty, the Company believes that the ultimate disposition of this 
matter will not have a material adverse effect on the Company's business or 
financial condition.

     From time to time, the Company is subject to other litigation arising 
in the ordinary course of business.  As of the date hereof, in the opinion 
of management, the resolution of such other litigation will not have a 
material adverse effect upon the Company's business or financial condition.

ITEM 2 -- CHANGES IN SECURITIES

     Not applicable.

ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES

     Not applicable.

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

     Not applicable.

ITEM 5 -- OTHER INFORMATION

RESNET COMMUNICATIONS, INC.

     OVERVIEW. On October 21, 1996, the Company entered into a transaction 
(the "TCI Transaction") with TCI Satellite Entertainment, Inc. ("TCI 
Satellite"), a subsidiary of Tele-Communications, Inc. ("TCI"), pursuant to 
which, among other things, TCI Satellite acquired an ownership interest in 
ResNet Communications, Inc., a Delaware corporation  ("ResNet").  Prior to 
the investment by TCI Satellite, ResNet was a wholly-owned subsidiary of the 
Company.

     ResNet was formed in January 1996 to engage in the business of offering 
basic and premium cable television programming and other interactive 
entertainment and information services ("ResNet's Services") to subscribers 
in multiple dwelling units ("MDUs") throughout the United States.  The 
Company believes there are substantial opportunities to provide its services 
in the multi-family residential market.  The Company believes there are 
approximately 26,000 apartment complexes having more than 200 units, with an 
aggregate of over 6 million multi-family residential units, in the 70 
largest metropolitan areas in the United States.  This represents a market 
that is more than three times the size of the Company's target lodging 
market.

     The Company views the multi-family cable television market as 
attractive due to : (i) the large market size; (ii) the portability to this 
market of the proprietary technology and operating expertise developed by 
the Company for the lodging industry; (iii) the favorable regulatory 
environment available to operators such as ResNet who qualify as "private 
cable" operators under applicable federal regulations (including the absence 
of franchise requirements, "must-carry" obligations and rate regulations 
applicable to franchised cable operators); (iv) the exclusive long-term 
contracts that have customarily been available in the multi-family 
residential market; and (v) the low-cost operating structure made possible 
by the services to be provided by GE Capital-ResCom (as described below). 

     ResNet's MDU private cable systems will have the capacity to deliver 
over 100 channels, although the ResNet expects that the typical system will 
deliver approximately 35 to 50 channels of programming.  The

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<PAGE>

Company may elect to provide from approximately 10 to 35 additional channels 
for pay-per-view, video on-demand, video games and other interactive 
services, such as Internet access. ResNet will design a specific programming 
line-up for each MDU property, based on the particular demographic profile 
of that property.  These systems are expected to include basic programming 
services, such as CNN, ESPN, WTBS, TNT, The Discovery Channel and The 
Weather Channel, premium programming, such as HBO and Showtime, plus 
additional channels which carry local off-air stations, an electronic 
programming guide, a preview channel, and a bulletin board channel. ResNet's 
Services are delivered utilizing proprietary technology which, among other 
things, combines addressable interdiction technology with the Company's 
proprietary broadband, local area network technology (B-LAN-TM-) developed 
for the lodging industry.

     GE CAPITAL-RESCOM TRANSACTION.     On February 9, 1996, ResNet entered 
into an agreement with GE Capital-ResCom, L.P. ("GE ResCom"), a leading 
provider of private telephony services to MDUs and an affiliate of General 
Electric Co., under which GE ResCom's national sales force will exclusively 
market ResNet's Services to MDUs on a nationwide basis.  The joint marketing 
plan is to offer the MDU owner or property manager a one-stop portfolio of 
products, including ResNet's Services and the private telephony, paging and 
other services offered by GE ResCom. GE ResCom will also provide, for a fee 
equal to 5% of collected revenues, the following services; (i) common sales 
training to on-site property leasing agents, who will promote and sign-up 
subscribers for ResNet's video services; (ii) a common customer service 
"hotline" through which residents may order or modify service and make 
inquiries; and (iii) subscriber billing. ResNet will own the franchise 
agreements with the property owners and the video services agreements with 
the tenants and will be responsible for all other operational aspects, 
including system design, installation, programming, and technical field 
service.  The Company's existing nationwide installation and field service 
organizations position ResNet to operate effectively throughout the United 
States wherever the GE ResCom sales force may obtain contracts, a capability 
which is of particular strategic importance when addressing the needs of the 
largest multi-state MDU property portfolios.

     TCI TRANSACTION.    As part of the TCI Transaction, ResNet and TCI 
Satellite entered into the following agreements:

     (i)  a Subscription Agreement, providing for the sale of 4.99% of 
ResNet's outstanding common stock to TCI Satellite for a purchase price 
equal to $5,396,000 (the "Initial Investment Amount");

     (ii) a Signal Availability Agreement, pursuant to which ResNet 
will receive long-term access on a nationwide basis to TCI Satellite's 
direct broadcast satellite signals;

     (iii) an Equipment Sale Agreement, pursuant to which ResNet has agreed
to purchase exclusively from TCI Satellite up to $40 million of satellite
reception equipment, including a purchase order placed at the closing in an
amount equal to the Initial Investment Amount;

     (iv) a Subordinated Convertible Term Loan Agreement, pursuant to which
TCI Satellite will provide ResNet with up to $34,604,000 in a subordinated
convertible term loan (the "Loan"), the proceeds of which can be used only to
finance purchases of equipment under the Equipment Sale Agreement, the term of
the Loan to be five years with an option by ResNet to extend the term for an
additional year, such loan to be convertible (as described below) into an
additional 32% of ResNet's outstanding common stock;

     (v) an Option Agreement granting TCI Satellite an option, exercisable
after three years and expiring on the maturity date of the Loan, to acquire an
additional 13.01% of ResNet's outstanding common stock at a purchase price equal
to the appraised fair market value of such shares at the time of exercise;

     (vi) a Stockholders' Agreement, providing for certain restrictions on
transfer of interests in ResNet, rights of first refusal on any such transfer,
and pre-emptive rights to purchase newly issued shares of ResNet's capital
stock; and

     (vii) a Standstill Agreement prohibiting TCI Satellite and its
controlled affiliates from acquiring more than 10% of the Company's outstanding
common stock, participating in any solicitation of proxies or otherwise seeking
to control or influence the Board of Directors or management of the Company.

