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 QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1996

                                or

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

----------------------------------   TO   ------------------------------------.

                          Commission File Number  1-13054

                           ALLIANCE ENTERTAINMENT CORP.
               (Exact name of registrant as specified in its charter)

Delaware                                                  13-3645913
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)


110 East 59th Street, New York, New York                     10022
(Address of principal executive offices)                  (Zip Code)


                                   (212) 935-6662
             ( Registrant's telephone number, including area code)

     Indicate by check mark whether the  registrant (1) has filed all reports 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 / /

     As  of  November  11,  1996,  the  number  of  shares  outstanding  of  the
registrant's common stock was 44,764,853.













<PAGE>



                      ALLIANCE ENTERTAINMENT CORP.

PART I--FINANCIAL INFORMATION
                                                                      Page
Item 1.  Financial Statements

            Consolidated Balance Sheets                                 4

            Consolidated Statements of Operations                       5

            Consolidated Statement of Stockholders'  Equity             6

            Consolidated Statements of Cash Flows                       7

            Notes to Consolidated Financial Statements                  9

Item 2.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations                      11

PART II--OTHER INFORMATION

Item 4.     Submission of Matters to a Vote of Security Holders        20

Item 6.     Exhibits and Reports on Form 8-K                           22



<PAGE>


PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
<TABLE>
<CAPTION>
                                  ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
                                         CONSOLIDATED BALANCE SHEETS
                                                (Unaudited)
                                    (Amounts in Thousands, Except Share Data)
                                                                 December 31,    September 30,
                                                                    1995            1996
<S>                                                              <C>             <C>     
                                                              ---------------- --------------
ASSETS
CURRENT ASSETS
    Cash and cash equivalents                                 $        12,852  $      17,736
    Accounts receivable, less allowance for doubtful
       accounts                                                       193,785        153,987
    Inventory                                                         192,604        198,071
    Advances and other prepaid expenses                                24,609         33,535
    Refundable income taxes                                               783         13,441
    Deferred income taxes                                               9,061         13,186
                                                              ---------------- --------------
          Total current assets                                        433,694        429,956
                                                              ---------------- --------------
INVESTMENTS, at cost                                                      782            785
PROPERTY AND EQUIPMENT                                                 24,826         31,074
COPYRIGHTS, less accumulated amortization                              64,150         69,842
COST IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED,
    less accumulated amortization                                      97,262        102,767
COVENANTS NOT TO COMPETE, less accumulated
    amortization                                                       10,586          8,920
DEFERRED INCOME TAXES                                                   1,894          2,442
OTHER ASSETS, less accumulated amortization                            12,214         17,802
                                                                --------------   ------------
TOTAL ASSETS                                                  $       645,408  $     663,588
                                                              ================   ============
CURRENT LIABILITIES AND STOCKHOLDERS' EQUITY
    Notes payable                                             $        73,700  $      75,452
    Current maturities of long-term debt                                8,983         11,585
    Current obligations under capital leases                              432            439
    Accounts payable and accrued expenses                             229,088        216,855
    Income taxes payable                                                  434
                                                              ---------------- --------------
          Total current liabilities                                   312,637        304,331
                                                              ---------------- --------------
LONG-TERM DEBT                                                        234,622        228,490                   
OBLIGATIONS UNDER CAPITAL LEASES                                          367            225
DEFERRED INCOME TAXES                                                   8,955          7,819
COMMITMENTS
STOCKHOLDERS' EQUITY
    Series A convertible preferred stock, $.01 par value,
       886,240 shares authorized, shares issued and
       outstanding 1995 0; 1996 422,500 ( $42,962
       liquidation preference)                                        -                    4
    Common stock, $.0001 par  value, 100,000,000
       shares authorized, shares issued and outstanding
       1995 35,638,331; 1996 44,724,845                                     3              4
    Additional paid-in capital                                         71,276        141,825
    Employee notes for stock purchases                                    (67)           (67)
    Retained earnings (deficit)                                        17,369        (18,601)
    Foreign currency translation adjustment                               246           (442)
                                                              ---------------- --------------
          Total stockholders' equity                                   88,827        122,723
                                                              ---------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                    $       645,408  $     663,588
                                                              ================ ==============

</TABLE>

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

<PAGE>
<TABLE>
<CAPTION>

                                                          ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES
                                                              CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                            (Unaudited)
                                                            (Amounts in Thousands, Except Share Data)

                                                         Three Months Ended             Nine Months Ended
                                                            September 30,                  September 30,
                                                ------------------------------ ----------------------------
                                                     1995           1996            1995           1996
                                                ------------- ---------------- -------------- -------------
<S>                                                  <C>             <C>             <C>           <C>    

Net sales                                       $    182,516  $       160,636  $     491,533  $    499,992   

Cost of sales                                        145,696          132,403        395,116       417,869
                                                ------------- ---------------- -------------- -------------

          Gross profit                                36,820           28,233         96,417        82,123
                                                                 
Selling, general and administrative expenses          24,894           31,975         64,156        99,454
Amortization of intangible assets                      3,007            2,891          7,953         8,645
                                                ------------- ---------------- -------------- -------------

                                                      27,901           34,866         72,109       108,099
                                                ------------- ---------------- -------------- -------------

                                                       8,919           (6,633)        24,308       (25,976)
                                                ------------- ---------------- -------------- -------------
                                                                 
Other income (expense)
    Amortization of deferred financing costs            (368)            (452)          (859)       (1,388)
    Other income (expense) - net                        (351)             286           (433)         (487)
    Interest expense                                  (6,096)          (8,994)       (13,396)      (25,835)
                                                ------------- ---------------- -------------- -------------
                                                      (6,815)          (9,160)       (14,688)      (27,710)
                                                ------------- ---------------- -------------- -------------

       Income (loss) before income taxes               2,104          (15,793)         9,620       (53,686)
                                                                 
Provision (benefit) for income taxes                   1,120           (6,348)         4,352       (17,716)
                                                ------------- ---------------- -------------- -------------

       Net income (loss)                        $        984  $        (9,445) $       5,268  $    (35,970)  
                                                ============= ================ ============== =============

Earnings (loss) per common share and
    common share equivalents                    $        .03 $           (.23)          .14  $        (.95)
                                                ============= ================ ============== =============

Weighted average number of shares of
    common stock and equivalents outstanding      38,466,650       40,562,141     36,704,040    37,798,670
                                                ============= ================ ============== =============

</TABLE>

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

 
<PAGE>
<TABLE>
<CAPTION>




                                                                    ALLIANCE ENTERTAINMENT CORP. AND SUBISIDIARIES
                                                                     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                                                               (Unaudited)
                                                                       (Amounts in Thousands, Except Share Data)

                                                                                          
                                                  Capital Stock Issued                         Employee                   Foreign
                                              ----------------------------    Additional       Notes for    Retained      Currency
                                                 Preferred        Common        Paid-In         Stock       Earnings    Translation
                                                  Stock           Stock        Capital         Purchases    (Deficit)   Adjustment 
                                             ------------- ---------------- -------------- ------------- --------------------------
<S>                                                <C>               <C>         <C>           <C>          <C>             <C>

Balance at December 31, 1995                    $      -       $        3       $    71,276  $     (67)    $  17,369     $    246

 Exercise of options and warrants for 2,367,763 shares
    of common stock                                    -                -             2,901        -              -            -
 Issuance of 6,718,751 shares of common stock
    for purchase of company                            -                1            26,874        -              -            -
 Issuance of 422,500 shares of series A convertible
    preferred stock                                    4               -             40,774        -              -            -
 Net loss                                              -               -                  -                   (35,970)          -
 Translation adjustment                                -               -                  -        -              -          (688)

                                                ============= ================ ============== ============= ============== ========
Balance at September 30, 1996                   $      4       $        4       $   141,825   $    (67)     $ (18,601)      $ (442)
                                                ============= ================ ============== ============= ============== ========


</TABLE>



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



<PAGE>
<TABLE>
<CAPTION>







                                                     ALLIANCE ENTERTAINMENT CORP. AND SUBISIDIARIES
                                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                          (Unaudited)
                                                                     (Amounts in Thousands)

                                                                       Nine Months Ended
                                                                           September 30,
                                                              --------------------------------
                                                                    1995            1996
                                                              ---------------- --------------
<S>                                                                   <C>              <C>    
Cash Flows From Operating Activities
    Net income (loss)                                         $         5,268        (35,970)

    Adjustments to reconcile net income (loss) to net cash
       used in operating activities:
       Depreciation and amortization                                   11,722         14,326
    Change in assets and liabilities:
       (Increase) decrease in accounts receivable                     (20,876)        46,580
       (Increase) in inventory                                        (63,307)        (5,822)
       (Increase) in prepaid expenses and other                       (10,494)        (9,017)
       (Increase) decrease in deferred income taxes                     2,082         (5,808)
       Increase (decrease) in accounts payable and
          accrued expenses                                             12,741        (17,758)
       (Decrease) in income taxes payable                              (6,099)       (13,092)
                                                              ---------------- --------------

       Net cash used in operating activities                          (68,963)       (26,561)
                                                              ---------------- --------------


Cash Flows From Investing Activities
    Purchase of property and equipment, net                           (16,099)       (10,372)
    (Increase) in copyrights                                          (12,728)        (8,681)
    (Increase) in other assets                                         (2,127)        (5,559)
    Purchase of businesses including costs,
       net of cash acquired                                           (40,267)        12,844
                                                              ---------------- --------------

       Net cash used in investing activities                          (71,221)       (11,768)
                                                              ---------------- --------------

 
Cash Flows From Financing Activities
    Increase (decrease) in excess of outstanding
       checks over bank balance                                        (1,344)         1,922
    Proceeds from issuance of  stock                                   11,187         43,679
    Proceeds from borrowings                                          436,750        221,382
    Payments on borrowings                                           (307,622)      (223,295)
    Payments for financing costs                                       (6,491)          (475)
                                                              ---------------- --------------

