<PAGE>
 
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                 -------------
                                        
                                   FORM 10-Q

                                        
 [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
      EXCHANGE ACT OF 1934
      FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998.

                                       OR
                                        
 [_]  TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      FOR TRANSITION PERIOD FROM              TO           .

                         COMMISSION FILE NO. 333-38689
                                        
                                 -------------

                           FOX/LIBERTY NETWORKS, LLC
             (Exact name of registrant as specified in its charter)


           DELAWARE                                             95-4577574
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)


             1440 SOUTH SEPULVEDA BOULEVARD, LOS ANGELES, CA 90025
                    (Address of principal executive offices)



       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 444-8123


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


  Indicate by check mark whether the Registrant has (1) 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) been subject to such
filing requirements for the past 90 days.


                          Yes  X    No
                              ---      ---  

================================================================================
<PAGE>
 
  In addition to historical information, this report contains forward-looking
statements which are subject to risks and uncertainties, including those that
are discussed in this report. Accordingly, the Company's actual results could
differ materially from those anticipated in such forward-looking statements.


                                     PART I
                             FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

                           FOX/LIBERTY NETWORKS, LLC
                     (A DELAWARE LIMITED LIABILITY COMPANY)

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                          SEPTEMBER 30,     DECEMBER 31,
                                                                                               1998             1997
                                                                                          --------------   --------------
                                                                                           (UNAUDITED)
<S>                                                                                       <C>              <C>
                                          ASSETS
Current assets:
  Cash and cash equivalents............................................................      $   17,821       $   49,560
  Trade and other receivables, net of allowance for doubtful accounts of $2,257 at
    September 30, 1998 and $1,714 at December 31, 1997.................................         167,764          136,661
  Receivables from equity affiliates, net..............................................          50,312           37,858
  Program rights.......................................................................          80,089           50,373
  Notes receivable, current............................................................           1,958            3,376
  Prepaid expenses and other current assets............................................          12,539            7,886
                                                                                             ----------       ----------
     Total current assets..............................................................         330,483          285,714
Property and equipment, net of accumulated depreciation of $26,656 at September 30,
 1998 and $22,221 at December 31, 1997.................................................          47,642           46,531
Investments in affiliates..............................................................         872,842          850,201
Note receivable, long-term.............................................................              26            4,432
Program rights.........................................................................         117,059           78,110
Excess cost, net of accumulated amortization of $82,911 at September 30, 1998 and
    $72,170 at December 31, 1997.......................................................         520,187          510,104
Other assets...........................................................................          23,375           42,666
                                                                                             ----------       ----------
     Total Assets......................................................................      $1,911,614       $1,817,758
                                                                                             ==========       ==========
 
                             LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses................................................      $  202,310       $  176,241
  Program rights payable...............................................................          10,637           23,232
  Current portion of long-term debt....................................................          80,641           80,216
  Accrued interest.....................................................................          13,793           17,413
  Other current liabilities............................................................          23,384           11,515
                                                                                             ----------       ----------
     Total current liabilities.........................................................         330,765          308,617
Non-current program rights payable.....................................................         134,180          110,693
Long-term debt, net of current portion.................................................       1,336,483        1,246,291
Minority interest......................................................................           1,582             (114)
Commitments and contingencies
Members' equity........................................................................         108,604          152,271
                                                                                             ----------       ----------
     Total Liabilities and Members' Equity.............................................      $1,911,614       $1,817,758
                                                                                             ==========       ==========
</TABLE>
                                                                                
  The accompanying notes are an integral part of these condensed consolidated
                                balance sheets.

                                       2
<PAGE>
 
                           FOX/LIBERTY NETWORKS, LLC
                     (A DELAWARE LIMITED LIABILITY COMPANY)

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED SEPTEMBER 30,     NINE MONTHS ENDED SEPTEMBER 30,
                                                          ---------------------------------   ---------------------------------
                                                               1998              1997              1998              1997
                                                          ---------------   ---------------   ---------------   ---------------
                                                            (UNAUDITED)       (UNAUDITED)       (UNAUDITED)       (UNAUDITED)
<S>                                                       <C>               <C>               <C>               <C>
Revenues:
  Programming..........................................         $ 77,173          $ 57,808          $225,422          $164,272
  Advertising..........................................           41,761            23,613           123,895            73,949
  Direct broadcast.....................................           29,390            35,267            88,359            70,162
  Infomercial..........................................            5,875             5,414            17,328            11,273
  Other................................................           12,245            (1,729)           37,463             7,602
                                                                --------          --------          --------          --------
                                                                 166,444           120,373           492,467           327,258
                                                                --------          --------          --------          --------
Expenses:
  Operating............................................          121,766            98,198           372,066           281,192
  General and administrative...........................           20,203            14,964            61,546            44,823
  Depreciation and amortization........................            6,655             4,822            17,749            13,387
                                                                --------          --------          --------          --------
                                                                 148,624           117,984           451,361           339,402
                                                                --------          --------          --------          --------
Operating income (loss)................................           17,820             2,389            41,106           (12,144)
                                                                --------          --------          --------          --------
 
Other (income) expenses:
  Interest, net........................................           27,343             8,368            81,864            16,666
  Subsidiaries' income tax expense.....................              131                 3             1,031             3,422
  Equity loss (income) of affiliates, net..............            5,820            (1,803)             (580)           (6,722)
  Other................................................              (35)           (2,462)              162            (2,462)
  Minority interest....................................              930             1,024             2,296             2,611
                                                                --------          --------          --------          --------
                                                                  34,189             5,130            84,773            13,515
                                                                --------          --------          --------          --------
Net loss...............................................         $(16,369)         $ (2,741)         $(43,667)         $(25,659)
                                                                ========          ========          ========          ========
</TABLE>



