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# UNITED STATESSECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

# FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

# For the Quarterly Period Ended September 30, 2004

# OR

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

# For the transition period from ________to _________

# Commission file number 0-20939

# CNET Networks, Inc.(Exact name of Registrant as specified in its Charter)

Delaware                                                                         13-3696170(State or Other Jurisdiction of Incorporation or Organization)         (I.R.S. Employer Identification Number)

# 235 Second Street, San Francisco, CA 94105(Address of Principal Executive Offices including Zip Code)

# Telephone Number (415) 344-2000(Registrants telephone number, including Area Code)

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

As of November 5, 2004 there were 143,646,911 shares of the registrants common stock outstanding.

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# CNET NETWORKS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(in thousands, except share and per share data)

|                                              | Three Months EndedSeptember 30, | Nine Months EndedSeptember 30,
|--------------------------------------------- | ------------------------------- | ------------------------------
|
|Revenues:                                     |                                 |                               
|Interactive                                   |                                 |                               
|Publishing                                    |                                 |                               
|                                              |                                 |                               
|Total revenues                                |                                 |                               
|Operating expenses:                           |                                 |                               
|Cost of revenues                              |                                 |                               
|Sales and marketing                           |                                 |                               
|General and administrative                    |                                 |                               
|Depreciation                                  |                                 |                               
|Amortization of intangible assets             |                                 |                               
|                                              |                                 |                               
|Total operating expenses                      |                                 |                               
|Operating income (loss)                       |                                 |                               
|Non-operating income (expense):               |                                 |                               
|Realized gains on investments, net            |                                 |                               
|Interest income                               |                                 |                               
|Interest expense                              |                                 |                               
|Other                                         |                                 |                               
|                                              |                                 |                               
|Total non-operating income (expense)          |                                 |                               
|                                              |                                 |                               
|Income (loss) before income taxes             |                                 |                               
|Income tax expense (benefit)                  |                                 |                               
|                                              |                                 |                               
|Net income (loss)                             |                                 |                               
|                                              |                                 |                               
|                                              |                                 |                               
|Basic net income (loss) per share             |                                 |                               
|                                              |                                 |                               
|Diluted net income (loss) per share           |                                 |                               
|                                              |                                 |                               
|Shares used in calculating basic net income   |                                 |                               
|(loss) per share                              |                                 |                               
|Shares used in calculating diluted net income |                                 |                               
|(loss) per share                              |                                 |                               

See accompanying notes to the condensed consolidated financial statements.

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# CNET NETWORKS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(in thousands, except share and per share data)

|                                               | September 30,2004 | December 31,2003
|---------------------------------------------- | ----------------- | ----------------
|ASSETS                                         |                   |                 
|Current Assets:                                |                   |                 
|Cash and cash equivalents                      |                   |                 
|Investments in marketable debt securities      |                   |                 
|Accounts receivable, net                       |                   |                 
|Other current assets                           |                   |                 
|                                               |                   |                 
|Total current assets                           |                   |                 
|Restricted cash                                |                   |                 
|Investments in marketable debt securities      |                   |                 
|Property and equipment, net                    |                   |                 
|Other assets                                   |                   |                 
|Intangible assets, net                         |                   |                 
|Goodwill                                       |                   |                 
|                                               |                   |                 
|Total assets                                   |                   |                 
|                                               |                   |                 
|LIABILITIES AND STOCKHOLDERS' EQUITY           |                   |                 
|Current liabilities:                           |                   |                 
|Accounts payable                               |                   |                 
|Accrued liabilities                            |                   |                 
|Current portion of long-term debt              |                   |                 
|                                               |                   |                 
|Total current liabilities                      |                   |                 
|Non-current liabilities:                       |                   |                 
|Long-term debt                                 |                   |                 
|Other liabilities                              |                   |                 
|                                               |                   |                 
|Total liabilities                              |                   |                 
|Stockholders' equity:                          |                   |                 
|Common stock; $0.0001 par value; 400,000,000   |                   |                 
|shares authorized; 143,520,815 outstanding at  |                   |                 
|September 30, 2004 and 142,100,372 outstanding |                   |                 
|at December 31, 2003                           |                   |                 
|Notes receivable from stockholders             |                   |                 
|Additional paid-in-capital                     |                   |                 
|Accumulated other comprehensive loss           |                   |                 
|Treasury stock, at cost                        |                   |                 
|Accumulated deficit                            |                   |                 
|                                               |                   |                 
|Total stockholders' equity                     |                   |                 
|                                               |                   |                 
|Total liabilities and stockholders' equity     |                   |                 
|                                               |                   |                 

See accompanying notes to the condensed consolidated financial statements.

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# CNET NETWORKS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(in thousands)

|                                                                  | Nine Months EndedSeptember 30,
|----------------------------------------------------------------- | ------------------------------
|
|Cash flows from operating activities:                             |                               
|Net Income (loss)                                                 |                               
|Adjustments to reconcile net income (loss) to net cash            |                               
|provided by (used in) operating activities:                       |                               
|Depreciation and amortization                                     |                               
|Asset disposals                                                   |                               
|Noncash interest expense                                          |                               
|Noncash stock compensation                                        |                               
|Allowance for doubtful accounts                                   |                               
|Gain on sale of marketable securities and privately               |                               
|held investments                                                  |                               
|Changes in operating assets and liabilities, net of acquisitions: |                               
|Accounts receivable                                               |                               
|Other assets                                                      |                               
|Accounts payable                                                  |                               
|Accrued liabilities                                               |                               
|Other long-term liabilities                                       |                               
|                                                                  |                               
|Net cash provided by (used in) operating activities               |                               
|                                                                  |                               
|Cash flows from investing activities:                             |                               
|Purchase of marketable debt securities                            |                               
|Proceeds from sale of marketable debt securities                  |                               
|Proceeds from sales of investments in privately held companies    |                               
|Investments in privately held companies                           |                               
|Proceeds from asset sales                                         |                               
|Net cash paid for acquisitions                                    |                               
|Capital expenditures                                              |                               
|                                                                  |                               
|Net cash provided by (used in) investing activities               |                               
|                                                                  |                               
|Cash flows from financing activities:                             |                               
|Payments received on stockholders' notes                          |                               
|Net proceeds from issuance of convertible notes                   |                               
|Net proceeds from employee stock purchase plan                    |                               
|Net proceeds from exercise of options                             |                               
|Principal payments on borrowings and debt retirement              |                               
|                                                                  |                               
|Net cash provided by financing activities                         |                               
|                                                                  |                               
|Net increase (decrease) in cash and cash equivalents              |                               
|Effect of exchange rate changes on cash and cash equivalents      |                               
|Cash and cash equivalents at the beginning of the period          |                               
|                                                                  |                               
|Cash and cash equivalents at the end of the period                |                               
|                                                                  |                               
|                                                                  |                               
|Supplemental disclosure of cash flow information:                 |                               
|Interest paid                                                     |                               
|Taxes paid (refunded)                                             |                               

See accompanying notes to the condensed consolidated financial statements.