       Net cash provided by financing activities                      132,480         43,213
                                                              ---------------- --------------

Net increase (decrease) in cash and cash equivalents                   (7,704)         4,884

Cash and cash equivalents
    Beginning of period                                                 8,230         12,852
                                                              ---------------- --------------

    End of period                                             $           526  $      17,736
                                                              ================ ==============


</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                      ALLIANCE ENTERTAINMENT CORP. AND SUBISIDIARIES
                                                             CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
                                                                            (Unaudited)
                                                                      (Amounts in Thousands)

                                                                       Nine Months Ended
                                                                          September 30,
                                                              -------------------------------
                                                                    1995            1996

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

<S>                                                                  <C>             <C>   
Supplemental Disclosure of Cash Flow Information

    Cash payments for interest                                $        11,125   $    27,375
    Cash payments (received) for income taxes                 $         7,917   $      (482)


Supplemental Disclosure of Noncash Investing
    and Financing Activities

    Common stock issued to employees for notes                $            15   $      -

    Acquisition of subsidiary
       Cash purchase price, net of cash acquired              $        37,283   $     (12,618)

    Working Capital acquired, net of cash
       and cash equivalents                                   $         6,918   $      5,083
    Fair value of other assets acquired, principally
       property and equipment                                           7,329          1,064
    Copyrights
    Cost in excess of net assets of business acquired                  26,517          8,110
    Covenant not to compete                                             2,500            -
    Long-term debt assumed                                                (81)           -
    Long-term debt incurred                                            (4,600)           -
    Common Stock issued                                                (1,300)       (26,875)
                                                              ---------------- --------------

                                                              $        37,283   $    (12,618)
                                                              ================ ==============


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


</TABLE>

<PAGE>





                    ALLIANCE ENTERTAINMENT CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited Interim Financial Information

     The  unaudited  balance  sheet as of September  30, 1996 and the  unaudited
statements  of  operations,  cash flows and  stockholders'  equity for the three
month  and nine  month  periods  ended  September  30,  1995  and 1996  (interim
financial  information),  are unaudited and have  generally been prepared on the
same basis as the  audited  financial  statements.  In the  opinion of  Alliance
Entertainment  Corp.  (the  "Company"  or  "Alliance"),  the  interim  financial
information  includes  all  adjustments,  consisting  of only  normal  recurring
adjustments,  necessary  for a fair  statement  of the  results  of the  interim
periods.

     Certain  information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting  principles
have been  condensed  or omitted  from the interim  financial  information.  The
results of operations  for the three months and nine months ended  September 30,
1996,  may not be indicative  of the operating  results for the full year or any
interim period.

     Certain amounts have been  reclassified to conform with the presentation in
the current period.

Acquisition of Red Ant L.L.C.

     On August 27, 1996, the Company acquired Red Ant L.L.C., a Delaware limited
liability   corporation  ("Red  Ant"),  pursuant  to  the  terms  of  the  Stock
Acquisition and Merger Agreement,  dated August 15, 1996, among Alliance,  Alvin
N. Teller,  Wasserstein & Co., Inc.  ("WCI"),  and other  parties  thereto.  The
Company acquired all of the outstanding units of Red Ant from Mr. Teller and WCI
in exchange for (i) 760,823  shares of the Company's  common  stock,  $.0001 par
value per share (the "Common Stock"),  issued to Mr. Teller and 5,957,928 shares
of  Common  Stock  issued to WCI and its  affiliates  and (ii) the right for Mr.
Teller and WCI and  affiliates  to  receive  additional  shares of Common  Stock
contingent  upon the market price of the Common Stock  achieving  defined target
prices or upon certain events.  In conjunction  with the acquisition of Red Ant,
Mr. Teller (the former Chairman and Chief Executive Officer of MCA Music) became
Co-Chairman,  Chief Executive Officer and President of Alliance. The acquisition
of Red Ant for shares of the Company's  Common Stock with an aggregate  value of
$26,875,004  resulted  in the  recognition  of costs  in  excess  of net  assets
acquired in the amount of $8,100,000.  Pro-forma  financial  information has not
been presented by the Company with respect to the acquisition of Red Ant because
such  information  would  not  be  materially   different  from  the  historical
information presented herein.

     The  stockholders  of the  Company  ratified  the  terms  of the  Company's
acquisition  of Red Ant at a Special  Meeting of the Company's  stockholders  on
October 29, 1996.

Restructuring Charges

     During  the  first six  months  of 1996,  the  Company  recognized  certain
non-recurring  expenses of $20.4 million (the "Restructuring  Charges") relating
to the  termination  of  the  proposed  merger  of the  Company  and  Metromedia
International  Group,  Inc.,  the  consolidation  and  relocation  of two of the
Company's  warehouse  facilities,  as well as charges  relating  to the  current
industry


<PAGE>



     climate.  Approximately  $11.0  million  of these  charges  resulted  in an
increase to cost of goods sold,  while the  remaining  $9.4 million was a charge
against selling,  general and administrative expenses. The Restructuring Charges
(which relate primarily to the Company's One Stop Group distribution operations)
include  termination costs,  severance and other incremental costs  relating to
the closure of two facilities and relocation of operations in Miami,  Florida to
the Company's Coral Springs,  Florida facility,  as well as expenses relating to
the further reduction of inventory levels once the relocation is completed.  The
relocation  to the Coral  Springs  facility is expected to be  completed  by the
first  quarter of 1997.  The  Restructuring  Charges  pertaining  to the current
industry  environment  relate  to the  further  strengthening  of the  Company's
reserve position with regard to customer  returns,  return penalties to vendors,
and allowance for doubtful accounts.

BT Capital and BCI Preferred Stock Issuance.

     On July 16,  1996,  the Company  entered  into a Preferred  Stock  Purchase
Agreement (the "Preferred Stock Purchase Agreement"),  with BT Capital Partners,
Inc.  ("BT"),  an  affiliate  of Bankers  Trust,  and BCI Growth IV, LP ("BCI"),
pursuant to which the Company  issued a total of $42.25 million of new preferred
stock, the proceeds of which were used to fund the purchase of catalog and other
proprietary rights and for general corporate purposes.  BT purchased $35 million
and BCI purchased $7.25 million of the preferred  stock. The preferred stock has
a cumulative dividend rate of 7 7/8% per annum,  payable in additional shares of
preferred stock, and is convertible into shares of the Company's Common Stock at
a  conversion  rate  equal to  $7.25  per  share  of  Common  Stock  subject  to
anti-dilution adjustments.

     The Company's  stockholders approved the issuance of shares of Common Stock
upon  conversion  of the preferred  stock at a Special  Meeting of the Company's
stockholders on October 29, 1996.

EMI Catalog Distribution Agreement

     On June 21, 1996,  the Company and  EMI-Capitol  Music Group North  America
entered into an exclusive Distribution Agreement dated June 21, 1996 under which
Alliance will market and sell selected  EMI-Capitol catalog titles in the United
States.  The five year agreement (which contains annual purchase  commitments by
Alliance  of  approximately  $16  million)  encompasses  approximately  450 deep
catalog titles by such diverse artists as Judy Garland,  The Band, Willie Nelson
and Ashford and Simpson.

Consolidation Plan

     On November 14, 1996,  the Company  announced a  significant  Consolidation
Plan  (the  "Consolidation  Plan")  involving  its North  American  Distribution
operations.  The  Consolidation  Plan  calls  for  the  closure  of  five of the
Company's eight domestic American distribution facilities and the centralization
of all administrative functions for the Company's One Stop Group and Independent
Distribution   Group.   Additionally,   under  the   Consolidation   Plan,   the
administrative functions of the Company's three domestic proprietary labels (Red
Ant,  Castle  (US) and Concord  Jazz) will be  consolidated  under Red Ant.  The
Company expects that the Consolidation Plan will require a fourth quarter charge
of  approximately  $28 to $32  million  encompassing  lease  termination  costs,
severance costs and other expenses relating to the  Consolidation  Plan of which
approximately $18 to $21 million will be cash expenditures.  The largest portion
of these  expenditures will occur during 1997. It is currently  anticipated that
the


<PAGE>



     Consolidation  Plan will be  completed by March 1998. 

     Concurrent with the Consolidation  Plan, the Company is also evaluating the
divestiture of its Brazilian  distribution  operations  and its Premier  Artists
Services  subsidiary.  Depending  on the  results of this  evaluation,  which is
anticipated  to be completed in the fourth  quarter of 1996,  such  divestitures
could result in  impairment  charges  with  respect to certain of the  Company's
long-lived  assets and intangibles  under The Statement of Financial  Accounting
Standards No. 121,  "Accounting for the Impairment of Long-Lived  Assets and for
Long Lived Assets to be Disposed Of." At September 30, 1996, the aggregate total
investment in and advances to the  operations  subject to  evaluation  was $32.2
million.

Fourth Amendment to Third Amended and Restated Credit Agreement

     On September 30, 1996, the Company  entered into a Fourth  Amendment to the
Third Amended and Restated Credit Agreement (the "Restated Credit Agreement") to
amend certain definitions and financial covenants for the period ended September
30, 1996, as set forth in the Restated Credit Agreement. The Fourth Amendment to
the Restated Credit Agreement did not amend any financial covenants with respect
to future periods and there can be no assurances  that the Company will be able
to  comply  with  the  financial  covenants  set  forth in the  Restated  Credit
Agreement with respect to such future periods.

     The Company is in  discussions  with third  parties and certain  affiliates
with  respect  to  obtaining  additional  financing  necessary  to  satisfy  the
Company's  debt  service  obligations,   anticipated  growth,  expected  capital
expenditure  needs and cash expenditures  relating to the  implementation of the
Consolidation Plan. While there can be no assurances that such financing will be
consummated,  the  Company  has no reason to believe it will be unable to obtain
such financing and satisfy its capital requirements for the foreseeable future.