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

                                       3
<PAGE>
 
                           FOX/LIBERTY NETWORKS, LLC
                     (A DELAWARE LIMITED LIABILITY COMPANY)

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                     NINE MONTHS ENDED SEPTEMBER 30,
                                                                                         1998              1997
                                                                                    ---------------   ---------------
                                                                                      (UNAUDITED)       (UNAUDITED)
<S>                                                                                 <C>               <C>
Cash flows from operating activities:
  Net loss.......................................................................         $(43,667)       $  (25,659)
  Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization...............................................           17,749            13,387
     Interest accretion and amortization of debt issuance costs..................           22,216             2,349
     Equity income of affiliates.................................................             (580)           (6,722)
     Loss on sale of investments.................................................              121                --
     Minority interests..........................................................            2,296             2,611
  Changes in operating assets and liabilities:
     Trade and other receivables.................................................          (30,949)          (71,707)
     Program rights..............................................................          (67,940)         (132,229)
     Prepaid expenses and other operating assets.................................           (1,788)           (3,132)
     Accounts payable and accrued expenses.......................................           34,644            44,410
     Program rights payable......................................................           10,863            30,040
     Other operating liabilities.................................................           (3,110)             (432)
                                                                                          --------        ----------
        Net cash used in operating activities....................................          (60,145)         (147,084)
                                                                                          --------        ----------
Cash flows from investing activities:
  Notes receivable collected from (issued to) third parties......................            5,824              (282)
  Purchases of property and equipment............................................           (8,133)          (23,051)
  Proceeds from sale of investment...............................................              900                --
  Advances from equity affiliates................................................           52,012            62,655
  Advances to equity affiliates..................................................          (65,576)          (37,796)
  Distributions from equity affiliates...........................................               50             1,762
  Purchase of programming rights and related assets..............................               --           (45,000)
  Acquisition of Fit TV..........................................................           (3,750)               --
  Investments in equity affiliates...............................................          (22,636)           (7,170)
                                                                                          --------        ----------
        Net cash used in investing activities....................................          (41,309)          (48,882)
                                                                                          --------        ----------
Cash flows from financing activities:
  Cash overdraft, included in accounts payable...................................               --            65,802
  Increase in restricted cash....................................................               --          (738,039)
  Borrowings of long-term debt...................................................           95,000         1,240,079
  Repayment of long-term debt....................................................          (24,817)         (268,460)
  Deferred debt issuance costs...................................................               --           (17,907)
  Distributions to minority interest in subsidiary...............................             (600)             (660)
                                                                                          --------        ----------
        Net cash provided by financing activities................................           69,583           280,815
                                                                                          --------        ----------
Net (decrease) increase in cash and cash equivalents.............................          (31,871)           84,849
Cash acquired in purchase of Fit TV..............................................              132                --
Cash and cash equivalents, beginning of period...................................           49,560             7,964
                                                                                          --------        ----------
Cash and cash equivalents, end of period.........................................         $ 17,821        $   92,813
                                                                                          ========        ==========
 
Supplemental Cash Flow disclosure:                                                  
  Cash paid for interest                                                                  $ 65,694        $   16,436
                                                                                          
</TABLE>
                                                                                
  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       4
<PAGE>
 
                           FOX/LIBERTY NETWORKS, LLC
                     (A DELAWARE LIMITED LIABILITY COMPANY)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                         SEPTEMBER 30, 1998 (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

(1)   BASIS OF PRESENTATION

  The accompanying unaudited condensed consolidated financial statements of
Fox/Liberty Networks, LLC (the "Company") have been prepared by the Company
pursuant to the instructions for Form 10-Q and, accordingly, certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted where permitted by regulation.  In management's opinion, the
accompanying unaudited condensed consolidated financial statements reflect all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the consolidated results of operations for the interim periods
presented.  The condensed consolidated results of operations for such interim
periods are not necessarily indicative of the results that may be expected for
future interim periods or for the year ended December 31, 1998.  These interim
condensed consolidated financial statements and the notes thereto should be read
in conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.

  The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period.  Because of the
use of estimates inherent in the financial reporting process, actual results
could differ from those estimates.

(2) DEBT

    Debt at September 30, 1998 and December 31, 1997 is summarized as follows:

<TABLE>
<CAPTION>
                                                                                              SEPTEMBER 30,     DECEMBER 31,
                                                                                                   1998             1997
                                                                                              --------------   --------------
                                                                                               (UNAUDITED)
    <S>                                                                                           <C>              <C>
    Turner Note Payable......................................................................    $   65,334       $   65,334
    Chase Manhattan Bank--Term loan..........................................................       400,000          400,000
    Chase Manhattan Bank--Revolver...........................................................       145,000           60,000
    Senior Notes.............................................................................       500,000          500,000
    Senior Discount Notes....................................................................       280,058          260,828
    Other....................................................................................        26,732           40,345
                                                                                                 ----------       ----------
                                                                                                  1,417,124        1,326,507
    Less current portion.....................................................................       (80,641)         (80,216)
                                                                                                 ----------       ----------
                                                                                                 $1,336,483       $1,246,291
                                                                                                 ==========       ==========
</TABLE>
                                                                                

                                       5
<PAGE>
 
                           FOX/LIBERTY NETWORKS, LLC
                     (A DELAWARE LIMITED LIABILITY COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                         SEPTEMBER 30, 1998 (UNAUDITED)
                             (DOLLARS IN THOUSANDS)
                                        