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# CNET NETWORKS, INC.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2004

# (1) BASIS OF FINANCIAL STATEMENTS

BUSINESS AND BASIS OF PRESENTATION

CNET Networks, Inc. (CNET) is a leading global interactive media company informing and connecting buyers, users and sellers of personal technology, games and entertainment, and business technology products.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the financial condition, results of operations and cash flows for the periods presented. These condensed financial statements should be read in conjunction with the audited consolidated financial statements included in CNETs most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, which contains additional financial and operating information and information concerning the significant accounting policies followed by CNET.

The condensed consolidated results of operations for the three and nine months ended September 30, 2004 are not necessarily indicative of the results to be expected for the current year or any other future period.

CONCENTRATION OF CREDIT RISK

Revenues from one customer, Google, Inc., approximated 10% of total revenues for both the three and nine months ended September 30, 2004. In the fourth quarter of 2003, CNET selected Google as its primary partner for paid search results, thereby consolidating paid search opportunities that were previously spread among several providers. Approximately 5% of CNETs accounts receivable balance at September 30, 2004 is due from Google, Inc.

No revenues from any one customer exceeded 10% of total revenues for the three months ended September 30, 2003. Revenues from Gateway Inc. approximated 11% of total revenues for the nine months ended September 30, 2003. Approximately 66% of the revenues from Gateway, Inc. for the nine months ended September 30, 2003 were generated from custom publishing contracts.

BARTER

CNET trades advertising on its Internet sites in exchange for marketing services of other companies, referred to as barter revenue. These revenues and marketing expenses are recognized in the period in which the advertisements are delivered based on the fair market value of the services delivered. CNET determines the fair market value of the service delivered based on amounts charged for similar services in non-barter deals within the previous nine-month period. For both of the three and nine months ended September 30, 2004 and 2003, approximately $2.9 million and $8.8 million of our revenues were derived from barter transactions.

INCOME TAXES

Income tax expense has been recorded based on an estimated effective tax rate for the year ended December 31, 2004. The estimated effective tax rate has taken into account any change in the valuation allowance for deferred tax assets where the realization of various deferred tax assets is subject to uncertainty. Management believes that sufficient uncertainty exists regarding the future realization of deferred tax assets and, accordingly, a full valuation allowance has been provided against the gross deferred tax assets. During 2003, CNET was refunded approximately $8.6 million of recoverable taxes.

IMPAIRMENT OF GOODWILL, LONG-LIVED AND OTHER ASSETS

Long-lived assets, such as property and equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted (and without interest charges) future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

During the first quarter of 2004, CNET recorded a charge of $3.5 million in depreciation expense related to buildings and fixed assets in Switzerland, which were written down to their estimated fair value. The operations in Switzerland, which were the headquarters of our Channel operations, were transitioned into our U.S. Media operations in the second quarter of 2004. As part of the transition, CNET will no longer require the land and building owned in Switzerland and is attempting to sell them. The land and building with a fair value of $5.8 million have been reclassified to assets held for sale and are included in other current assets.

CNET has invested in equity instruments of privately held, information technology companies for business and strategic purposes. The carrying value of these investments is included in other assets in the non-current section of the balance sheet. These investments are accounted for under the cost method, as CNET does not have the ability to exert significant influence over the investee or their operations and is not required to provide any future funding to these companies. For these non-quoted investments, any changes in the estimated fair value, including any impairment, is assessed routinely based, where possible, on the pricing of new rounds of financing for the individual company, cash resources, liquidity, and other subjective factors such as CNETs estimate of the strength of the underlying business and assets including technology and intangibles. If an impairment is believed to have occurred based on CNETs assessment of these
factors, the investment is further evaluated. If it appears that there are no funding options for a company, and CNETs evaluation of their available cash resources results in a determination that they will not be able to sustain liquidity for a reasonable period of time, then the investment is fully impaired. If CNETs assessment determines that a privately held investment has sufficient liquidity, but that current rounds of financing for comparable companies are at amounts significantly less than in the past, the investment will be impaired to reflect current market conditions. However, the extent of any impairment is evaluated in conjunction with CNETs view of the subjective factors discussed above. CNETs evaluation of certain of its private investments during the second quarter of 2004 determined that an impairment should be recorded. Accordingly, during the nine months ended September 30, 2004, a charge of $1.8 million was recorded to impair two investments. At September 30,
2004, other assets included private investments with a carrying value of $10.3 million.

Under Statement of Financial Accounting Standard (SFAS) 142, Goodwill and Other Intangible Assets, goodwill is to be tested for impairment at least annually. Intangible assets with definite useful lives will continue to be amortized over their respective estimated useful lives.

Goodwill of a reporting unit is reviewed for impairment if events or changes in circumstances indicate that the carrying amount of its goodwill may not be recoverable. Impairment of reporting unit goodwill is evaluated based on a comparison of the reporting units carrying value to the implied fair value of the reporting unit. Conditions that indicate that impairment of goodwill should be evaluated include a sustained decrease in our market value or an adverse change in business climate. CNET reviews goodwill for impairment on at least an annual basis. CNET has established August 31 as the valuation date on which this annual review takes place.

CNET performed its annual evaluation of goodwill and intangible assets impairment as of August 31, 2004. The evaluation was prepared based on CNETs current and projected performance for the identified reporting units. Based on this evaluation, CNET determined that the carrying value of goodwill and other intangible assets for all its reporting units did not exceed their implied fair values. If events or changes in circumstances indicate that the assumptions used in the evaluation should be changed, CNET will re-evaluate the implied fair values of the reporting units.

STOCK-BASED COMPENSATION

CNET accounts for its stock-based employee compensation plans using the intrinsic value method. As such, compensation expense is recorded on the date of grant if the current market price of the underlying stock exceeds the exercise price. The compensation expense is recorded over the vesting period of the grant.