Accounting Pronouncement on Stock-Based Compensation

     The  Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  123,
"Accounting for Stock- Based Compensation" must be implemented by the Company in
1996.  This  pronouncement   establishes   financial  accounting  and  reporting
standards for stock-based employee  compensation plans. It encourages,  but does
not require,  companies to recognize  compensation  expense for grants of stock,
stock options and other equity  instruments to employees based on new fair value
accounting  rules.  Companies  that  choose  not to  adopt  the new  fair  value
accounting  rules will be required to disclose pro forma net income and earnings
per share under the new method. The Company anticipates  adopting the disclosure
provisions of SFAS No. 123,  although the impact of such  disclosure has not yet
been determined.

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

Overview

     Alliance  Entertainment Corp.  ("Alliance" or the "Company") is the largest
full service distributor of pre-recorded music and music related products in the
United States and is also actively  engaged in the acquisition and  exploitation
of proprietary  content rights with respect to recorded  music,  video and video
CDs. In August 1996 as part of its  strategy to expand its  proprietary  content
business, Alliance acquired Red Ant L.L.C. ("Red Ant"), a new music label formed
by Alvin N. Teller,  to build a roster of alternative  rock, urban  contemporary
and country artists.  In conjunction with the acquisition of Red Ant, Mr. Teller
(the  former  Chairman  and  Chief  Executive   Officer  of  MCA  Music)  became
Co-Chairman, Chief Executive Officer and President of Alliance.



<PAGE>



     Prior  to  the  acquisition  of Red  Ant,  Alliance's  proprietary  content
business conducted through the Proprietary  Product Group consisted primarily of
the operations of Castle  Communications  plc ("Castle") and Concord Jazz,  Inc.
("Concord").  Castle's catalog includes  proprietary  rights with respect to The
Kinks, The Searchers,  Status Quo and Donovan, and rock music from the 1970's by
bands such as Motorhead  and Uriah Heep.  Since 1994,  Castle has also  actively
acquired  domestic  and/or  worldwide  rights to a broader range of  proprietary
rights, including catalogs of artists such Black Sabbath and Iron Maiden as well
as world-wide rights to projects of newly recorded music by established  artists
formerly with the six major record companies: Sony Music, Time Warner, Polygram,
MCA, EMI and BMG (the "Major  Labels") such as Cheap Trick,  REO  Speedwagon and
Ugly Kid Joe.  Concord,  a label established in 1974 and acquired by the Company
in late 1994,  has a catalog  of over 600 jazz  recordings  by  artists  such as
Rosemary Clooney,  Mel Torme,  Tito Puente,  and Art Blakey as well as exclusive
recording  agreements for new recordings with a number of other established jazz
artists such as Chick Corea and Maynard  Ferguson.  The  acquisition  of Red Ant
will add additional artist  development  capabilities to Alliance's  proprietary
content business.

     The Company's  distribution segment is conducted through the One Stop Group
and  Independent  Distribution  Group.  The One Stop  Group  specializes  in the
wholesale  distribution  of all  available  pre-recorded  music  product  (i.e.,
pre-recorded   music   manufactured  by  the  Major  Labels  as  well  as  music
manufactured  by  independent  labels).   The  Independent   Distribution  Group
specializes  in  the  domestic  wholesale  distribution  of  pre-recorded  music
manufactured  by third party  independent  labels on an  exclusive  and regional
basis.  The Independent  Distribution  Group has  historically  generated higher
gross  margins  than has the One Stop Group but carries a higher  degree of risk
related  to  industry  conditions  due to a greater  dependence  on new  release
product and a higher degree of exposure to product returns.

     The International  Distribution Group specializes in wholesale distribution
of pre-recorded music product outside the United States, primarily in Brazil and
Canada.  The  International  Distribution  Group  consists of (i) the  Company's
Brazilian operations conducted through DisqueMusic  Comercial Importadora Ltda.,
Brasison Distribuidora de Discos Ltda. and Distribuidora de Discos E Fitas Canta
Brasil Ltda. (Canta Brasil was acquired by the Company in October 1995) and (ii)
the Company's Canadian operation  conducted through The St. Clair  Entertainment
Group Inc. ("St. Clair").  The Company is currently  evaluating a plan to divest
itself  of its  Brazilian  operations  and such  evaluation  is  expected  to be
completed  in the fourth  quarter of 1996.  See,  "Management's  Discussion  and
Analysis of Financial  Condition  and Results of  Operations  - Recent  Events -
Consolidation Plan."

Recent Events

Acquisition of Red Ant L.L.C.

     On August 27, 1996, the Company acquired Red Ant L.L.C., a Delaware limited
liability   corporation  ("Red  Ant"),  pursuant  to  the  terms  of  the  Stock
Acquisition and Merger Agreement,  dated August 15, 1996, among Alliance,  Alvin
N. Teller,  Wasserstein & Co., Inc.  ("WCI"),  and other  parties  thereto.  The
Company acquired all of the outstanding units of Red Ant from Mr. Teller and WCI
in exchange for (i) 760,823  shares of the Company's  common  stock,  $.0001 par
value per share (the "Common Stock"),  issued to Mr. Teller and 5,957,928 shares
of  Common  Stock  issued to WCI and its  affiliates  and (ii) the right for Mr.
Teller and WCI and  affiliates  to  receive  additional  shares of Common  Stock
contingent  upon the market price of the Common Stock  achieving  defined target
prices or upon certain events.  In conjunction  with the acquisition of Red Ant,
Mr. Teller (the former Chairman and Chief Executive Officer of MCA Music) became
Co-Chairman, Chief Executive Officer and


<PAGE>



     President  of  Alliance.  The  acquisition  of Red  Ant for  shares  of the
Company's  Common Stock with an aggregate  value of $26,875,004  resulted in the
recognition  of  costs  in  excess  of net  assets  acquired  in the  amount  of
$8,100,000.  Pro-forma financial information has not been presented with respect
to the acquisition of Red Ant because such  information  would not be materially
different from the historical information presented herein.

     The  stockholders  of the  Company  ratified  the  terms  of the  Company's
acquisition  of Red Ant at a Special  Meeting of the Company's  stockholders  on
October 29, 1996.

Restructuring Charges

     During  the  first six  months  of 1996,  the  Company  recognized  certain
non-recurring  expenses of $20.4 million (the "Restructuring  Charges") relating
to the  termination  of  the  proposed  merger  of the  Company  and  Metromedia
International  Group,  Inc.,  the  consolidation  and  relocation  of two of the
Company's  warehouse  facilities,  as well as charges  relating  to the  current
industry  climate.  Approximately  $11.0 million of these charges resulted in an
increase to cost of goods sold,  while the  remaining  $9.4 million was a charge
against selling,  general and administrative expenses. The Restructuring Charges
(which relate primarily to the Company's One Stop Group distribution operations)
include termination costs, severance and other incremental costs relating to the
closure of two facilities and relocation of operations in Miami,  Florida to the
Company's Coral Springs,  Florida facility,  as well as expenses relating to the
further  reduction of inventory  levels once the  relocation is  completed.  The
relocation  to the Coral  Springs  facility is expected to be  completed  by the
first  quarter of 1997.  The  Restructuring  Charges  pertaining  to the current
industry  environment relate to the further  strengthening the Company's reserve
position  with regard to customer  returns,  return  penalties  to vendors,  and
allowance for doubtful accounts.

BT Capital and BCI Preferred Stock Issuance.

     On July 16,  1996,  the Company  entered  into a Preferred  Stock  Purchase
Agreement (the "Preferred Stock Purchase Agreement"),  with BT Capital Partners,
Inc.  ("BT"),  an  affiliate  of Bankers  Trust,  and BCI Growth IV, LP ("BCI"),
pursuant to which the Company  issued a total of $42.25 million of new preferred
stock, the proceeds of which were used to fund the purchase of catalog and other
proprietary rights and for general corporate purposes.  BT purchased $35 million
and BCI purchased $7.25 million of the preferred  stock. The preferred stock has
a cumulative dividend rate of 7 7/8% per annum,  payable in additional shares of
preferred stock, and is convertible into shares of the Company's Common Stock at
a  conversion  rate  equal to  $7.25  per  share  of  Common  Stock  subject  to
anti-dilution adjustments.

     The Company's  stockholders approved the issuance of shares of Common Stock
upon  conversion  of the preferred  stock at a Special  Meeting of the Company's
stockholders on October 29, 1996.

Matrix Software Acquisition

     On October 11, 1996, the Company acquired Matrix Software, Inc. ("Matrix"),
a  leading  provider  of music  product  databases  to  cyber-retailers  selling
prerecorded music over the internet.  Matrix is the creator of the All-Music and
All-Movie Guides, print and software encyclopedic databases widely used by music
retailers and the key element of search engines for most on-line/web  sites that
sell  prerecorded  music and video.  Matrix also maintains two  proprietary  web
sites ("www.allmusic.com" and "www.allmovie.com") on the world wide web


<PAGE>



     promoting the All-Music Guide and the All-Movie  Guide.  The acquisition of
Matrix  is part  of the  Company's  strategy  to  create  a full  service  music
distribution company serving existing as well as future internet-based retailers
by combining its music  distribution  expertise with an extensive music software
database.

Consolidation Plan

     On November 14, 1996, the Company announced a significant Consolidation
Plan  (the  "Consolidation  Plan")  involving  its North  American  Distribution
operations.  The  Consolidation  Plan  calls  for  the  closure  of  five of the
Company's eight domestic  distribution  facilities and the centralization of all
administrative  functions  for the  Company's  One Stop  Group  and  Independent
Distribution   Group.   Additionally,   under  the   Consolidation   Plan,   the
administrative functions of the Company's three domestic proprietary labels (Red
Ant,  Castle (US) and Concord) will be  consolidated  under Red Ant. The Company
expects  that the  Consolidation  Plan will require a fourth  quarter  charge of
approximately $28 to $32 million encompassing lease termination costs, severance
costs  and  other  expenses  relating  to  the   Consolidation   Plan  of  which
approximately $18 to $21 million will be cash expenditures.  The largest portion
of these  expenditures  will occur during 1997. It is the Company's  expectation
that once fully  implemented,  the Consolidation  Plan will result in annualized
cost savings in excess of $20  million.  It is  currently  anticipated  that the
Consolidation  Plan  will  be  completed  by  March  1998.  See,   "Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
Liquidity and Capital Resources."