(3) SUMMARIZED FINANCIAL INFORMATION

    Summarized unaudited income statement information for subsidiaries accounted
for under the equity method for which separate financial information would be
required for annual periods, is as follows:

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED SEPTEMBER 30,       NINE MONTHS ENDED SEPTEMBER 30,
                                                         1998               1997               1998               1997
                                                   ----------------   ----------------   ----------------   ----------------
                                                     (UNAUDITED)        (UNAUDITED)        (UNAUDITED)        (UNAUDITED)
<S>                                                <C>                <C>                <C>                <C>
Revenue                                                   $149,506            $ 1,631           $542,770            $ 4,847
Operating Loss                                             (27,627)            (3,917)           (42,824)            (6,985)
Net Loss                                                   (24,661)            (3,917)           (16,706)            (6,985)
</TABLE>
                                                                                
(4) EQUITY APPRECIATION RIGHTS PLAN

    In October 1997, the Company adopted the Fox/Liberty Networks, LLC Equity
Appreciation Rights Plan for management and key employees (the "Plan"), with
an effective date of May 1, 1996. A committee has been appointed by the Company
to administer and interpret this Plan. The amount payable by the Company with
respect to any Appreciation Rights exercised will equal the excess, if any, of
the value at December 31 of the preceding year over the original grant value.
Based upon a valuation, the Company has recognized a non-cash charge to earnings
of approximately $11,201 in the nine months ended September 30, 1998 to reflect
its estimated liability under the Plan as of September 30, 1998.

                                       6
<PAGE>
 
                           FOX/LIBERTY NETWORKS, LLC
                     (A DELAWARE LIMITED LIABILITY COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                         SEPTEMBER 30, 1998 (UNAUDITED)
                             (DOLLARS IN THOUSANDS)
                                        
(5) SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS

    Supplemental disclosure of cash flow information and non-cash investing and
financing activities for the nine months ended September 30, 1998 is as follows:

<TABLE>
<CAPTION>

Fair value of net assets acquired:                  Fit TV(a)
                                                    ---------
    <S>                                             <C>
    Cash.......................................     $   132
    Accounts receivable........................         650
    Prepaid program rights.....................         725
    Prepaid expenses...........................         200
    Fixed assets...............................          11
    Other assets...............................         156
    Accounts payable and accrued expenses......      (3,762)
    Program rights payable.....................         (29)
    Other current liabilities..................        (158)
                                                    -------
                                                     (2,075)
Satisfied by:
    Cash.......................................      18,750
                                                    -------
Excess cost....................................     $20,825
                                                    =======
</TABLE>

     (a) In April 1998, the Company completed the acquisition of Fit TV
Partnership, with an effective date as of January 1, 1998, in which the Company
paid $15,000 to Cable Health TV, Inc. in 1997 and $1,875 each to Reebok CHC,
Inc. and Liberty CHC, Inc., representing 100% capital interest and a 92% profit
interest in Fit TV Partnership, and accordingly, has been consolidated with the
Company.  An 8% minority profit interest in Fit TV Partnership was acquired by a
third party.  Had the capital interest been acquired at January 1, 1997, pro
forma revenue would have increased by $2,922 for the nine months ended September
30, 1997, and net loss would have increased by $5,566 for the nine months ended
September 30, 1997.  These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the acquisition occurred on the date
indicated, or which may result in the future.

                                       7
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
Management's Discussion and Analysis included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.

INTRODUCTION

  Fox/Liberty Networks, LLC (together with its subsidiaries, the "Company")
operates two principal business units: (i) a sports programming business,
consisting of interests in regional sports networks ("RSNs") and Fox Sports Net
("FSN"), a national sports programming service, and (ii) FX Network ("FX"), a
general entertainment network. FSN provides its affiliated RSNs with 24 hour per
day national sports programming, including a national sports news program, Fox
Sports News. The Company was formed in April 1996, as a 50/50 joint venture
between Fox Entertainment Group, Inc. ("Fox"), an indirect subsidiary of The
News Corporation Limited ("News Corporation") and Liberty Media Corporation
("Liberty"), a wholly-owned subsidiary of Tele-Communications, Inc. ("TCI").

  In December 1997, the Company consummated a transaction (the "Rainbow
Transaction") with Rainbow Media Sports Holdings, Inc. ("Rainbow"), an indirect
subsidiary of Cablevision Systems Corporation ("Cablevision"), pursuant to which
(i) the Company acquired a 40% interest in Regional Programming Partners ("RPP")
which was formed to hold interests in Rainbow's then existing RSNs and Madison
Square Garden, L.P. (which, in addition to owning two RSNs, owns the Madison
Square Garden entertainment complex, Radio City Productions LLC, the New York
Rangers NHL franchise and the New York Knicks NBA franchise), (ii) the Company
and Rainbow formed National Sports Partners (the "National Sports Partnership")
as a 50/50 partnership to operate FSN and (iii) the Company and Rainbow formed
National Advertising Partners (the "National Advertising Partnership") as a
50/50 partnership to act as the national advertising sales representative for
the RSNs which are affiliated with FSN. RPP is managed by Rainbow, while the
National Sports Partnership and the National Advertising Partnership are managed
by the Company.

  After giving effect to the Rainbow Transaction, the Company's interests in the
sports programming business are derived through its 99% ownership interests in
Fox Sports Net, LLC ("Fox/Liberty Sports") and Fox Sports RPP Holdings, LLC
("Fox Sports RPP"), and its interest in FX is derived through its 99% ownership
interest in FX Networks, LLC ("Fox/Liberty FX").