As allowed under SFAS 123, Accounting for Stock Based Compensation, CNET applies APB Opinion No. 25 in accounting for its stock-based compensation plans and, accordingly, no compensation cost has been recognized for the plans in the financial statements because options are granted at the current market price. Had CNET determined compensation cost based on the fair value at the grant date for its stock options under SFAS 123, CNETs net income (loss) and net income (loss) per share would have been adjusted to the pro forma amounts indicated below:

|(in thousands, except per share data)          | Three Months EndedSeptember 30, | Nine Months EndedSeptember 30,
|---------------------------------------------- | ------------------------------- | ------------------------------
|
|Net income (loss):                             |                                 |                               
|As reported                                    |                                 |                               
|Fair value based method                        |                                 |                               
|compensation expense                           |                                 |                               
|                                               |                                 |                               
|Proforma                                       |                                 |                               
|                                               |                                 |                               
|Basic and diluted net income (loss) per share: |                                 |                               
|As reported                                    |                                 |                               
|Proforma                                       |                                 |                               

SFAS No. 123 does not apply to awards prior to 1995. The weighted-average fair value of options granted in the three and nine months ended September 30, 2004 was $8.97 and $9.14, respectively. The weighted-average fair value of options granted in the three and nine months ended September 30, 2003 was $4.54 and $2.92, respectively. The fair value of each option grant is estimated on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions used for grants:

|                         | Three Months Ended September 30, | Nine Months Ended September 30,
|------------------------ | -------------------------------- | -------------------------------
|
|Dividend yield           |                                  |                                
|Expected volatility      |                                  |                                
|Risk-free interest rate  |                                  |                                
|Expected life (in years) |                                  |                                

Beginning with the third quarter of fiscal 2003, CNET decreased the estimate of the expected life of new options granted to employees from five years to three years. CNET bases its expected life assumption on historical experience as well as the terms and vesting periods of the options granted. The reduction in the estimated expected life was a result of an analysis of CNETs historical experience.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2003, the FASB issued FASB Interpretation
(FIN) 46 (revised December 2003), Consolidation of Variable Interest Entities, which addresses
how a business enterprise should evaluate whether it has a controlling interest in an entity through means other than voting rights and, accordingly, should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest Entities, which was issued in January 2003. FIN 46R is required to be applied to variable interests in variable interest entities (VIEs) created after December 31, 2003. For variable interests in VIEs created before January 1, 2004, the Interpretation will be applied beginning on January 1, 2004. For any VIEs that must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities and non-controlling interests of the VIE initially would be measured at their carrying amounts with any
difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and non-controlling interest of the VIE. On January 1, 2004, CNET implemented FIN 46R. The application of FIN 46R did not have a material impact on our consolidated financial statements.

RECLASSIFICATIONS

Certain amounts in the financial statements and notes thereto have been reclassified to conform to the current year classification.

# (2) ACQUISITIONS

On August 2, 2004, CNET acquired Twofold Photos, Inc. which operates the website at www.webshots.com (Twofold Photos, Inc. and Webshots, collectively known as Webshots). Webshots is a leading web site in the photography category, and has the largest publicly available collection of photo content. Under the terms of the agreement, CNET paid a total of $70.0 million of which $10.0 million is deferred consideration payable in three years bearing interest at a rate of 3.0% per year. The $60.0 million of consideration paid at closing was paid in cash net of the discharge of assumed employee loans in the amount of $2.6 million.

The preliminary estimated fair values of the assets acquired and liabilities assumed for the Webshots acquisition at the date of acquisition are as follows:

|(in thousands)                                 | Amount
|---------------------------------------------- | ------
|Cash acquired                                  |       
|Tangible assets acquired                       |       
|Amortizable intangible assets:                 |       
|Existing Technology, estimated life of 3 years |       
|Content, estimated life of 3 years             |       
|Trade Name, estimated life of 7 years          |       
|Existing User Base, estimated life of 7 years  |       
|Goodwill                                       |       
|                                               |       
|Total assets acquired                          |       
|Liabilities assumed                            |       
|                                               |       
|Net assets acquired                            |       
|                                               |       

Under the purchase method of accounting, the total purchase price as of the date of acquisition has been allocated to assets and liabilities based on managements preliminary estimate of fair value. A estimate of $17.4 million has been allocated to amortizable intangible assets consisting of existing technology, content, trade name, and existing user base. The excess of the purchase consideration over the fair value of the net assets acquired has been allocated to goodwill. A preliminary estimate of $52.7 million has been allocated to goodwill, and is deductible for tax purposes. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. Goodwill will not be amortized and will be tested for impairment at least annually. The preliminary purchase price allocation for Webshots is subject to revision as more detailed analysis is completed and additional information on the fair value
of the assets and liabilities becomes available. Any change in the fair value of the net assets of Webshots will change the amount of the purchase price allocable to goodwill. Liabilities assumed include approximately $380,000 of lease abandonment costs associated with Webshots former office space upon the consolidation of the Webshots employees into CNETs headquarters.

The results of Webshots operations have been included in CNETs statement of operations from the date of acquisition. The following unaudited pro forma financial information for CNET, presented in the table below, represents the combined revenue, net income and net income per share of CNET for the three and nine months ended September 30, 2004 and 2003 as if the acquisition of Webshots had occurred on the first day of the periods presented, including the amortization of identified intangible assets.

|(in thousands, except share and per share data) | Three Months EndedSeptember 30, | Nine Months EndedSeptember 30,
|----------------------------------------------- | ------------------------------- | ------------------------------
|
|Revenue                                         |                                 |                               
|Net income (loss)                               |                                 |                               
|Basic net income (loss) per share:              |                                 |                               
|Diluted net income (loss) per share             |                                 |                               

On March 19, 2004, CNET acquired EDventure Forum, Ltd. and EDventure Holdings, Inc., a provider of information services focusing on the technology and Internet industry. On April 1, 2004, CNET acquired WGR Media, a provider of editorial reviews, previews and insights to mobile gamers. The aggregate purchase price for these transactions was $5.4 million consisting of $500,000 in stock and $4.9 million in cash. The total purchase price has been allocated to the tangible and intangible assets based on estimates of their respective fair values. The purchase price of $5.4 million was allocated to intangible assets of approximately $1.6 million that are being amortized over a three-year period, goodwill of approximately $3.9 million, current assets of $1.2 million and current liabilities of $1.3 million.