     Concurrent with the Consolidation  Plan, the Company is also evaluating the
divestiture of its Brazilian  distribution  operations  and its Premier  Artists
Services  subsidiary.  Depending  on the  results of this  evaluation,  which is
anticipated  to be completed in the fourth  quarter of 1996,  such  divestitures
could result in an  impairment  charge with respect to certain of the  Company's
long-lived  assets and intangibles  under The Statement of Financial  Accounting
Standards No. 121,  "Accounting for the Impairment of Long-Lived  Assets and for
Long Lived Assets to be Disposed Of." At September 30, 1996, the aggregate total
investment in and advances to the  operations  subject to  evaluation  was $32.2
million.

Industry Conditions

     During the nine months ended September 30, 1996, the Company's distribution
segment  experienced  lower than  anticipated  net sales to its  customers  as a
result of the  continued  weak  music  retail  environment.  This  weakness  has
particularly  impacted the Independent  Distribution  Group, as continued retail
closings  have  resulted  in  higher  than  expected  product  returns  from its
customers.  During the third  quarter,  the Company's net sales were  negatively
impacted by: (i) higher than anticipated customer returns; (ii) limited customer
budgets  allocated to the purchase of new release and catalog  product and (iii)
the reduction in successful new product released by the industry during 1996.

Results of Operations

     The following  discussion and analysis  should be read in conjunction  with
the unaudited financial statements of the Company and the notes thereto included
elsewhere in this report.




<PAGE>



     The following table sets forth,  for the three months and nine months ended
September  30, 1995 and 1996,  certain  operating  data as a  percentage  of net
sales.

<TABLE>
<CAPTION>


                                               Three Months Ended              Nine Months Ended
                                               September 30                      September 30(1)
                                               ------------                      ---------------


                                                                                                 1996 Pre-
                                                                                               Restructuring
                                           1995          1996            1995         1996        Charges
                                           ----          ----            ----         ----        ------
<S>                                         <C>           <C>             <C>          <C>          <C>


Net Sales                                100.0%           100.0%          100.0%    100.0%         100.0%


Gross Profit                               20.2          17.5            19.6         16.4         18.6


Selling, General & Administrative Expenses 13.6          19.9            13.0         19.9         18.0


Amortization of Intangible Assets           1.7          1.8             1.6          1.7           1.7


Other income (expense) primarily interest  (3.7)        (5.7)           (3.0)        (5.5)         (5.5)
expense


Provision (benefit) for income tax          .6          (4.0)             .9         (3.5)         (2.2)


Net Income (loss)                           .5          (5.9)            1.1         (7.2)         (4.4)

<FN>


     (1) Cost of sales and selling,  general &  administrative  expenses for the
nine months  ended  September  30, 1996 include  restructuring  charges of $11.0
million and $9.4 million ($2.5 million of which reflects  non-recurring expenses
related to the  termination of the proposed merger of the Company and Metromedia
International  Group,  Inc.),  respectively.  See  "Management's  Discussion and
Analysis of  Financial  Condition  and  Results of  Operations  - Recent  Events
Restructuring  Charges" and "Results of  Operations-Nine  Months Ended September
30, 1996 vs. Nine Months Ended September 30, 1995."

</FN>
</TABLE>

<PAGE>



     The following table sets forth,  for the three months and nine months ended
September  30,  1996,  certain  operating  data by business  segment,  excluding
corporate related expenses and assets.

<TABLE>
<CAPTION>



                                                  Three Months Ended                        Nine Months Ended
                                                   September 30, 1996                       September 30, 1996
                                                   ------------------                       ------------------


                                            Distribution        Proprietary                              Proprietary
                                                                  Products         Distribution           Products

<S>                                              <C>                 <C>                <C>                  <C>

Net Sales                                     $144,007            $16,562            $448,213              $51,443


Depreciation & Amortization                     953                1,967               3,137                5,783


Operating Income (Loss) - Pre-Restructuring    (661)               (594)               7,762                 619
Charges (1)


Operating Income (loss) - Post-Restructuring   (661)               (594)              (9,575)                453
Charges (1)


Capital Expenditures                           1,874                624                3,261                1,677


Identifiable Assets                                                                   351,949              156,247


<FN>


     (1) See  "Management's  Discussion and Analysis of Financial  Condition and
Results of Operations - Recent Events - Restructuring Charges."

</FN>
</TABLE>

Three Months Ended September 30, 1996 vs. Three Months Ended September 30, 1995

     Net sales  decreased  12%,  from $182.5  million for the three months ended
September  30, 1995 to $160.6  million for the three months ended  September 30,
1996. Net sales attributable to the Company's distribution segment for the three
months ended September 30, 1996 were  approximately  $144.0 million  compared to
$166.6  million  for the three  months  ended  September  30,  1995  despite the
inclusion of net sales for three months of  Independent  National  Distributors,
Inc. ("INDI") and One Way Records Inc. ("One Way") in the period ended September
30,  1996 as  compared  to two months net sales for INDI and one month net sales
for One Way for the three months  ended  September  30,  1995.  During the three
months  ended  September  30,  1996,  the  Company's  distribution  segment,  in
particular the Independent  Distribution  Group,  continued to experience  lower
than  anticipated  net sales to its  customers  in part due to: (i) higher  than
expected  product  returns  from  customers as a result of weak retail sales and
store closings,  especially with respect to traditional retailers;  (ii) limited
budgets  allocated  to the  purchase of new product by certain of the  Company's
customers;  and (iii) the  reduction in successful  new product  released by the
industry during the second and third quarters of 1996. Net sales attributable to
the Company's  proprietary  product segment for the three months ended September
30, 1996 were approximately $16.6 million, compared to $15.9


<PAGE>



     million for the three months ended  September  30, 1995.  Net sales for the
period in the  proprietary  products  segment  were  positively  impacted by the
continued  exploitation of acquired  catalogs and the expansion of the Company's
domestic  proprietary labels, which were partially offset by a reduced demand by
the Company's customers for deep catalog product as opposed to front-line or new
release product. The Company's business is seasonal with the smallest percentage
of sales typically  occurring in the first quarter and the largest percentage of
annual sales typically occurring in the fourth quarter.

     The  Company's  gross margin  decreased to 17.5% for the three months ended
September 30, 1996 from 20.2% for the three months ended September 30, 1995. For
the three months ended September 30, 1996, the gross margin of the  distribution
segment was 14.3%,  compared to 18.4% for the three months ended  September  30,
1995, with the reduction primarily related to (i) return disincentive  penalties
associated  with higher than expected  product  return  during the period;  (ii)
increased  proportion of sales of the One Stop Group attributable to new release
product as opposed to higher margin,  deep catalog product and (iii) a reduction
in discount buying and advertising programs offered by the Major Labels. For the
three  months ended  September  30,  1996,  the gross margin of the  proprietary
products  segment  was  45.7%  compared  to 38.6%  for the  three  months  ended
September 30, 1995,  with the increase due  primarily to a higher  proportion of
income in the period derived from royalty  payments under license  agreements as
opposed to the sale of finished goods.  The proportion of revenues  derived from
licenses as opposed to finished goods fluctuates from quarter to quarter.

     Selling,  general and administrative expenses increased from $24.9 million,
or 13.6% of net sales,  for the three months ended  September  30, 1995 to $32.0
million,  or 19.9% of net sales,  for the three months ended September 30, 1996.
The Company's selling,  general and  administrative  expenses as a percentage of
net sales  increased  on an  overall  basis in the period  for  several  reasons
including:  (i) the  incremental  costs of  processing  higher than  anticipated
customer  returns during the period;  (ii) costs associated with the duplication
of certain  overhead related to the  consolidation of operations  within the One
Stop Group which is  anticipated  to be completed in the first  quarter of 1997;
(iii) the  inclusion  of three  months  results  in 1996 for INDI and One Way as
compared  to two months of results for INDI and one month of results for One Way
for the three months ended  September  30, 1995;  and (iv) the  inclusion of one
month's selling,  general and administrative expenses for the Company's recently
acquired Red Ant operation.

     Net income for the three months ended  September  30, 1995 was $1.0 million
compared  to a net loss in the three  months  ended  September  30, 1996 of $9.4
million  primarily  due to the results of  operations  combined  with  increased
interest expense of $2.9 million  resulting from: (i) increased  working capital
needs of companies  acquired in 1995; (ii) higher interest rates associated with
working  capital  borrowings by the  Company's  Brazilian  operations;  (iii) an
on-going timing  difference  between the financing of copyright  acquisitions by
the  Proprietary  Products  Group and the  generation of sales  associated  with
products  produced  pursuant to such acquired  rights;  and (iv) higher interest
rates  associated  with  the  Company's  borrowings  under  the 11  1/4%  Senior
Subordinated  Notes,  the proceeds of which were  utilized to finance  strategic
acquisitions.