  In August 1997, the Company and FLN Finance, Inc. ("FLN"), a subsidiary of the
Company issued $500.0 million aggregate principal amount of their 8 7/8% Senior
Notes due 2007 and $405.0 million aggregate principal amount at maturity ($252.3
million gross proceeds) of their 9 3/4 % Senior Discount Notes due 2007. The
net proceeds from these notes were used, along with proceeds from the Bank
Facility (as defined below), to finance the Rainbow Transaction. In January
1998, pursuant to an exchange offer, the Company exchanged all of these notes
for new notes, the terms of which were substantially identical to the original
notes, which were registered by the Company under the Securities and Exchange
Act of 1933, as amended.

  In connection with the consummation of the Rainbow Transaction, the Company
and a group of banks led by Chase Manhattan Bank, amended and restated an
existing credit agreement to permit borrowings by Fox/Liberty Sports, Fox Sports
RPP and Fox/Liberty FX, each a subsidiary of the Company (together, the "Co-
Borrowers"), in the amount of $800.0 million (the "Bank Facility"). The Bank
Facility is comprised of a $400.0 million revolving credit facility and a $400.0
million term loan facility. The proceeds of the loans under the Bank Facility
were used to finance, in part, the Rainbow Transaction. The Company currently
expects that remaining availability will primarily be used for investments in
certain subsidiaries of the Company and for working capital purposes.

  Borrowings under the Bank Facility are unconditionally guaranteed by certain
RSNs that are wholly owned, directly or indirectly, by the Co-Borrowers and by
certain of the Co-Borrowers' subsidiaries that hold the direct interest in RSNs
that are not wholly owned, directly or indirectly, by the Co-Borrowers. The
Company also provides a parent company guarantee of the borrowings under the
Bank Facility. In addition, borrowings under the Bank Facility and the
guarantees are secured by substantially all of the equity interests of the Co-
Borrowers (other than Fox Sports RPP) and the equity interests held by the Co-
Borrowers (other than Fox Sports RPP) and their subsidiaries in certain related
entities.

                                       8
<PAGE>
 
SIGNIFICANT ACCOUNTING PRACTICES

 Basis of Presentation

  The Company's ownership interests in the RSNs are held either directly or
indirectly and have different voting rights attached thereto. The Company
consolidates all subsidiaries in which it has a majority interest and voting
control. The percentage of ownership, together with the degree to which the
Company controls the management and operation of an RSN, determines the
appropriate accounting treatment for the Company's interest in that particular
RSN. If the Company owns a majority interest in a particular RSN, but does not
have voting control, the ownership interest is accounted for using the equity
method of accounting. Under the equity method of accounting, the financial
position and results of operations of entities are not reflected on a
consolidated basis and, accordingly, the consolidated revenues and expenses of
the Company, as reported on its consolidated statements of operations, do not
include revenues and expenses related to the entities accounted for under the
equity method.

  The following RSNs, together with Fox Sports Direct and FX, are consolidated
in the financial statements of the Company, at September 30, 1998: Fox Sports
West, Fox Sports West 2, Fox Sports Northwest, Fox Sports Utah, Fox Sports
Arizona, Fox Sports South, Fox Sports Southwest, Fox Sports Rocky Mountain, Fox
Sports Midwest and Fox Sports Detroit.

  As of September 30, 1998, the following RSNs and other businesses are
accounted for using the equity method of accounting: Fox Sports Pittsburgh, the
Sunshine Network, Fox Sports Chicago, Fox Sports Bay Area, Home Team Sports,
RPP, the National Sports Partnership and the National Advertising Partnership.

  In connection with the consummation of the Rainbow Transaction in December
1997, the Company contributed certain business interests and other assets
related to national sports programming to the National Sports Partnership and
certain assets related to advertising sales to the National Advertising
Partnership. The Company holds 50% partnership interests in each partnership.
Whereas the assets and liabilities, and the results of operations of FSN, the
national sports programming business, and the national advertising sales
representation business were consolidated prior to the Rainbow Transaction, the
National Sports Partnership and the National Advertising Partnership are each
accounted for under the equity method.

  On March 13, 1997, upon the acquisition of the remaining interests in
Affiliated Regional Communications, Ltd. and affiliates ("ARC") by Liberty/Fox
ARC LP ("ARC LP"), the Company assumed management control of the consolidated
subsidiaries of ARC LP, and from that date the consolidated subsidiaries of ARC
and their operations were consolidated with the Company.

  Entities that are consolidated in the financial statements of the Company, at
September 30, 1997, therefore include subsidiary entities which own FX, Fox
Sports West, Fox Sports West 2, Fox Sports Northwest, Fox Sports Utah, Fox
Sports Arizona, Fox Sports South and Fox Sports Ad Sales, as well as certain
operations within Fox Sports Net and, subsequent to March 13, 1997 Fox Sports
Direct, Fox Sports Southwest, Fox Sports Rocky Mountain and Fox Sports Midwest.
Fox Sports Detroit was launched in September 1997.

  As of September 30, 1997, the following RSNs are accounted for using the
equity method of accounting: Fox Sports Pittsburgh, the Sunshine Network, Fox
Sports Chicago, Fox Sports Bay Area and Home Team Sports, as well as certain
operations within Fox Sports Net.

  Because the Company reports the results of a significant number of its
subsidiary entities on the equity method, its financial results do not represent
the total combined revenues and expenses of the entire Company. As a result of
the various acquisitions and sales in recent years, which in turn impact the
accounting treatment of many of the Company's subsidiary entities, comparability
of the Company's historical financial results is affected.