In January 2004, CNET entered into an agreement to acquire the rights to distribute and circulate TV Game magazine in China. On April 27, 2004, CNET acquired the rights to distribute and circulate NetFriends magazine in China. The aggregate price paid for these rights was $4.4 million in cash. The purchase price was allocated to intangible assets of $2.4 million that are being amortized over a three-year period and $2.0 million to goodwill.

On October 14, 2004, CNET announced that it has entered into a definitive agreement to acquire the assets of ZOL and Fengniao, which operate the zol.com.cn and fengniao.com Web sites, respectively, in cooperation with Chinese subsidiaries and affiliates. The transactions total approximately $16.0 million in cash payments to be paid over the next two quarters. ZOL is a provider of online personal technology-related content and shopping services, and Fengniao is one of Chinas leading digital photography properties.

(3) GOODWILL AND INTANGIBLE ASSETS

Acquired Intangible Assets.The following table sets forth the amount of intangible assets that are subject to amortization, including the related accumulated amortization:

|(in thousands)               | September 30, 2004 | December 31, 2003
|---------------------------- | ------------------ | -----------------
|
|Amortized intangible assets: |                    |                  
|Tradename/trademarks         |                    |                  
|Registered Users             |                    |                  
|Subscriptions                |                    |                  
|Content                      |                    |                  
|Noncompetition agreements    |                    |                  
|Publishing rights            |                    |                  
|Developed technology         |                    |                  
|                             |                    |                  
|Total                        |                    |                  
|                             |                    |                  

Intangibles that are subject to amortization are amortized on a straight-line basis over three to fifteen years. Estimated future amortization expense related to acquired intangible assets at September 30, 2004 is as follows:

|(in thousands) | 
|-------------- | 
|Q4 2004        | 
|2005           | 
|2006           | 
|2007           | 
|2008           | 
|Thereafter     | 
|               | 
|               | 
|               | 

Goodwill.The following table sets forth the changes in goodwill for the nine months ended September 30, 2004:

|(in thousands)                   | Total | U.S.Media | ComputerShopper | Asia    | Europe
|-------------------------------- | ----- | --------- | --------------- | ------- | ------
|Balance as of December 31, 2003  |       |           | $               | 61,555  |       
|Acquisitions                     |       |           |                 | 58,648  |       
|                                 |       |           |                 |         |       
|Balance as of September 30, 2004 |       |           | $               | 120,203 |       
|                                 |       |           |                 |         |       

# (4) DEBT

On April 27, 2004, CNET sold $125.0 million of 0.75% Convertible Senior Notes due in 2024 to qualified institutional buyers in a private placement, which resulted in net proceeds of approximately $120.8 million after transaction costs of approximately $4.2 million. The notes will be convertible, under certain circumstances, for shares of CNET Networks, Inc. common stock based on an initial effective conversion price of approximately $15.00 per share. The notes may be called by CNET at any time after five years, and may be put to CNET by the holders in five, ten and fifteen years. If a holder of the notes exercises their put in the fifth year of the notes, the earliest date a note would be due is on April 27, 2009. These notes were registered with the Securities and Exchange Commission through a filing on Form S-3 Registration Statement, which was declared effective on June 21, 2004.

CNET used the majority of the proceeds to redeem the $113.7 million outstanding principal of its 5% Convertible Subordinated Notes due 2006. In conjunction with the redemption, $950,000 of deferred debt issuance costs related to the 5% notes were written-off and charged to interest expense and a $1.6 million prepayment penalty was recorded as other non-operating expense.

Additionally, with the reclassification of the land and building owned by CNET in Switzerland to assets held for sale, the mortgages on those buildings were reclassified to current since CNET would repay the mortgages upon the sale of the related properties. The balance outstanding under these mortgages as of September 30, 2004 is $3.7 million.

On October 14, 2004, CNET entered into a $30.0 million, 2-year credit agreement with Bank of America, N.A (revolver). The borrowings may be drawn down as revolving loans or, where the purpose is to fund a permitted acquisition or replacement of revolver used to fund a permitted acquisition, term loans. Interest rates applicable to amounts outstanding under term loans or revolvers are, at CNETs option, either the base rate or the Eurodollar rate, where the base rate is the higher of the Federal Funds rate plus 0.5% and the lenders prime rate, and the Eurodollar rate is LIBOR plus 1.25%. The credit facility carries a non-use fee of 0.275%. The borrowings are collateralized by security interests in certain of CNETs assets. The credit agreement contains restrictive covenants with which CNET must comply. These restrictive covenants, in some circumstances, limit the incurrence of additional indebtedness, payment of dividends,
transactions with affiliates, asset purchases and sales, mergers, acquisitions, prepayment of other indebtedness, liens and encumbrances. Additionally, CNET is required to meet certain financial tests, including minimum levels of consolidated EBITDA (as defined in the agreement), consolidated net income, and unrestricted net liquidity. A copy of this agreement is filed as an exhibit to CNETs Quarterly Report on Form 10-Q for the three months ended September 30, 2004.

(5) NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of net income (loss) per share:

|(in thousands, except share and per share data) | Three Months EndedSeptember 30, | Nine Months EndedSeptember 30,
|----------------------------------------------- | ------------------------------- | ------------------------------
|
|Income (loss) available to common stockholders  |                                 |                               
|                                                |                                 |                               
|Weighted average shares - basic                 |                                 |                               
|Stock options                                   |                                 |                               
|                                                |                                 |                               
|Weighted average shares - diluted               |                                 |                               
|                                                |                                 |                               
|Basic income (loss) per common share            |                                 |                               
|                                                |                                 |                               
|Diluted income (loss) per common share          |                                 |                               
|                                                |                                 |                               

Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed using the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period.

Diluted net income per share for the three months ended September 30, 2004 does not include the effect of 8,895,560 common shares related to options with a weighted average exercise price of $12.97 because their effect is anti-dilutive. Diluted net income per share for the three months ended September 30, 2004 also does not include the effect of 8,333,337 common shares related to the 0.75% Convertible Senior Notes with an average conversion price of $15.00 per share. Diluted net income per share for the nine months ended September 30, 2004 does not include the effect of 6,203,823 common shares related to options with a weighted average exercise price of $14.84 because their effect is anti-dilutive. Diluted net income for the nine months ended September 30, 2004 also does not include the effect of 4,739,779 common shares related to the 0.75% Convertible Senior Notes with an average conversion price of $15.00 per share or 1,763,114 common shares
related to the 5% Convertible Subordinated Notes with an average conversion price of $37.41.