<PAGE>



Nine Months Ended September 30, 1996 vs. Nine Months Ended September 30, 1995

     Net sales increased from $491.5 million for the nine months ended September
30, 1995 to $500.0  million for the nine months ended  September  30,  1996,  or
1.7%,  as a result of  inclusion of nine months of net sales of INDI and One Way
partially  offset by higher  levels of returns and weak demand by the  Company's
customers.  Net sales attributable to the Company's distribution segment for the
nine months ended September 30, 1996 were approximately  $448.2 million compared
to $445.3  million for the nine  months  ended  September  30,  1995.  Net sales
attributable  to the Company's  proprietary  product segment for the nine months
ended September 30, 1996, were  approximately  $51.4 million,  compared to $46.3
million for the nine months ended  September 30, 1995.  Net sales for the period
in the proprietary  products  segment were positively  impacted by the continued
exploitation  of acquired  catalogs  and the  expansion  of the  domestic  label
groups,  which  were  partially  offset  by a reduced  demand  by the  Company's
customers for deep catalog (as opposed to  front-line  or new release)  product.
During the nine months ended  September  30, 1996,  the  Company's  distribution
segment,  in  particular  the  Independent   Distribution  Group,  continued  to
experience lower than anticipated net sales to its customers in part due to: (i)
higher than expected  product  returns from customers as a result of weak retail
sales and store closings, especially with respect to traditional retailers; (ii)
limited  budgets  allocated  to the  purchase  of new  product by certain of the
Company's customers;  and (iii) the reduction in successful new product released
by the industry during the first three quarters of 1996. The Company's  business
is seasonal  with the smallest  percentage of sales  typically  occurring in the
first quarter and the largest percentage of annual sales typically  occurring in
the fourth quarter.

     The  Company's  gross  margin  decreased to 16.4% for the nine months ended
September  30, 1996 from 19.6% for the nine months  ended  September  30,  1995.
Excluding  the  impact  of the  Restructuring  Charges  in  cost of  sales,  the
Company's gross margin would have been 18.6% for the nine months ended September
30, 1996. For the nine months ended  September 30, 1996, the gross margin of the
distribution  segment was 13.3%,  compared  to 17.3% for the nine  months  ended
September  30, 1995.  Prior to the impact of the  Restructuring  Charges,  gross
margins  for this  segment  would  have  been  15.7% for the nine  months  ended
September 30, 1996, with the remaining reduction primarily related to (i) return
disincentive  penalties  associated  with higher than  expected  product  return
during the  period;  (ii)  increased  proportion  of sales of the One Stop Group
attributable  to new release  product as opposed to higher margin,  deep catalog
product  and (iii) a  reduction  in  discount  buying and  advertising  programs
offered by the six Major Labels.  For the nine months ended  September 30, 1996,
the gross margin of the proprietary products segment was 43.5% compared to 40.7%
for the nine months ended September 30, 1995.

     Selling,  general and administrative expenses increased from $64.2 million,
or 13.0% of net sales,  for the nine months  ended  September  30, 1995 to $99.5
million,  or 19.9% of net sales,  for the nine months ended  September 30, 1996.
The Company's selling,  general and  administrative  expenses as a percentage of
net sales  increased  on an  overall  basis in the period  for  several  reasons
including:  (i) non-recurring  charges of approximately  $9.4 million associated
with the  Restructuring  Charges ($2.5 million of which  reflects  non-recurring
expenses  related to the  termination of the proposed  merger of the Company and
Metromedia  International Group, Inc.); (ii) the incremental costs of processing
higher  than  anticipated  customer  returns  during  the  period;  (iii)  costs
associated with the duplication of certain


<PAGE>



     overhead  related to the  consolidation  of operations  within the One Stop
Group which is  anticipated  to be completed in the first  quarter of 1997;  and
(iv)  the  inclusion  of nine  months  results  for  INDI and One Way in 1996 as
compared  to two months of results for INDI and one month of results for One Way
for the nine months ended September 30, 1995.

     Net income for the nine months  ended  September  30, 1995 was $5.3 million
compared  to a net loss in the nine  months  ended  September  30, 1996 of $36.0
million primarily due to the results of operations,  the  Restructuring  Charges
discussed above, and increased interest expense of $13.0 million resulting from:
(i) higher interest rates associated with the Company's  borrowings under the 11
1/4% Senior  Subordinated  Notes, the proceeds of which were utilized to finance
strategic  acquisitions;  (ii) increased working capital requirements related to
the  [increase  in sales],  as well as the working  capital  needs of  companies
acquired in 1995;  (iii) higher  interest rates  associated with working capital
borrowings by the Company's  Brazilian  operations;  and (iv) an on-going timing
difference  between the financing of copyright  acquisitions  by the Proprietary
Products Group and the  generation of sales  associated  with products  produced
pursuant to such acquired rights.

Liquidity and Capital Resources

Cash Used in Investing Activities

     The Company's capital  expenditures for the nine months ended September 30,
1996,  were $11.9  million  compared to $16.1  million for the nine months ended
September 30, 1995. The Company  anticipates  that capital  expenditures for the
twelve  months  ended  December  31,  1996  will be  approximately  $14  million
primarily related to the Company's consolidation and modernization program.

     The Company spent $8.7 million for the  acquisition  of  proprietary  music
rights in the nine months ended  September  30, 1996,  compared to $12.7 million
for the nine months ended September 30, 1995. The Company anticipates  continued
expenditures   related  to  the  acquisition  of  proprietary  music  rights  as
opportunities  are presented  that are  consistent  with the Company's long term
objectives. As of September 30, 1996, the Company's Red Ant subsidiary had $12.4
million in cash  available  plus a call for an  additional  $5 million  from WCI
which  will be  utilized  to fund its  operations  and to  acquire  and  develop
proprietary rights.

Cash Provided from Financing Activities

     On July 16, 1996,  the Company  entered into the Preferred  Stock  Purchase
Agreement  with BT,  pursuant  to which  the  Company  issued a total of  $42.25
million of new  preferred  stock,  the  proceeds  of which were used to fund the
purchase  of catalog  and other  proprietary  rights and for  general  corporate
purposes.  BT  purchased  $35 million  and BCI  purchased  $7.25  million of the
preferred  stock.  The preferred stock has a cumulative  dividend rate of 7 7/8%
per annum,  payable in additional  shares of preferred stock, and is convertible
into shares of the  Company's  Common Stock at a conversion  rate equal to $7.25
per share of Common Stock subject to anti- dilution adjustments.




<PAGE>



     The Company's  stockholders approved the issuance of shares of Common Stock
upon  conversion  of the preferred  stock at a Special  Meeting of the Company's
stockholders on October 29, 1996.

     On September 30, 1996, the Company  entered into a Fourth  Amendment to the
Third Amended and Restated Credit Agreement (the "Restated Credit Agreement") to
amend certain definitions and financial covenants for the period ended September
30, 1996, as set forth in the Restated Credit Agreement. The Fourth Amendment to
the Restated Credit Agreement did not amend any financial covenants with respect
to future periods and there can be no assurance that the Company will be able to
comply with the existing  financial  covenants set forth in the Restated  Credit
Agreement with respect to such future periods.

     The Company is in  discussions  with third  parties and certain  affiliates
with  respect  to  obtaining  additional  financing  necessary  to  satisfy  the
Company's  debt  service  obligations,   anticipated  growth,  expected  capital
expenditure  needs and cash expenditures  relating to the  implementation of the
Consolidation Plan. While there can be no assurances that such financing will be
consummated  the  Company  has no reason to  believe it will be unable to obtain
such financing and satisfy its capital requirements for the foreseeable future.

Forward-Looking Statements

     Forward-looking  statements  herein are made  pursuant  to the safe  harbor
provisions of the Private  Securities  Litigation  Reform Act of 1995. There are
certain  important  factors that could cause results to differ  materially  from
those anticipated by some of the statements made herein. Investors are cautioned
that all forward-looking  statements involve risks and uncertainty.  In addition
to the  factors  discussed  above,  among the factors  that could  cause  actual
results to differ  materially  are the  following:  availability  of new release
product,  pricing strategies of competitors,  product returns from customers and
overall economic conditions.

PART II -  OTHER INFORMATION

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

A.  Annual Meeting of Stockholders

     The Annual Meeting of Stockholders of the Company was held on July 30, 1996
(the  "Meeting").  Of the  36,456,094  shares  of  Common  Stock of the  Company
entitled  to be voted at the  Meeting,  28,250,090  shares of Common  Stock were
voted in person or by proxy, constituting a quorum.

The following matters were considered and voted at the Meeting:

     (i) The  stockholders  voted to elect the  Company's  five Class I director
nominees.  Of  the  votes  cast,  Messrs.  Goldin,  Kaufmann  and  Gay  received
27,758,461 votes for election,  and 491,629 votes were withheld,  Mr. Rothschild
received 27,758,156 votes for election,  and 491,934 votes were withheld and Mr.
Marakovits received 27,758,300 votes for election and 491,790 votes




<PAGE>



     were withheld. Accordingly, the following persons were elected directors of
the Company for a three year period expiring in 1999:

                                  Barry L. Goldin
                                  Peter Kaufmann
                                  Robert C. Gay
                                  Peter Rothschild
                                  Robert Marakovits

     (ii) The stockholders also approved an amendment to the Company's 1994 Long
Term  Incentive and Share Award Plan (the "1994 Plan") to increase the number of
shares of the Company's  Common Stock which may be issued under the 1994 Plan by
3,300,000.

                        Votes cast for                   15,472,799
                        Votes cast against                1,377,563
                        Abstentions                         159,116
                        Broker non-votes                 11,240,612

     (iii)  Performance  measures under the 1994 Plan established and adopted by
the  Compensation  Committee of the Company's Board of Directors was approved by
the Company's stockholders.

                         Votes cast for                  17,843,25
                         Votes cast against                264,119
                         Abstentions                       116,678
                         Broker non-votes               10,026,038

     (iv) The stockholders  voted to ratify the appointment of Coopers & Lybrand
L.L.P. as the Company's independent public accountants for 1996.

                         Votes cast for                 28,192,813
                         Votes cast against                 42,476
                         Abstentions                        14,801
                         Broker non-votes                        0

B.  Special Meeting of Stockholders

     A Special  Meeting of  Stockholders  of the Company was held on October 29,
1996 (the "Special  Meeting").  Of the 44,724,845  shares of Common Stock of the
Company entitled to be voted at the Special Meeting, 30,110,467 shares of Common
Stock were voted in person or by proxy, constituting a quorum.