                                       9
<PAGE>
 
RESULTS OF OPERATIONS

  Three months ended September 30, 1998 as compared with the three months ended
September 30, 1997

  As previously discussed, the Company has certain subsidiaries that are
consolidated and others, which are accounted for under the equity method of
accounting. The comparability of the three months ended September 30, 1998 to
the three months ended September 30, 1997 is affected significantly by two
events: 1) Fox Sports Detroit was launched in September 1997 and 2) the
operations of FSN were contributed to the National Sports Partnership in
December 1997 and subsequent to the date of the contribution were accounted for
under the equity method.

  Total revenues for the three months ended September 30, 1998 were $166.4
million, an increase of $46.1 million, or 38%, over the three months ended
September 30, 1997. The increase in total revenue between the three month
periods would have been $41.4 million, or 36%, excluding Fox Sports Detroit and
the impact of FSN.

  Programming revenue was the largest source of revenue, representing 46% of
total revenue, or $77.2 million, for the three months ended September 30, 1998.
Advertising revenue represents 25% of total revenue, or $41.8 million, for the
three months ended September 30, 1998. For the three months ended September 30,
1997, programming revenue was $57.8 million and advertising revenue was $23.6
million. Excluding the impact of FSN, programming and advertising revenue
represented 48% and 20%, respectively, of total revenues for the three months
ended September 30, 1997. Excluding Fox Sports Detroit, programming and
advertising revenue for the three months ended September 30, 1998 represented
46% and 25%, respectively, of total revenue for the period.

  Excluding Fox Sports Detroit and the impact of FSN, programming and
advertising revenue would have increased by $15.0 million and $19.7 million,
respectively in the three months ended September 30, 1998 as compared to the
three months ended September 30, 1997. These increases represent a 28% increase
and 92% increase in programming and advertising revenue, respectively, between
the periods. The increase in programming revenue of 28% is comprised primarily
of an increase in subscribers at Fox Sports West 2 which launched in January
1997, a combined 5% subscriber growth in other RSNs and the continued subscriber
growth of FX, which reached 36.9 million households as of September 30, 1998, a
13% increase over September 30, 1997. Rate increases comprised the balance of
the increase between periods. The increase in advertising revenue of 92% is
comprised of a 51% increase in advertising revenue by FX and a 114% increase by
RSNs, other than Fox Sports Detroit. Primetime weekday ratings on FX were flat
in the three months ended September 30, 1998 as compared to the same period in
the previous year.  The addition of The X-Files and NYPD Blue to the primetime
schedule in August, 1997 generated strong ratings for the launch, while ratings
in the three months ended September 30, 1998 remained consistent throughout the
period. The increased subscribers together with consistent ratings resulted in
the significant increase in advertising revenue. The RSNs growth in advertising
revenue is due to increased advertising rates, as well as an increase in the
number of MLB events telecast. The number of local MLB games telecast by the
Company's RSNs increased by 25% in the three months ended September 30, 1998,
excluding Fox Sports Detroit, as compared to the same period in the prior year.
Advertising rates per game increased for these MLB events in the three months
ended September 30, 1998 as compared to the previous year.

  Operating expenses totaled $121.8 million for the three months ended September
30, 1998, which represented 73% of total revenues. These expenses consist
primarily of rights fees, programming and production costs. Operating expenses
for the three months ended September 30, 1997 totaled $98.2 million, or 82% of
total revenues. Excluding Fox Sports Detroit and the impact of FSN, operating
expenses for the three months ended September 30, 1998 and 1997 would have been
$113.3 million and $83.0 million, respectively. On this basis, operating
expenses represent 73% of total revenues for each of the three month periods.
The increase in operating expenses is attributable to an increase in the number
of MLB events, as well as increased programming rights fees of RSNs due to
renegotiated and newly entered into sports rights agreements. Additionally,
programming expenses of FX increased relating to newly launched programs during
or subsequent to the three month period ended September 30, 1997.

  General and administrative expenses totaled $20.2 million for the three months
ended September 30, 1998, which represented 12% of total revenues. General and
administrative expenses for the three months ended September 30, 1997 totaled
$15.0 million, or 12% of total revenues. A non-cash charge to earnings was taken
in the three months ended September 30, 1998 with respect to an equity
appreciation rights plan in the amount of $2.3 million. Excluding this non-cash 
charge, general and administrative expenses would have been $17.9 million, or 
11% of total revenues.

                                       10
<PAGE>
 
  Depreciation and amortization expenses totaled $6.7 million and $4.8 million
for the three months ended September 30, 1998 and 1997, respectively. Of these
amounts, $3.6 million and $3.0 million were related to amortization of excess
cost from acquisitions of programming entities consolidated with the Company.
The increase is primarily due to the acquisition of an RSN in Detroit.

  Interest expense for the three months ended September 30, 1998 totaled $27.3
million as a result of $1.4 billion of debt outstanding as of September 30,
1998. The amount of debt is primarily attributable to (i) the Offering, pursuant
to which the Company incurred $752.3 million of debt; (ii) the Bank Facility and
indebtedness thereunder in the amount of $545.0 million; and (iii) the
acquisition of certain assets in connection with the commencement of operations
of Fox Sports Detroit, pursuant to which the Company incurred $25.7 million of
debt.