Basic and diluted net loss per share for the three months ended September 30, 2003 does not include the effect of 524 shares of unvested restricted stock with an average exercise price of $1.18 per share because their effect is anti-dilutive. In addition, diluted net loss per share for the three months ended September 30, 2003 does not include the effect of 6,955,718 common shares related to options with an average exercise price of $7.49 per share and 3,040,242 common shares related to the 5% Convertible Subordinated Notes with an average conversion price of $37.41 per share because their effect is anti-dilutive. Basic and diluted net loss per share for the nine months ended September 30, 2003 does not include the effect of 1,838 shares of unvested restricted stock with an average exercise price of $1.18 per share because their effect is anti-dilutive. Diluted net loss per share for the nine months ended September 30, 2003 also does not include the
effect of 3,336,048 common shares related to options with an average exercise price of $4.69 per share and 3,040,242 common shares related to the 5% Convertible Subordinated Notes with an average conversion price of $37.41 per share.

At the annual meeting of stockholders on May 4, 2004, the stockholders approved the 2004 CNET Networks, Inc. Incentive Stock Award Plan. The aggregate number of common shares subject to options, stock purchase rights, stock appreciation rights, restricted stock awards, performance awards, dividend equivalents awards, deferred stock awards, and stock payment awards will not exceed 5,000,000.

# (6) COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss) for the three and nine months ended September 30, 2004 and 2003 are as follows:

|(in thousands)                           | Three Months EndedSeptember 30, | Nine Months EndedSeptember 30,
|---------------------------------------- | ------------------------------- | ------------------------------
|
|Net income (loss)                        |                                 |                               
|Other comprehensive income:              |                                 |                               
|Unrealized holding gains arising         |                                 |                               
|during the period, net of tax            |                                 |                               
|Unrealized holding losses arising        |                                 |                               
|during the period, net of tax            |                                 |                               
|Foreign currency translation gain (loss) |                                 |                               
|                                         |                                 |                               
|Comprehensive income (loss)              |                                 |                               
|                                         |                                 |                               

# (7) SEGMENTS

CNETs primary areas of measurement and decision-making include two principal business segments, U.S. Media and International Media. U.S. Media consists of an online network focused on three content categories: personal technology, games and entertainment, and business technology. International Media includes the delivery of online technology information and several technology print publications in non U.S. markets. Beginning in 2004, U.S. Media also includes Channel Services, a product database licensing business and an online technology marketplace for resellers, distributors and manufacturers. Previously, Channel Services was presented as a separate segment; however, as CNET continued to see a convergence of customer relationships between U.S. Media and the Channel Services product offerings, CNET determined that combining the reporting of the results of Channel Services within U.S. Media more accurately reflected the decision-making
processes, internal reporting and resource allocation within these businesses.

Summarized information by segment as excerpted from the internal management reports is as follows:

|(in thousands)         | Three Months Ended September 30, 2004
|---------------------- | -------------------------------------
|
|Revenues               |                                      
|Operating expenses     |                                      
|                       |                                      
|Operating income(loss) |                                      
|                       |                                      
|
|
|Revenues               |                                      
|Operating expenses     |                                      
|                       |                                      
|Operating income(loss) |                                      
|                       |                                      
|                       |                                      
|
|
|Revenues               |                                      
|Operating expenses     |                                      
|                       |                                      
|Operating income(loss) |                                      
|                       |                                      
|
|
|Revenues               |                                      
|Operating expenses     |                                      
|                       |                                      
|Operating income(loss) |                                      
|                       |                                      

Since operating income (loss) before depreciation, amortization and realignment expenses is the measure of operating performance that management uses for making decisions and allocating resources, certain operating costs are not allocated across segments. These unallocated operating costs, included in Other in the tables above, represent all costs related to the realignment of CNETs business in 2003 and all depreciation and amortization expenses. For the three months ended September 30, 2004 and 2003, Other includes $5.3 million and $5.6 million of depreciation and amortization expenses, respectively.

For the nine months ended September 30, 2004, Other includes $19.1 million of depreciation and amortization expenses. Of this amount, $3.5 million related to an impairment charge taken on our buildings and fixed assets in Switzerland used by our Channel operations. For the nine months ended September 30, 2003, Other includes $9.8 million of realignment expenses and depreciation and amortization expenses of $18.5 million. The $9.8 million of realignment expenses consisted of $2.8 million of lease abandonment expense, $890,000 of costs associated with the termination of CNETs on-air radio operations, and $6.1 million of severance (relating to 135 employees). This $9.8 million of expense was included in the statement of operations as $3.9 million in cost of revenue, $925,000 in sales and marketing and $5.0 million in general and administrative expenses.

Assets are not allocated to segments for internal reporting purposes. Segment operating income (loss) before realignment expenses and depreciation and amortization should not be considered a substitute for operating income, cash flows or other measures of financial performance prepared in accordance with accounting principles generally accepted in the United States of America.

The following table represents revenues for groups of similar services.

|                         | Three Months Ended September 30, | Nine Months Ended September 30,
|------------------------ | -------------------------------- | -------------------------------
|
|Revenues:                |                                  |                                
|Marketing services       |                                  |                                
|Licensing, fees and user |                                  |                                
|                         |                                  |                                
|Interactive              |                                  |                                
|Publishing               |                                  |                                
|                         |                                  |                                
|                         |                                  |                                
|                         |                                  |                                

|(1) |  | Marketing Services: sales of advertisements on our Internet network through impression-based advertising (fees earned from the number of times an advertisement is viewed by users of our websites) or activity-based advertising (fees earned when our users click on an advertisement or text link to visit the websites of our merchant partners, or download a software application or a whitepaper)
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Licensing, Fees and User: licensing our product database and online content, subscriptions to our online services, and other paid services
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Publishing: sales of advertisements in our print publications, subscriptions and newsstand sales of publications, and custom publishing services.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------

# (8) COMMITMENTS AND CONTINGENCIES

Lease Abandonment.In 2001, CNET performed an evaluation of its domestic and international real estate requirements. This evaluation resulted in the consolidation or abandonment of several leased facilities. In connection with these abandoned leases, CNET established an accrual for lease abandonment. The balance in this accrual was $5.1 million at December 31, 2003. During the nine-month period ended September 30, 2004, additions to this accrual were $1.2 million, of which approximately $370,000 related to the addition of the rent for the former office space of Webshots upon that acquisition with the remainder resulting from a change in assumptions regarding the subleasing of properties. For the nine months ended September 30, 2004, cash expenditure reductions to this accrual were $2.1 million. At September 30, 2004, a balance of $4.2 million remained in this accrual. The total undiscounted liability under these leases, assuming that the
spaces cannot be sublet, is approximately $4.9 million.