The following matters were considered and voted at the Special Meeting:

     (i) The stockholders  approved the issuance of Common Stock upon conversion
of the Company's Series A Preferred Stock.


<PAGE>




                         Votes cast for                  29,733,778
                         Votes cast against                 320,709
                         Abstentions                         62,774
                         Unvoted                         14,614,378

     (ii) The  stockholders  ratified the acquisition of Red Ant pursuant to the
Stock Acquisition and Merger Agreement (the "Merger Agreement") so as to approve
the  issuance  of the  Contingent  Stock.  After  adjustments  required by rules
promulgated  by the New York Stock  Exchange to vote the shares of Common  Stock
acquired by Mr. Teller and WCI and affiliates  pursuant to the Merger  Agreement
in the same  proportion  as  shares  voted  for  approval  of this  proposal  by
unaffiliated stockholders the vote was:

                         Votes cast for                   26,454,577
                         Votes cast against                  412,459
                         Abstentions                          62,774
                         Unvoted                          17,795,035

Item 6.      EXHIBITS AND REPORTS ON FORM 8-K

                (a)         Exhibits

     2.1 Merger  Agreement  dated  December  20, 1995,  by and among  Metromedia
International   Group,   Inc.,   Alliance   Merger  Corp.  and  the  Registrant.
(Incorporated  by reference  from Exhibit 1 filed in the  Registrant's  Form 8-K
dated December 21, 1995 (File No. 1-13054).)

     2.2 Termination and Release  Agreement dated April 29, 1996.  (Incorporated
by reference from Exhibit 1 filed in the  Registrant's  Form 8-K dated April 29,
1996 (File No 1-13054).)

     3.1 Certificate of  Incorporation,  as amended.  (Incorporated by reference
from  Exhibit  3.1 filed in the  Registrant's  Amendment  No. 1 to  Registration
Statement on Form S-4 filed September 22, 1995 (Registration No. 33-95386).)

     3.2 Revised and Restated By-Laws.*

     3.3 Certificate of Designations.*

     4.1  Restated  Stockholders'  Agreement  dated  as of  November  30,  1993.
(Incorporated   by  reference  from  Exhibit  4.1  filed  in  the   Registrant's
Registration Statement on Form S-3 dated September 22, 1995 (Registration No.
33-97280).)

     4.2 Amendment to Restated Stockholders' Agreement dated as of May 18, 1995.
(Incorporated   by  reference  from  Exhibit  4.2  filed  in  the   Registrant's
Registration Statement on Form S-3 dated September 22, 1995 (Registration No.
33-97280).)

*Filed Herewith


<PAGE>



     4.3  Indenture  dated July 25,  1995,  among the  Company,  the  Subsidiary
Guarantors and Bankers Trust  Company,  as trustee.  (Incorporated  by reference
from Exhibit 4.1 filed in the  Registrant's  Registration  Statement on Form S-4
filed August 3, 1995 (Registration No. 33- 95386).)

     4.4 First  Supplemental  Indenture dated July 26, 1995,  among the Company,
the Subsidiary  Guarantors and Bankers Trust Company, as trustee.  (Incorporated
by  reference  from  Exhibit 4.2 filed in the  Registrant's  Amendment  No. 1 to
Registration Statement on Form S-4 filed September 22, 1995 (Registration No.
33-95386).)

     4.5  Registration  Rights Agreement dated July 25, 1995, among the Company,
the Subsidiary Guarantors and the Initial Purchasers. (Incorporated by reference
from exhibit 4.3 filed in the  Registrant's  Registration  Statement on Form S-4
filed August 3, 1995 (Registration No. 33- 95386).)

     4.6  Purchase  Agreement  dated  July 18,  1995,  among  the  Company,  the
Guarantors and the Initial  Purchasers.  (Incorporated by reference from Exhibit
4.4 filed in the Registrant's Registration Statement on Form S-4 filed August 3,
1995 (Registration No. 33-95386).)

     4.7 Second  Supplemental  Indenture  dated  September  6,  1995,  among the
Company,  the  Subsidiary  Guarantors  and Bankers  Trust  Company,  as trustee.
(Incorporated by reference from Exhibit 4.5 filed in the Registrant's  Amendment
No.  1  to  Registration   Statement  on  Form  S-4  filed  September  22,  1995
(Registration No. 33-95386).)

     4.8 Purchase  Agreement made as of May 18, 1995,  between AEC Americas Inc.
and Bain Capital Fund IV L.P.,  Bain Capital Fund IV-B L.P., BCIP Associates and
BCIP Trust Associates, L.P. (Incorporated by reference from Exhibit 4.5 filed in
the Registrant's Form 10-Q for the period ended June 30, 1995 (File No.
1-13054).)

     4.9 Parent  Covenant  Agreement  dated as of May 18,  1995,  by and between
Alliance Entertainment Corp., AEC Americas,  Inc. and Bain Capital Fund IV L.P.,
Bain Capital Fund IV-B L.P.,  BCIP  Associates and BCIP Trust  Associates,  L.P.
(Incorporated by reference from Exhibit 4.6 filed in the Registrant's  Form 10-Q
for the period ended June 30, 1995 (File No 1- 13054).)

     4.10 Third  Supplemental  Indenture  dated  February  26,  1996,  among the
Company,  the  Subsidiary  Guarantors  and  Bankers  Trust  Company as  Trustee.
(Incorporated by reference from Exhibit 4.10 filed in the Registrant's Form 10-Q
for the period ended March 31, 1996 (File No 1-13054).)

     4.11 Preferred Stock Purchase  Agreement  dated July 16, 1996,  between the
Company,  BT Capital  Partners,  Inc. and BCI Growth IV, L.P.  (Incorporated  by
reference  from Exhibit 4.11 filed in the  Registrant's  Form 8-K dated July 16,
1996. (File No. 1-13054).)


*Filed Herewith



<PAGE>



     4.12 Voting Agreement dated as of August 15, 1996,  among Joe Bianco,  John
Friedman, Peter Kaufmann, Elliot Newman, Robert Marx, Alvin Teller, Bain Capital
Inc., BT Capital Partners Inc., U.S. Equity Partners, L.P., U.S. Equity Partners
(Offshore) L.P. and Wasserstein & Co., Inc.*

     10.1  Incentive  Stock Option Plan for  Executives  of Jerry  Bassin,  Inc.
(Incorporated  by  reference  from Exhibit 10.1 filed as a part of the Proxy and
Prospectus  in  connection  with the Special  Meeting  held on November 30, 1993
(File No. 33-68816).)

     10.2 1992 Non-Qualified Stock Option Plan.  (Incorporated by reference from
Exhibit 10.2 filed as part of the Proxy and  Prospectus in  connection  with the
Special Meeting held on November 30, 1993 (File No. 33-68816).)

     10.3 1993 Stock Option Plan.  (Incorporated  by reference from Exhibit 10.3
filed as part of the Proxy and Prospectus in connection with the Special Meeting
held on November 30, 1993 (File No. 33-68816).)

     10.4 1993 Stock Option  Incentive  Plan.  (Incorporated  by reference  from
Exhibit 10.4 filed as part of the Proxy and  Prospectus in  connection  with the
Special Meeting held on November 30, 1993 (File No. 33-68816).)

     10.5 Amended and Restated Employment Agreement dated as of August 15, 1996,
between the Company and Joseph J. Bianco.*

     10.6 Amended and Restated Employment  Agreement dated as of August 15,1996,
between the Company and Anil K. Narang.*

     10.8 Amended and Restated Employment Agreement dated as of August 15, 1996,
between the Company and Elliot B. Newman.*

     10.10 Lease dated March 25,  1993,  between  Howard L. Bellowe and E. James
Judd (as  Landlord)  and Encore  Distributors,  Inc.,  relating to the  premises
located at 2345 Delgany Street,  Denver,  Colorado.  (Incorporated  by reference
from Exhibit 10.11 filed as part of the Proxy and Prospectus in connection  with
the Special Meeting held on November 30, 1993 (File No. 33-68816).)

     10.11 Lease dated  November 30,  1992,  between  Harriet  Shapiro and Jerry
Bassin, Inc., relating to the premises located at 15959 N.W. 15th Avenue, Miami,
Florida, as amended. (Incorporated by reference from Exhibit 10.13 filed as part
of the Proxy and  Prospectus  in  connection  with the Special  Meeting  held on
November 30, 1993 (File No. 33-68816).)

     10.12 Stock Sale  Agreement  dated  December  11,  1992,  between R. Tobias
Knobel and the Registrant.  (Incorporated  by reference from Exhibit 10.20 filed
as part of the Proxy and Prospectus in connection  with the Special Meeting held
on November 30, 1993 (File No. 33- 68816).)

*Filed Herewith


<PAGE>



     10.13 Merger  Agreement  dated August 11, 1993,  among the  Registrant,  CD
Acquisition  Corp.,  Titus Oaks Records,  Inc.,  Alan Meltzer and Diana Meltzer.
(Incorporated  by reference  from  Exhibit  10.21 filed as part of the Proxy and
Prospectus  in  connection  with the Special  Meeting  held on November 30, 1993
(File No. 33-68816).)

     10.14 Engagement Letter dated October 29, 1992,  between the Registrant and
Tucker Anthony Incorporated. (Incorporated by reference from Exhibit 10.22 filed
in the Registrant's Form 10-K for the year ended December 31, 1993 (File No.
1-13054).)

     10.15  Amendment of Stock Sale Agreement and Employment  Agreement dated as
of  September  30,  1993,   between  R.  Tobias   Knobel  and  the   Registrant.
(Incorporated  by reference  from Exhibit 10.23 filed in the  Registrant's  Form
10-K for the year ended December 31, 1993 (File No. 1-13054).)

     10.16 Form of Employment  Agreement dated as of March 14, 1994, between the
Registrant  and Eric S. Weisman.  (Incorporated  by reference from Exhibit 10.28
filed in the  Registrant's  Form 10-K for the year ended December 31, 1993 (File
No. 1-13054).)