  Equity loss of affiliates for the three months ended September 30, 1998 was
$5.8 million, a decrease of $7.6 million, from equity income of $1.8 million for
the three months ended September 30, 1997.  For the three months ended September
30, 1998, equity loss of affiliates includes the Company's equity interests in
the operations of the National Sports Partnership and the National Advertising
Partnership, whose operations were consolidated prior to the Rainbow
Transaction, RPP and certain RSNs.  For the three months ended September 30,
1997, equity income of affiliates included the Company's equity interests in
certain RSNs.  For the three months ended September 30, 1998, equity income of
affiliates includes the effect of $1.9 million in amortization of excess cost
relating to the Company's investment in RPP and the Sunshine Network.

Nine months ended September 30, 1998 as compared with the Nine months ended
September 30, 1997

  As discussed above, the Company has certain subsidiaries that are consolidated
and others, which are accounted for under the equity method of accounting. The
comparability of the nine months ended September 30, 1998 to the nine months
ended September 30, 1997 is affected significantly by three events: 1) on March
13, 1997, upon the acquisition of the remaining interests in ARC by ARC LP, the
Company assumed management control of ARC and subsequent to that date, Fox
Sports Direct, Fox Sports Southwest, Fox Sports Midwest and Fox Sports Rocky
Mountain were consolidated, 2) Fox Sports Detroit was launched in September 1997
and 3) the operations of FSN were contributed to the National Sports Partnership
in December 1997 and subsequent to the date of the contribution were accounted
for under the equity method.

  Total revenues for the nine months ended September 30, 1998 were $492.5
million, an increase of $165.2 million, or 50%, over the nine months ended
September 30, 1997. Had the remaining interests in ARC been acquired at the
beginning of the nine months ended September 30, 1997, total revenues would have
increased by an additional $29.9 million for the period. The increase in total
revenue between the nine month periods would have been 34%, or $116.9 million,
had ARC been consolidated for the entire period, and excluding Fox Sports
Detroit and the impact of FSN.

  Programming revenue was the largest source of revenue, representing 46% of
total revenue, or $225.4 million, for the nine months ended September 30, 1998.
Advertising revenue represents 25% of total revenue, or $123.9 million, for the
nine months ended September 30, 1998. For the nine months ended September 30,
1997, programming revenue was $164.3 million and advertising revenue was $73.9
million. Had ARC been consolidated for the entire period ended September 30,
1997 and excluding the impact of FSN, programming and advertising revenue would
have been $164.8 million and $72.5 million in the nine months ended September
30, 1997. On this basis, as a percentage of total revenue for the nine months
ended September 30, 1997, programming and advertising revenue represented 48%
and 21%, respectively. Excluding Fox Sports Detroit and the impact of FSN,
programming and advertising revenue for the nine months ended September 30, 1998
represented 44% and 26%, respectively, of total revenue.

  Had ARC been consolidated for the entire nine months ended September 30, 1997,
and excluding Fox Sports Detroit and the impact of FSN, programming and
advertising revenue would have increased by $37.9 million and $48.3 million,
respectively in the nine months ended September 30, 1998 as compared to the nine
months ended September 30, 1997. These represent a 23% increase and 67% increase
in programming and advertising revenue, respectively, between the periods. The
increase in programming revenue of 23% is comprised primarily of an increase in
subscribers at Fox Sports West 2 which launched on January 31, 1997, subscriber
growth in other RSNs and the continued subscriber growth of FX. Rate increases
comprised the balance of the increase between periods. The increase in
advertising revenue of 67% is comprised of an 74% increase in advertising
revenue by FX and a 

                                       11
<PAGE>
 
64% increase by RSNs, other than Fox Sports Detroit. Primetime weekday ratings
on FX increased by 26% in the nine months ended September 30, 1998 over the same
period in the previous year due primarily to the addition of The X-Files and
NYPD Blue to the primetime schedule in the fall of 1997. The increased ratings
together with increased subscribers resulted in the significant increase in
advertising revenue. The RSNs growth in advertising revenue is due to increased
advertising rates and an increase in the number of professional events,
primarily MLB and NBA games. Advertising rates per game increased for MLB, NBA
and NHL events in the nine months ended September 30, 1998 as compared to the
same period in the previous year. The number of local professional events
increased by 32% over these same periods.

  Operating expenses totaled $372.1 million for the nine months ended September
30, 1998, which represented 76% of total revenues. These expenses consist
primarily of rights fees, programming and production costs. Operating expenses
for the nine months ended September 30, 1997 totaled $281.2 million, or 86% of
total revenues. Had ARC been consolidated for the entire nine months ended
September 30, 1997, and excluding Fox Sports Detroit and the impact of FSN,
operating expenses for the nine months ended September 30, 1998 and 1997 would
have been $344.0 million and $250.1 million, respectively. On this basis,
operating expenses represent 75% and 73% of total revenues for the nine months
ended September 30, 1998 and 1997, respectively. The increase in operating
expenses is attributable to an increase in the number of professional events,
primarily MLB games, as well as increased programming rights fees of RSNs due to
renegotiated and newly entered into sports rights agreements. Additionally,
programming expenses of FX increased relating to newly launched programs during
or subsequent to the nine month period ended September 30, 1997.

  General and administrative expenses totaled $61.5 million for the nine months
ended September 30, 1998, which represented 12% of total revenues. General and
administrative expenses for the nine months ended September 30, 1997 totaled
$44.8 million, or 14% of total revenues. A non-cash charge to earnings was taken
in the nine months ended September 30, 1998 with respect to an equity
appreciation rights plan in the amount of $11.2 million. Excluding this non-cash
charge, general and administrative expenses would have been $50.3 million, or 
10% of total revenues.