     The Loan is convertible, to the extent permitted by applicable 
regulations of the Federal Communications Commission ("FCC") (as described 
below), over a four-year period into shares representing 32% of ResNet's

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<PAGE>

outstanding common stock.  The Loan is subordinated to all present and 
future borrowings of ResNet and/or the Company, to the extent that the 
proceeds thereof are advanced to ResNet.  TCI Satellite's only recourse with 
respect to repayment of the Loan is conversion into ResNet common stock (or 
warrants as described below).  Under current interpretations of FCC rules 
and regulations relating to restrictions on cross-ownership of franchised 
cable and satellite master antenna television operations, TCI Satellite 
would be prevented from holding 5% or more of ResNet's capital stock and 
consequently could not exercise the conversion rights under the convertible 
loan agreement.  TCI Satellite is required to convert the Loan into ResNet 
common stock at such time as conversion would not violate the aforementioned 
FCC restriction.  The acquisition of such conversion shares, when combined 
with TCI Satellite's initial purchase of 4.99% of ResNet's common stock and 
the exercise of the option to acquire an additional 13.01% of such stock, 
would result in ownership by TCI Satellite of 50% of ResNet's outstanding 
common stock (assuming no other issuances of common stock or common stock 
equivalents). Upon the maturity date of the Loan, if TCI Satellite has been 
prevented from converting the Loan or exercising the option in full due to 
the previously described FCC restriction, ResNet will issue warrants to TCI 
Satellite to acquire such shares into which the Loan is convertible and/or 
for which the option is exercisable and that it has been unable to acquire.  
The exercise price of the warrants for the shares issuable upon conversion 
of the Loan will be DE MINIMUS, and the exercise price of the warrants for 
the option shares will be equivalent to the exercise price under such option 
agreement.

     The Company, on behalf of itself and ResNet, retained PaineWebber 
Incorporated ("PaineWebber") to act as financial advisor in connection with 
the TCI Transaction, and to render its opinion to the stockholders of each 
of ResNet and the Company as to the fairness of certain aspects of the 
transaction, from a financial point of view.  PaineWebber was engaged by the 
Company because of its experience and expertise in strategic investment 
transactions in the entertainment and multimedia industries and its 
knowledge of the respective businesses of the Company and ResNet arising out 
of its prior role as an investment banker to the Company.

     PaineWebber delivered its written opinion, dated October 18, 1996 (the 
"Opinion"), to the respective Board of Directors of the Company and ResNet 
to the effect that, as of such date, the initial sale of 4.99% of ResNet's 
outstanding common stock for consideration equal to $5,396,000 and the right 
of TCI Satellite to convert the full amount of the Loan into 32% of ResNet's 
outstanding common stock was fair, from a financial point of view, to the 
stockholders of the Company and ResNet.  In rendering the Opinion, 
PaineWebber, among other things, reviewed historical business and financial 
information of the Company, analyzed discounted cash flows of ResNet based 
on financial forecasts furnished by the Company, conducted discussions with 
members of senior management of the Company and ResNet concerning ResNet's 
business and prospects, reviewed the historical market prices and trading 
activity of certain publicly traded companies similar to ResNet which it 
deemed relevant and conducted such other financial analyses and 
investigations as it deemed necessary for purposes of the Opinion.  Although 
PaineWebber evaluated certain financial terms of the TCI Transaction, 
PaineWebber did not recommend the specific consideration to be received by 
the Company or ResNet, such terms being determined by negotiations between 
TCI Satellite, the Company and their respective representatives.

     Pursuant to an engagement letter, PaineWebber will be paid $200,000 for 
its services as financial advisor to the Company and ResNet and $200,000 in 
connection with the rendering of the Opinion.  The Company has also agreed 
to reimburse PaineWebber for its reasonable out-of-pocket expenses incurred 
in connection with its engagement and to certain customary indemnification 
provisions for the benefit of PaineWebber and its officers, agents, 
employees and control persons, including indemnification for liabilities 
under federal securities laws.

ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K

     A.  EXHIBITS:
     
          Exhibit 11.1   Statement Regarding Computation of  Net Loss Per Common
                         Share.
          Exhibit  99.1  Press Release of the Company, dated October 21, 1996
     
     
     B.  REPORTS ON FORM 8-K:
     
          The Company filed no Reports on Form 8 - K during the nine months
          ended September 30, 1996.

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<PAGE>

                        LODGENET ENTERTAINMENT CORPORATION

                                     FORM 10-Q


                                    SIGNATURES

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

                                       LODGENET ENTERTAINMENT CORPORATION
                                  --------------------------------------------
                                                  (Registrant)


Date:  November 7, 1996                 / S /  TIM C. FLYNN
                                   -------------------------------------------
                                        Tim C. Flynn
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)


Date:  November 7, 1996                 / S /  JEFFREY T. WEISNER
                                   -------------------------------------------
                                        Jeffrey T. Weisner
                                        Vice President - Finance
                                        (Principal Financial and Accounting
                                           Officer)

LodgeNet Entertainment Corporation       Page 23             September 30, 1996