     10.17 Form of 1994 Long-Term Incentive and Share Award Plan.  (Incorporated
by reference from Exhibit 10.29 filed in the Registrant's Form 10-K for the year
ended December 31, 1993 (File No. 1-13054).)

     10.18 Form of Amendment  to the 1994  Long-Term  Incentive  and Share Award
Plan.  (Incorporated  by reference from Exhibit 10.18 filed in the  Registrant's
Form 10-K for the year ended December 31, 1995 (File No. 1-13054).)

     10.19  Engagement  Letter dated June 9, 1993,  between the  Registrant  and
Paine Webber  Incorporated.  (Incorporated by reference from Exhibit 10.30 filed
in the Registrant's Form 10- K for the year ended December 31, 1993 (File No.
1-13054).)

     10.20  Engagement  Letter dated May 27, 1993,  between the  Registrant  and
Bear, Stearns & Co., Inc. (Incorporated by reference from Exhibit 10.31 filed in
the Registrant's Form 10-K for the year ended December 31, 1993 (File No.
1-13054).)

     10.21  Asset  Purchase  Agreement  dated  December  16,  1993,  between the
Registrant and Nova Distributing  Corp.  (Incorporated by reference from Exhibit
10.32 filed in the  Registrant's  Form 10-K for the year ended December 31, 1993
(File No. 1-13054).)

     10.22 Merger Agreement dated as of February 4, 1994, between the Registrant
and Airlie,  Inc.  (Incorporated  by reference  from Exhibit  10.35 filed in the
Registrant's Form 8-K dated February 4, 1994 (File No. 1-13054).)

     10.24 Stock  Purchase  Agreement  dated as of April 17, 1994,  by and among
Alliance,  Premier Artists Services and the shareholders thereof.  (Incorporated
by reference from Exhibit 10.39 filed in the Registrant's Form 8-K dated May 26,
1994 (File No. 1-13054).)




<PAGE>



     10.25 Offer Document dated July 28, 1994, from AEC Holdings (UK) Limited to
the  Shareholders  of Castle and press release  issued in the United  Kingdom in
connection therewith. (Incorporated by reference from Exhibit 10.41 filed in the
Registrant's Form 10-Q for the quarterly period ended June 30, 1994 (File No.
1-13054).)

     10.26  Lease  between  the  Registrant  and The  Northwestern  Mutual  Life
Insurance  Company dated January 12, 1995,  relating to the premises  located at
15050 Shoemaker Avenue, Santa Fe Springs, California. (Incorporated by reference
from Exhibit 10.45 filed in the Registrant's Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-13054).)

     10.27 Third Amended and Restated Credit  Agreement and Guaranty dated as of
July 25,  1995,  among  the  Company,  the  Guarantors,  the Banks and The Chase
Manhattan Bank,  N.A., as Agent.  (Incorporated  by reference from Exhibit 10.50
filed in the  Registrant's  Registration  Statement  on Form S-4 filed August 3,
1995 (Registration No. 33-95386).)

     10.28 Merger  Agreement dated as of September 1, 1995,  relating to One Way
Records,  Inc.  (Incorporated  by  reference  from  Exhibit  10.51  filed in the
Registrant's  Amendment  No.  1 to  Registration  Statement  on Form  S-4  filed
September 22, 1995 (Registration No. 33-95386).)

     10.29 Merger  Agreement dated as of September 1, 1995,  relating to Deja Vu
Music,  Inc.  (Incorporated  by  reference  from  Exhibit  10.52  filed  in  the
Registrant's  Amendment  No.  1 to  Registration  Statement  on Form  S-4  filed
September 22, 1995 (Registration No. 33-95386).)

     10.30  Management  Consulting  Agreement  dated as of May 10,  1995,  among
Alliance  Entertainment Corp. and Bain Capital, Inc.  (Incorporated by reference
from Exhibit 10.51 filed in the Registrant's Form 10-Q for the period ended June
30, 1995 (File No. 1-13054).)

     10.31 Merger Agreement by and between the Company,  INDI Acquisition  Corp.
and INDI Holdings,  Inc.,  dated July 17, 1995.  (Incorporated by reference from
Exhibit 2.3 filed in the  Registrant's  Form 10-Q for the period  ended June 30,
1995. (File No. 1-13054).)

     10.32  Employment  Agreement dated as of July 1, 1995,  between the Company
and Christopher J. Joyce. (Incorporated by reference from Exhibit 10.32 filed in
the  Registrant's  Form 10-Q for the  Quarter  ended March 31,  1996.  (File No.
1-13054).)

     10.33 Quota  Purchase  Agreement  dated  October 11, 1995,  relating to the
acquisition of Distribuidora de Discos E Fitas Canta Brasil Ltda.  (Incorporated
by reference  from Exhibit filed in the  Registrant's  Form 10-Q for the Quarter
ended March 31, 1996. (File No. 1- 13054).)

     10.34  Distribution  Agreement dated June 21, 1996, between the Company and
EMI-Capitol  Music Group.  (Incorporated  by reference from Exhibit 2 filed with
the Registrant's Form 8-K dated June 21, 1996. (File No. 1-13054).)

     10.35  Letter of Intent  dated July 1, 1996  between the Company and Matrix
Software,  Inc.  (Incorporated  by reference  from Exhibit  10.35 filed with the
Registrant's Form 10-Q for the period ended June 30, 1996 (File No. 1-13054).)


<PAGE>



     10.36 First  Amendment to Third Amended and Restated  Credit  Agreement and
Guaranty  dated as of September 30, 1995,  among the Company,  AEC Holdings (UK)
Limited, the Guarantors, the Banks and The Chase Manhattan Bank, N.A., as Agent.
(Incorporated by reference from Exhibit 10.36 filed with the  Registrant's  Form
10-Q for the period ended June 30, 1996 (File No. 1-13054).)

     10.37 Second  Amendment to Third Amended and Restated Credit  Agreement and
Guaranty  dated as of December 31, 1995,  among the Company,  AEC Holdings  (UK)
Limited, Castle Communications Limited, the Guarantors,  the Banks and The Chase
Manhattan Bank,  N.A., as Agent.  (Incorporated  by reference from Exhibit 10.37
filed with the  Registrant's  Form 10-Q for the period ended June 30, 1996 (File
No. 1-13054).)

     10.38 Third  Amendment to Third Amended and Restated  Credit  Agreement and
Guaranty  dated as of June 30,  1996,  among  the  Company,  AEC  Holdings  (UK)
Limited,  Castle Communication Limited, the Guarantors,  the Banks and The Chase
Manhattan Bank,  N.A., as Agent.  (Incorporated  by reference from Exhibit 10.38
filed with the  Registrant's  Form 10-Q for the period ended June 30, 1996 (File
No. 1-13054).)

     10.39 Stock  Acquisition and Merger  Agreement dated as of August 15, 1996,
by and among the Company,  Alvin N. Teller,  Wasserstein & Co. Inc., U.S. Equity
Partners L.P. and others.  (Incorporated  by reference from Exhibit 1 filed with
the Registrant's Form 8-K dated August 15, 1996. (File No. 1-13054).)

     10.40 The 1994 Long Term Incentive and Share Award Plan.  (Incorporated  by
reference from the Registrant's Registration Statement on Form S-8 filed on June
10, 1994 - File No. 33- 80134).

     10.41 Amendment No. 1 to the 1994 Long Term Incentive and Share Award Plan.
(Incorporated by reference from the Registrant's  Registration Statement on Form
S-8 filed on September 5, 1995 - File No. 33-96592.)

     10.42  Employment  Agreement dated as of August 15, 1996,  between Alliance
Entertainment Corp. and Alvin N. Teller. *

     10.43 Stock Option Agreement between Alliance Entertainment Corp. and Alvin
N. Teller dated August 15, 1996. *

     10.44 Engagement Letter Agreement among the Company and Wasserstein Perella
& Co., Inc. dated as of August 15, 1996.*

     10.45 Right of First Refusal  Agreement dated as of August 15, 1996, by and
among Alvin Teller and Joe Bianco and Anil Narang.*


*Filed Herewith




<PAGE>



     10.46 Fourth  Amendment to Third Amended and Restated Credit  Agreement and
Guaranty  among the Company,  AEC Holdings (UK) Limited,  Castle  Communications
Limited,  The  Guarantors,  the Banks and The Chase  Manhattan  Bank,  N.A.,  as
Agent.*

     11.1 Statement Re: Computation of Earnings (Loss) per Share.  (Incorporated
by reference  from Exhibit  11.1 filed with the  Registrant's  Form 10-K for the
year ended December 31, 1995. (File No. 1-13054).)

     27.1 Financial Data Schedule.*

          (b)   Reports on Form 8-K

     The Company  reported under Item 5 on Form 8-K, dated August 15, 1996, that
it had entered into a Stock  Acquisition and Merger Agreement to acquire Red Ant
L.L.C.  See  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations - Recent Events - Acquisition of Red Ant L.L.C."

     The Company  reported under Item 5 on Form 8-K, dated August 27, 1996, that
it had consummated its acquisition of Red Ant. See "Management's  Discussion and
Analysis of  Financial  Condition  and  Results of  Operations  - Recent  Events
Acquisition of Red Ant L.L.C."











* Filed Herewith















<PAGE>



                                 SIGNATURE

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

                                  ALLIANCE ENTERTAINMENT CORP.


                                  By:     /s/ Timothy Dahltorp
                                       ------------------------------------
                                          Timothy Dahltorp
                                          Executive Vice President,
                                          Chief Financial Officer and Treasurer


Date: November 14, 1996


<PAGE>



                              Exhibit Index

Exhibit No.             Exhibit Description                            Page No.

2.1                     Merger Agreement dated                              *
                        December 20, 1995, by and
                        among Metromedia International
                        Group, Inc., Alliance Merger
                        Corp. and the Registrant.