  Depreciation and amortization expenses totaled $17.7 million and $13.4 million
for the nine months ended September 30, 1998 and 1997, respectively. Of these
amounts, $10.8 million and $8.2 million were related to amortization of excess
cost from acquisitions of programming entities consolidated with the Company.
The increase is primarily due to the consolidation of ARC and the acquisition of
an RSN in Detroit.

  Interest expense for the nine months ended September 30, 1998 totaled $81.9
million as a result of $1.4 billion of debt outstanding as of September 30,
1998. The amount of debt is primarily attributable to (i) the Offering, pursuant
to which the Company incurred $752.3 million of debt; (ii) the Bank Facility and
indebtedness thereunder in the amount of $545.0 million; and (iii) the
acquisition of certain assets in connection with the commencement of operations
of Fox Sports Detroit, pursuant to which the Company incurred $25.7 million of
debt.

  Equity loss of affiliates for the nine months ended September 30, 1998 was
$0.6 million, a decrease of $6.1 million, from equity income of $6.7 million for
the nine months ended September 30, 1997.  For the nine months ended September
30, 1998, equity income of affiliates includes the Company's equity interests in
the operations of the National Sports Partnership and the National Advertising
Partnership, whose operations were consolidated prior to the Rainbow
Transaction, RPP and certain RSNs.  For the nine months ended September 30,
1997, equity income of affiliates included the Company's equity interests in ARC
and its related subsidiaries through March 13, 1997, and certain RSNs.  For the
nine months ended September 30, 1998, equity income of affiliates includes the
effect of $5.8 million in amortization of excess cost relating to the Company's
investment in RPP and the Sunshine Network and a $7.1 million gain on the sale
of 50% of RPP's investment in Fox Sports New England.


LIQUIDITY AND CAPITAL RESOURCES

  The Company's liquidity requirements arise from (i) the funding of net losses
and working capital needs, (ii) its strategic plan to secure national
distribution for its network programming, either through the acquisition of
existing third party-owned RSNs or through the launch of new RSNs, (iii) the
acquisition of additional programming rights and (iv) its capital expenditure
requirements, which include the Company's plans to convert to digital
transmission.

  Net cash used in operating activities of the Company for the nine months ended
September 30, 1998 and for the nine months ended September 30, 1997 was $60.1
million and $147.1 million, respectively.

                                       12
<PAGE>
 
  Net cash used in investing activities of the Company for the nine months ended
September 30, 1998 and for the nine months ended September 30, 1997 was $41.3
million and $48.9 million, respectively.

  Net cash provided by financing activities of the Company for the nine months
ended September 30, 1998 and for the nine months ended September 30, 1997 was
$69.6 million and $280.8 million, respectively.

  In August 1997, the Company issued $500.0 million aggregate principal amount
of its 8 7/8 % Senior Notes due 2007 and $405.0 million aggregate principal
amount at maturity of its 9 3/4 % Senior Discount Notes due 2007 through a
public debt offering.  The indentures pursuant to which the Notes were issued
include certain covenants regarding, among other things, limitations on the
incurrence of debt and distributions to partners.  The Company is in compliance
with these covenants as of September 30, 1998.

  The Company has several credit facilities with different banks. The credit
facilities restrict the amount of distributions that can be made to Members, and
contain certain restrictive covenants regarding, among other things, the
maintenance of certain financial ratios and restrictions on the distribution of
assets. The Company is in compliance with these covenants as of September 30,
1998. During the nine months ended September 30, 1998, the Company incurred net
borrowings of $70.2 million bringing the total amount borrowed under these
credit facilities to $552.8 million as of September 30, 1998. The total unused
commitments pursuant to these credit facilities were $255.0 million as of
September 30, 1998.

  Future capital requirements will be substantial as the Company continues to
invest in developing networks, acquire sports programming rights and explore
opportunities to expand its distribution.  Although no assurances can be given
in this regard, the Company believes that the proceeds from the Notes, together
with existing funds and the proceeds from borrowings under its credit
facilities, will be sufficient to meet its plan to secure national distribution,
maintain and/or acquire programming, make anticipated capital expenditures, and
meet its projected working capital requirements.


NBA LOCKOUT

On June 29, 1998, the National Basketball Association ("NBA") league owners
announced a lockout of the union members of the National Basketball Players
Association ("NBPA").  As of October 29, 1998, the NBA has canceled games on the
regular season schedule through November 30, 1998.  The regular season schedule
was to commence on November 3, 1998.  Certain of these games were scheduled to
be broadcast on the Company's RSNs.  It is uncertain whether additional games
will be canceled by the NBA or if games previously canceled will be reinstated
to the regular season schedule.  The Company does not believe that the lockout
will have a material adverse effect on its consolidated financial position or
its consolidated results of operations.


YEAR 2000

  The Company is implementing plans to resolve the potential impact of the Year 
2000 on the processing of data-sensitive information by its computerized 
information systems.  The Year 2000 problem is the result of computer programs 
being written using two digits (rather than four) to define the applicable year.
Certain programs may recognize a date using "00" as the year 1900 rather than 
the year 2000, which could result in miscalculations or system failures.

  The Company has been focused on the Year 2000 issue for several years since
its normal capital spending plan requires it to ensure that significant
investments in technology in the periods prior to December 31, 1999, would be
for systems which would be operational after December 31, 1999. As a result of
its assessment and capital planning, no acceleration of material planned systems
replacements were made due to Year 2000 issues.

  Between now and January 1, 2000, the Company will proceed through its various
phases of assessment, strategy, detailed planning, implementation, testing and
management. The Company expects to be fully Year 2000 compliant with respect to
all significant business systems during the first half of calendar 1999.