Legal.In August 1999, Simon Property Group (SPG) filed a trademark infringement suit in federal district court in Indianapolis against mySimon, Inc. (mySimon), a subsidiary of CNET acquired on February 29, 2000. SPG alleged that the mySimon trademark infringed SPGs Simon trademark. On August 31, 2000, following a trial on the subject, the jury found in favor of SPG and awarded damages against mySimon in the amount of $11.5 million in compensatory damages, $5.3 million for corrective advertising, and $10.0 million in punitive damages. On September 25, 2000, the court entered an order establishing an escrow for royalties pending final resolution of the litigation where mySimon pays into escrow 2% of its gross cash receipts each month.

On December 7, 2001, mySimon filed a motion for a dismissal of the case or, alternatively a new trial based on newly discovered evidence it believes SPG should have produced prior to the August 2000 trial. On March 26, 2003, the court granted mySimons motion for a new trial on all issues, thereby eliminating the original jury verdict. The court also granted mySimons motion that sanctions be imposed against SPG and reserved a decision about what the appropriate sanctions should be until later proceedings.

On July 1, 2004, the federal district court entered a judgment enforcing a settlement reached by the parties. Pursuant to the terms of the settlement, mySimon may continue to use the Simon name in exchange for the payment of a royalty to SPG and an on-going monthly royalty fee, and the placement of a disclaimer on mySimons website. The amount of the royalty payment, as well as the on-going monthly fee is not material to CNETs business, operating results or financial condition.

On August 3, 2004, a class action lawsuit was filed in the Superior Court of the State of California, County of San Francisco by Mario Cisneros and Michael Voigt on behalf of themselves, all others similarly situated and the general public against CNET and numerous other defendants. The complaint alleges that certain search results displayed by the defendants facilitate illegal internet gambling in violation of California state law. The proceeding is in its early stages, and accordingly, CNET cannot predict the impact of this litigation on its business, financial condition or results of operations.

# ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This report contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. Further information about these forward-looking statements and risks associated with our business can be found below under the subheading Special Note Regarding Forward-Looking Statements and Risk Factors.

Overview

CNET Networks, Inc. is a leading global interactive media company. Known for its editorial expertise, CNET Networks combines its award-winning content with the power of interactive technology to inform and connect buyers, users and sellers of personal technology, games and entertainment, and business technology.

We have determined that our business segments are U.S. Media and International Media. U.S. Media consists of an online network focused on three content categories: personal technology, games and entertainment, and business technology. International Media includes the delivery of online technology information and several technology print publications in non U.S. markets. Beginning in 2004, U.S. Media also includes Channel Services, a product database licensing business and an online technology marketplace for resellers, distributors and manufacturers. Previously, Channel Services was presented as a separate segment; however as we continued to see a convergence of customer relationships between U.S. Media and the Channel Services product offerings, we determined that combining the reporting of the results of Channel Services within U.S. Media more accurately reflected the decision-making processes, internal reporting, and resource allocation within
these businesses.

We earn revenues from:

| | o |  | Marketing Services: sales of advertisements on our Internet network through impression-based advertising (fees earned from the number of times an advertisement is viewed by users of our websites) or activity-based advertising (fees earned when our users click on an advertisement or text link to visit the websites of our merchant partners, or download a software application or a whitepaper)
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Licensing, Fees and User: licensing our product database and online content, subscriptions to our online services, and other paid services
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Publishing: sales of advertisements in our print publications, subscriptions and newsstand sales of publications, and custom publishing services.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------

We evaluate our revenues according to the classifications listed above. We classify our marketing services revenues and licensing, fee and user revenues as interactive revenues and our publishing revenues as publishing revenues on our consolidated statements of operations. Beginning in 2004, we renamed our core revenue stream from Internet to Interactive, as this change matches our goal to build a premier global interactive content company and more accurately describes the various revenue streams within our marketing service and licensing, fees and user revenues. Revenues for the three and nine months ended September 30, 2004 and 2003 for these categories are as follows:

|                             | Three Months Ended September 30, | Nine Months Ended September 30,
|---------------------------- | -------------------------------- | -------------------------------
|
|Revenues:                    |                                  |                                
|Marketing services           |                                  |                                
|Licensing, fees and user     |                                  |                                
|                             |                                  |                                
|Interactive                  |                                  |                                
|Publishing                   |                                  |                                
|                             |                                  |                                
|                             |                                  |                                
|                             |                                  |                                
|As a Percentage of Revenues: |                                  |                                
|Marketing Services           |                                  |                                
|Licensing, fees and user     |                                  |                                
|                             |                                  |                                
|Interactive                  |                                  |                                
|Publishing                   |                                  |                                
|                             |                                  |                                
|                             |                                  |                                
|                             |                                  |                                

We had an average 88.7 million unique
users in the third quarter of 2004 as compared to 65.5 million unique users in the third
quarter of 2003, an increase of 35%. Daily page views averaged 61.8 million in the third
quarter of 2004 compared with 40.7 million in the third quarter of 2003, a 52% increase.
Excluding Webshots, we had 80.5 million unique users and 45.5 million daily page views.
While increases or decreases in unique users and daily average page views are not necessarily
indicative of increases or decreases in financial results, we believe that these statistics are
helpful because they provide insight into the growth of the Internet as an advertising medium
resulting from increased user adoption and into user demand for CNET Networks properties
in particular.

We evaluate our financial performance primarily
on the following key measurements:

| | o | Revenues
| | - | --------

| | o | Operating income (loss)
| | - | -----------------------

| | o | Operating income (loss) before depreciation, amortization and asset impairment
| | - | ------------------------------------------------------------------------------

| | o | Net income (loss)
| | - | -----------------

| | o | Earnings (loss) per share
| | - | -------------------------

Operating expenses included in our operating income
(loss) before depreciation and amortization consist of cost of revenues, sales and marketing and general
and administrative costs, which are primarily cash related expense activities. Noncash related expenses
consist of depreciation and amortization of intangible assets and are included in our operating income
(loss).