2.2                     Termination and Release                             *
                        Agreement dated April 29, 1996.

3.1                     Certificate of Incorporation, as amended.           *

3.2                     Amended and Restated By-Laws.                       36

3.3                     Certificate of Designations.                        60

4.1                     Restated Stockholders' Agreement                    *
                        dated as of November 30, 1993.

4.2                     Amendment to Restated Stockholders'                 *
                        Agreement dated as of May 18, 1995.

4.3                     Indenture dated July 25, 1995,                      *
                        among the Company, the Subsidiary
                        Guarantors and Bankers Trust Company,
                        as trustee.

4.4                     First Supplemental Indenture dated                  *
                        July 26, 1995, among the Company,
                        the Subsidiary Guarantors and Bankers
                        Trust Company, as trustee.

4.5                     Registration Rights Agreement                       *
                        dated July 25, 1995,  among the Company,  
                        the Subsidiary Guarantors and the 
                        Initial Purchasers.

4.6                     Purchase Agreement dated                            *
                        July 18, 1995, among the Company,
                        the Guarantors and the Initial Purchasers.




<PAGE>




4.7                     Supplemental Indenture dated                        *
                        September 6, 1995, among the Company,
                        the Subsidiary Guarantors and Bankers
                        Trust Company, as trustee.

4.8                     Purchase Agreement made as of                       *
                        May 18, 1995, between AEC Americas
                        Inc. and Bain Capital Fund IV L.P.,
                        Bain Capital Fund IV-B L.P., BCIP
                        Associates and BCIP Trust Associates, L.P.

4.9                     Parent Covenant Agreement dated as                  *
                        of May 18, 1995, by and between
                        Alliance Entertainment Corp.,
                        AEC Americas, Inc. and Bain
                        Capital Fund IV L.P., Bain Capital
                        Fund IV-B L.P., BCIP Associates and
                        BCIP Trust Associates, L.P.

4.10                    Third Supplemental Indenture                        *
                        dated February 26, 1996, among
                        the Company, the Subsidiary Guarantors
                        and Bankers Trust Company as Trustee.

4.11                    Preferred Stock Purchase Agreement dated            *
                        July 16, 1996, between the Company,
                        BT Capital Partners, Inc. and BCI Growth
                        IV, L.P.

4.12                    Voting Agreement dated as of August 15, 1996,       77
                        among Joe Bianco, John Friedman, Peter
                        Kaufmann, Elliot Newman, Robert Marx, Alvin
                        Teller, Bain Capital Inc., BT Capital Partners Inc.,
                        U.S. Equity Partners, L.P., U.S. Equity Partners
                        (Offshore) L.P. and Wasserstein & Co., Inc.

10.1                    Incentive Stock Option Plan for                     *
                        Executives of Jerry Bassin, Inc.

10.2                    1992 Non-Qualified Stock Option Plan.               *

10.3                    1993 Stock Option Plan.                             *

10.4                    1993 Stock Option Incentive Plan.                   *

<PAGE>

10.5                    Amended and Restated Employment                     82
                        Agreement dated as of August 15, 1995,
                        between the Company and Joseph J. Bianco.

10.6                    Amended and Restated Employment                    104
                        Agreement dated as of August 15, 1995,
                        between the Company and Anil K. Narang.

10.8                    Amended and Restated Employment                    126
                        Agreement dated as of August 15, 1995,
                        between the Company and Elliot B. Newman.

10.10                   Lease dated March 25, 1993, between                *
                        Howard L. Bellowe and E. James Judd
                        (as Landlord) and Encore Distributors, Inc.,
                        relating to the premises located at 2345
                        Delgany Street, Denver, Colorado.

10.11                   Lease dated November 30, 1992,                     *
                        between Harriet Shapiro and Jerry Bassin,
                        Inc., relating to the premises located at
                        15959 N.W. 15th Avenue, Miami,
                        Florida, as amended.

10.12                   Stock Sale Agreement dated                         *
                        December 11, 1992, between
                        R. Tobias Knobel and the Registrant.

10.13                   Merger Agreement dated August 11, 1993,            *
                        among the Registrant, CD Acquisition Corp.,
                        Titus Oaks Records, Inc., Alan Meltzer
                        and Diana Meltzer.

10.14                   Engagement Letter dated October 29, 1992,          *
                        between the Registrant and Tucker Anthony
                        Incorporated.

10.1                    Amendment of Stock Sale Agreement                  *
                        and Employment Agreement dated as of
                        September 30, 1993, between R. Tobias Knobel
                        and the Registrant.

10.16                   Form of Employment Agreement dated as of           *
                        March 14, 1994, between the Registrant and
                        Eric S. Weisman.


<PAGE>



10.17                   Form of 1994 Long-Term Incentive and               *
                        Share Award Plan.

10.18                   Form of Amendment to the 1994                      *
                        Long-Term Incentive and Share Award Plan.

10.19                   Engagement Letter dated September 9, 1993,         *
                        between the Registrant and PaineWebber
                        Incorporated.

10.20                   Engagement Letter dated May 27, 1993,              *
                        between the Registrant and Bear, Stearns & Co., Inc.

10.21                   Asset Purchase Agreement dated                     *
                        December 16, 1993, between the Registrant
                        and Nova Distributing Corp.

10.22                   Merger Agreement dated as of                       *
                        February 4, 1994, between the Registrant
                        and Airlie, Inc.

10.24                   Stock Purchase Agreement dated as of               *
                        April 17, 1994, by and among Alliance,
                        Premier Artists Services and the shareholders
                        thereof.

10.25                   Offer Document dated July 28, 1994,                *
                        from AEC Holdings (UK) Limited to the
                        Shareholders of Castle and press release
                        issued in the United Kingdom in connection
                        therewith.

10.26                   Lease between the Registrant and                   *
                        The Northwestern Mutual Life Insurance
                        Company dated January 12, 1995, relating
                        to the premises located at 15050 Shoemaker Avenue,
                        Santa Fe Springs, California.

10.27                   Third Amended and Restated Credit Agreement        *
                        And Guaranty dated as of July 25, 1995, among
                        the Company, the Guarantors, the Banks and
                        The Chase Manhattan Bank, N.A., as Agent

10.29                   Merger Agreement dated as of September 1, 1995,    *
                        relating to Deja Vu Music, Inc.
<PAGE>

10.30                   Management Consulting Agreement dated              *
                        as of May 10, 1995, among Alliance Entertainment
                        Corp. and Bain Capital, Inc.

10.31                   Merger Agreement by and between the Company,       *
                        INDI Acquisition Corp. and INDI Holdings, Inc.,
                        dated July 17, 1995.

10.32                   Employment Agreement dated as of July 1, 1995,     *
                        between the Company and Christopher J. Joyce.

10.33                   Quota Purchase Agreement dated October 11, 1995,   *
                        relating to the acquisition of Distribuidora de
                        Discos E Fitas Canta Brasil Ltda.

10.34                   Distribution Agreement dated June 21, 1996,        *
                        between the Company and EMI-Capitol Music Group.

10.35                   Letter of Intent dated July 1, 1996 between the    *
                        Company and Matrix Software, Inc.

10.36                   First Amendment to Third Amended and               *
                        Restated Credit Agreement and Guaranty dated as of
                        September 30, 1995, among the Company,
                        AEC Holdings (UK) Limited, the Guarantors,
                        the Banks and The Chase Manhattan Bank, N.A.,
                        as Agent.

10.37                   Second Amendment to Third Amended and              *
                        Restated Credit Agreement and Guaranty dated
                        as of December 31, 1995, among the Company,
                        AEC Holdings (UK) Limited, Castle Communications
                        Limited, the Guarantors, the Banks and The Chase
                        Manhattan Bank, N.A., as Agent.

10.38                   Third Amended to Third Amended and                 *
                        Restated Credit Agreement and Guaranty dated
                        as of June 30, 1996, among the Company,
                        AEC Holdings (UK) Limited, Castle Communication
                        Limited, the Guarantors, the Banks and
                        The Chase Manhattan Bank, N.A., as Agent.

10.39                   Stock Acquisition and Merger Agreement             *
                        dated as of August 15,1996, by and
                        among the Company,
                        Alvin N. Teller, Wasserstein & Co. Inc., U.S.


<PAGE>


                        Equity Partner, L.P. and others (Incorporated
                        by reference from Exhibit 1 filed with the
                        Registrants Form 8-K dated August 15,1996.
                        File 1-13054.)

10.40                   The 1994 Long Term Incentive and Share Award Plan.  *
                        (Incorporated by reference from the Registrant's
                        Registration Statement on Form S-8 filed on
                        June 10, 1994 - File No. 33-80134.)

10.41                   Amendment No. 1 to the 1994 Long Term Incentive     *
                        and Share Award Plan.  (Incorporated by
                        reference from the Registrants Registration
                        Statement on Form S-8 filed on September 5, 1995
                        - File No. 33-96592.)

10.42                   Employment Agreement dated as of August 15,1996,   145
                        between Alliance Entertainment Corp.
                        and Alvin N. Teller

10.43                   Stock Option Agreement between Alliance            173 
                        Entertainment Corp. and Alvin N. Teller
                        dated August 15, 1996.

10.44                   Engagement Letter Agreement among the              177 
                        Company and Wasserstein Perella & Co., Inc. dated as of
                        August 15, 1996.

10.45                   Right of First Refusal Agreement dated as of       187
                        August 15, 1996 by and among Alvin Teller and Joe Bianco
                        and Anil Narang.

10.46                   Fourth Amendment to Third Amended and              192
                        Restated Credit Agreement and Guaranty among the
                        Company, AEC Holdings (UK) Limited, Castle
                        Communications Limited, the Guarantors, the Banks and
                        The Chase Manhattan Bank, N.A. as agent.

11.1                    Statement Re: Computation of Earnings (Loss)        *
                        per Share.

27.1                    Financial Data Schedule.                           206
    

------------------------
*Incorporated by Reference