  The Company has in place a Year 2000 program in each of its operating
divisions. These programs, which are executed by project teams, do not rely to a
significant degree on outside consultants. The objectives of these Year 2000
programs are to determine and assess the risks of the Year 2000 issue and to
plan and institute mitigating actions to minimize those risks to acceptable
levels.

  The Company's standard for compliance requires that for a computer system or a
business process to be Year 2000 compliant, it must be designed to be used prior
to, on and after January 1, 2000.  Such systems or processes must be able to 
operate without error in dates and date-related data, including without 
limitation, calculating, comparing, indexing and sequencing prior to, on and 
after January 1, 2000.

  The Company's Year 2000 project teams are focusing on the following major 
areas:

  Core Computer Systems. Information technology systems account for much of the
Year 2000 work and include all computer systems and technology managed by the
Company. All core systems have been or will be assessed. The Company's core
systems relate to the broadcasting of programming and the placement of
advertising, with respect to both of which the Company relies on standard
package systems developed by vendors whose products are widely used in the
industry. Information Technology vendors and suppliers have been or will be
contacted as to their Year 2000 compliance and their responses have been or will
be factored into the Company's plans.

  Equipment and Facilities.  An inventory of all critical broadcast equipment, 
office equipment and building infrastructure is scheduled for all major sites.

  Customers and Vendors.  The Company is communicating with its significant 
customers and vendors to understand their Year 2000 issues and how they might 
prepare themselves to manage those issues as they relate to the Company.  To 
date, no significant customers or vendors have informed the Company that a 
material Year 2000 issue exists which will have a material effect on the 
Company.

  During calendar 1998 and 1999, the Company will continually review its 
progress against its Year 2000 plans and conclude on the appropriate and 
feasible contingency plans to reduce its exposure to Year 2000 related issues.

  Based on the Company's current assessment, the costs of addressing potential 
problems are not currently expected to have a material adverse impact on the 
Company's financial position, results of operations or cash flows in future 
periods.  However, if the Company, its customers or vendors identify Year 2000 
issues in the future and are unable to resolve such issues in a timely manner, 
it could result in a material financial risk.  Accordingly, the Company plans to
devote the necessary resources to resolve all significant Year 2000 issues in a 
timely manner.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  Not Applicable.

                                       13
<PAGE>
 
                                    PART II
                               OTHER INFORMATION
                                        
ITEM 1.  LEGAL PROCEEDINGS

  As of September 30, 1998 there are no material pending legal proceedings
against the Company, other than routine litigation incidental to the Company's
business, except as described in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, and as described below.
 
  U.S. v. ASCAP. - Virtually every cable network is involved in this "rate
court" proceeding in the Southern District of New York to set a formula for
assessing music performance license fees on cable programming.  Fox/Liberty
Networks cable services pay ASCAP license fees under the current interim rate
structure, which is calculated as a percentage of each network's gross revenues,
and ASCAP is seeking an increase in those fees.  The interim rate is subject to
upward or downward adjustment in future rate court proceedings.  The other major
copyrighted music performance society, BMI, is assessing a negotiated interim
license fee, and the final rate will be determined either by negotiation after
the conclusion of the ASCAP rate court proceeding or in another rate court
proceeding.  The Company cannot predict the final outcome of these disputes, but
does not believe that it will suffer any material liability as a result thereof.

  ECHOSTAR - On October 27, 1997, Echostar Communications Corporation
("Echostar") filed a complaint with the FCC against the Company alleging that
the Company had violated Section 548 of the Communications Act of 1934, as
amended (the "1934 Act") and Sections 76.1000 et seq. of the FCC's Rules (the
"FCC Rules") by discriminating against Echostar in the prices and other terms
and conditions for distribution of regional sports programming to Echostar's
subscribers by direct broadcast satellite. Echostar's claim is based on
allegations that the Company licenses cable operators to distribute regional
sports programming at lower prices and on more favorable terms than those
contained in Echostar's contract with the Company. Echostar's complaint requests
the FCC to order the Company to offer Echostar regional sports programming at
rates and on terms that are no worse than those offered to other cable
operators, to award damages in an unspecified amount, and to impose future
reporting requirements to ensure non-discrimination. On December 10, 1997, the
Company filed a response to the Echostar complaint denying any violation of the
1934 Act or the FCC Rules.  On October 28, 1998, the FCC dismissed Echostar's
complaint with prejudice on the grounds that the statute of limitations had
expired.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

  None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

  None.

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

  None.

ITEM 5.  OTHER INFORMATION

  None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The following exhibits are filed as part of this report:  
27       Financial Data Schedule (for SEC purposes only).

(b) Reports on Form 8-K
         No reports on Form 8-K have been filed during the last three months of
the period covered by this report.

                                       14
<PAGE>
 
                                   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.



                                     FOX/LIBERTY NETWORKS, LLC
Dated: November 13, 1998
                                     By:     /S/ Jeff Shell
                                        -----------------------------
                                                 Jeff Shell
                                         Executive Vice President and
                                           Chief Financial Officer


Dated: November 13, 1998
                                     By:     /S/ Jeff Shell
                                        -----------------------------
                                                 Jeff Shell
                                         Executive Vice President and
                                          Chief Financial Officer
                                          (Principal Financial Officer
                                          and Principal Accounting Officer)

                                       15
<PAGE>
 
EXHIBIT INDEX

<TABLE> 
<CAPTION> 
EXHIBIT NO.
-----------
<C>   <S>
27    Financial Data Schedule (for SEC purposes only).
</TABLE> 

                                       16