Cost of revenues includes costs associated with the
production and delivery of our Internet sites, print publications and creation of our product database and
related technology. The principal elements of cost of revenues for our Internet operations are payroll and
 related expenses for the editorial, production and technology staff and related costs for facilities and
equipment. Cost of revenues for our publishing operations includes payroll and related expenses for
editorial personnel and costs to print and distribute our magazines and related costs for facilities and
equipment. The majority of our cost of revenues do not necessarily fluctuate proportionately with
fluctuations in revenues.

Sales and marketing expenses consist primarily of
payroll and related expenses, consulting fees and advertising expenses and related costs for facilities
and equipment.

General and administrative expenses consist of
payroll and related expenses for executive, finance and administrative personnel, professional fees
and other general corporate expenses and related costs for facilities and equipment.

As shown in the table below, we earned operating
income of $1.8 million for the three months ended September 30, 2004 and incurred an operating loss of
 $4.5 million for the three months ended September 30, 2003, and of $4.1 million and $28.9 million for
 the nine months ended September 30, 2004 and 2003, respectively. We also earned an operating income
before depreciation and amortization of $7.1 million and $1.0 million in the three months ended
September 30, 2004 and 2003, respectively, and $15.0 million for the nine months ended September 30, 2004.
We incurred an operating loss before depreciation and amortization of $10.4 million for the nine months
ended September 30, 2003. Our net income and basic and diluted income per share for the three and nine
months ended September 30, 2004 was $1.1 million, or $0.01 per share, and $2.5 million, or $0.02 per
share, respectively. Our net loss and basic and diluted loss per share for the three months ended
September 30, 2003 was $5.8 million, or $0.04 per share, and for the nine months ended September 30, 2003
was $33.2 million, or $0.24 per share.

|                                          | Three Months Ended September 30, | Nine Months Ended September 30,
|----------------------------------------- | -------------------------------- | -------------------------------
|
|Operating income (loss)                   |                                  |                                
|Depreciation                              |                                  |                                
|Amortization                              |                                  |                                
|                                          |                                  |                                
|Operating income (loss) before            |                                  |                                
|depreciation and amortization             |                                  |                                
|                                          |                                  |                                
|Net income (loss)                         |                                  |                                
|                                          |                                  |                                
|Basic and diluted income (loss) per share |                                  |                                
|                                          |                                  |                                

We believe that operating income (loss) before
depreciation and amortization is useful to management and investors in evaluating our current
operating performance, since depreciation and amortization include the impact of past transactions and costs that are not necessarily directly related to the current underlying capital requirements or performance of the business operations. Management refers to operating income before depreciation and amortization to compare historical operating results, in making operating decisions and for planning and compensation purposes. A limitation associated with this measure is that it does not reflect the costs of certain capitalized tangible and intangible assets used in generating revenue. Management evaluates the costs of these assets through other financial measures such as capital expenditures. Operating income before depreciation and amortization should be considered in
addition to, and not as a substitute for, other measures of financial performance prepared in accordance with US GAAP.

Outlook

In 2004, the demand for marketing services in the
online industry improved from prior years, and we expect continued growth in online marketing in the
fourth quarter of 2004 as well as in 2005. Through the efficiencies we have implemented in the past
few years, we have been able to improve our profitability by growing revenues faster than our operating
expenses, and we expect to continue to improve our overall margins on a year-over-year basis by achieving
operating leverage from our incremental revenue growth. We believe that we will experience growth in
interactive revenues, coming primarily from the personal technology and games and entertainment sectors,
as well as from new categories of consumer-oriented advertisers, while advertising from the business
technology sector may continue to be negatively impacted by the continuing challenges affecting the
enterprise computing industry. We anticipate that revenues from our publishing operations will
decline in the fourth quarter of 2004 as compared to the prior year due to a decrease in our custom
publishing arrangements. Revenue in the fourth quarter of 2004 is expected to increase mostly from
existing operations and partially due to the inclusion of revenues from Webshots, which we acquired
on August 2, 2004.

We believe that marketing spending on the Internet, as in traditional media, fluctuates significantly with economic cycles and during the calendar year, with spending being weighted towards the end of the year to reflect trends in the retail industry. Our historical revenues have exhibited some degree of seasonality with higher revenues in the fourth quarter due to increased marketing spending by our customers and with lower revenues in the first quarter reflecting lower levels of marketing spending. Marketing expenditures account for a majority of our revenues. Fluctuations in marketing expenditures generally, or with respect to Internet-based marketing specifically, could therefore have a material adverse effect on our business, financial condition or operating results. Also, this seasonality historically results in a weakness in Internet usage during the summer months, and can impact our quarter over quarter growth.

# RESULTS OF OPERATIONS

# Revenues

Total Revenues. Total revenues were $70.5 million and $57.7 million for the three months ended September 30, 2004 and 2003, and were $201.9 million and $172.7 million for the nine months ended September 30 2004 and 2003, respectively. Total revenues increased 22% for the quarter and 17% for the nine months ended September 30, 2004 primarily due to growth of our interactive revenue. During the third quarter of 2004, Webshots contributed approximately $2.0 million in revenues since date of acquisition. Publishing revenues decreased for both of the periods ended September 30, 2004 as compared to the same periods of 2003.

For both of the three and nine months ended September 30, 2004 and 2003, approximately $2.9 million and $8.8 million of our revenues were derived from barter transactions. Barter transactions occur when we deliver marketing services for the marketing services of other companies. These revenues and marketing expenses were recognized at the fair value of the advertisements delivered.

Interactive Revenues

Marketing Services Revenues.Marketing services revenues were $52.6 million and $39.3 million and represented 75% and 68% of total revenues for the three months ended September 30, 2004 and 2003, respectively. Marketing services revenues were $153.2 million and $115.6 million and represented 76% and 67% of total revenues for the nine months ended September 30, 2004 and 2003, respectively. The increase in marketing services revenues of $13.3 million, or 34%, and of $37.6 million, or 33%, for the three and nine months ended September 30, 2004, respectively, as compared to the same periods of the prior year reflects strong growth from our personal technology and games and entertainment content areas, as well as growth in paid search and international media.The increase in marketing services revenue is attributable not only to growth in categories where we have traditionally seen demand, such as computing, consumer electronics and games,
but also modest contributions from new categories of advertisers in sectors such as automobiles, consumer packaged goods, movies and music, reflecting our expansion of content offerings in the areas of personal technology and games and entertainment.

Licensing, Fees and User.Licensing, fees and user revenues were $8.7 million and $6.8 million and represented 12% of total revenues for both of the three-month periods ended September 30, 2004 and 2003. Licensing, fees and user revenues were $22.9 million and $19.4 million for the nine months ended September 30, 2004 and 2003, respectively, and represented 11% of total revenues for both of the nine-month periods. The $1.9 million, or 28%, increase in the three months ended September 30, 2004 reflects equal amounts of growth from existing operations and the acquisition of Webshots, reflecting revenue from its Premium Services offerings. The $3.5 million, or 18%, increase in the nine months ended September 30, 2004 was primarily due to revenues from EDventures PC Forum conference after our acquisition of that company in March 2004 and revenues from Webshots.

Publishing Revenues.Publishing revenues were $9.1 million and $11.6 million and represented 13% and 20% of total revenues for the three months ended September 30, 2004 and 2003, respectively. Publishing revenues were $25.8 million and $37.7 million and represented 13% and 22% of total revenues for the nine months ended September 30, 2004 and 2003, respectively. The decrease in publishing revenues was primarily due to lower custom publishing revenues in the current year period as compared to last year.

# Operating Expenses

Cost of Revenues, Sales and Marketing, and
General and Administrative.Total operating expenses excluding depreciation and amortization were
$63.4 million and $56.7 million for the three months ended September 30, 2004 and 2003, representing
approximately 90% and 98% of total revenues, respectively. Total operating expenses excluding depreciation
and amortization were $187.0 million and $183.1 million for the nine months ended September 30, 2004 and
2003, representing approximately 93% and 106% of total revenues, respectively. For the nine months ended
September 30, 2003, approximately $9.8 million of realignment costs were included in cost of revenues,
sales and marketing, and general and administrative. Excluding the realignment costs incurred in 2003,
these expenses increased approximately 8% for the nine months ended September 30, 2004 when compared to
the prior year. This increase related primarily to expanding our workforce to
accommodate our revenue growth mostly in the areas of content creation and sales and marketing, as well as personnel added through acquisitions. Also included in operating expenses in the nine months ended September 30, 2004 was the net effect of two tax transactions. During the second quarter of 2004, we learned of a payroll tax liability related to a transaction that occurred prior to our acquisition of ZDNet. We recorded a charge of $2.1 million for this tax liability in the nine months ended September 30, 2004. Additionally, a tax liability of $2.1 million related to a sale of assets by ZDNet expired during the nine months ended September 30, 2004 resulting in the reversal of that accrual. The net effect of these two events was not material to our operating expenses.

Depreciation and Intangible Assets Amortization.Depreciation expense was $3.7 million and $3.8 million for the three months ended September 30, 2004 and 2003 and was $14.9 million and $13.3 million for the nine months ended September 30, 2004 and 2003, respectively. The increase in depreciation expense in the nine months ended September 30, 2004 as compared to prior year resulted from $3.5 million of charges related to buildings and fixed assets in Switzerland, which were written down to their estimated fair value. The operations in Switzerland, which were the headquarters of our Channel operations, were transitioned into our U.S. Media operations in the second quarter of 2004. As part of that transition, we will no longer require the land and building we own in Switzerland, and we are attempting to sell them. We have reclassified the land and building to assets held for sale.

Intangible assets amortization expense was $1.6 million and $1.7 million for the three months ended September 30, 2004 and 2003, and $4.1 million and $5.2 million for the nine months ended September 30, 2004 and 2003, respectively. We expect that our amortization expense will increase during the remainder of this year due to the intangible assets acquired during 2004.

# Operating Loss

We recorded operating income of $1.8 million for the three months ended September 30, 2004, and we incurred an operating loss of $4.5 million for the three months ended September 30, 2003. The increase in operating income in the three months ended September 30, 2004 as compared to the three months ended September 30, 2003 was due to an increase in revenues of $12.7 million partially offset by increased expenses to accommodate that revenue growth.

We recorded an operating loss of $4.1 million and $28.9 million for the nine months ended September 30, 2004 and 2003, respectively. The decrease in operating loss of $24.8 million for the nine months ended September 30, 2004 as compared to the nine months ended September 30, 2003 related to an increase in revenues of $29.2 million.

# Operating Income (Loss) before
Depreciation and Amortization

As shown in the table in the Overview section
above, we had an operating income before depreciation and amortization of $7.1 million and $1.0
million for the three months ended September 30, 2004 and 2003, respectively. Operating income before depreciation and amortization increased by $6.1 million. The increase primarily related to an increase in revenues of $12.7 million.

For the nine months ended September 30, 2004,
 we had an operating income before depreciation and amortization of $15.0 million, and for the nine
months ended September 30, 2003 we had an operating loss before depreciation and amortization of $10.4 million. Operating income (loss) before depreciation and amortization improved by $25.4 million. The improvement related to an increase in revenues of $29.2 million.

# Nonoperating Income and Expense

Realized Gain/Loss on Investments.We recognized a gain of $13.1 million during the nine months ended September 30, 2004 from the sale of three private investments. Our investments in these companies were purchased upon the acquisition of those companies by third parties. This gain was offset by an impairment loss of $1.8 million on other privately-held investments.

Interest Expense.Interest expense decreased by $1.0 million for the three months ended September 30, 2004 as compared to the same period of the prior year. The decrease resulted from the redemption of our 5% Convertible Subordinated Notes through the issuance of 0.75% Convertible Senior Notes. For the nine months ended September 30, 2004, the decrease in interest resulting from the lower interest rate on debt after redemption of the 5% Notes was offset by the write-off of $950,000 of deferred debt issuance costs related to the redeemed 5% Convertible Subordinated Notes and approximately $558,000 resulting from a payroll tax liability related to a transaction that occurred prior to our acquisition of ZDNet.

Other Expense.Other expense for the nine months ended September 30, 2004 consisted primarily of $1.6 million related to an optional redemption premium due when we redeemed the remaining $113.7 million principal balance of our 5% Convertible Subordinated Notes due in 2006 with the proceeds from the offering of our $125.0 million 0.75% Convertible Senior Notes Due in 2024 offset by foreign exchange gain related to fixed assets located in Switzerland that were reclassified to assets held for sale during the first quarter of 2004.

# Net Income (Loss)

We recorded net income of $1.1 million or $0.01
per basic and diluted share for the three months ended September 30, 2004 compared to a net loss of
$5.8 million or $0.04 per basic and diluted share for the three months ended September 30, 2003.
The increase in the current quarter earnings as compared to the prior year period was due primarily
to an increase in revenues partially offset by increased operating expenses to accommodate the
revenue growth

We recorded net income of $2.5 million or $0.02
per basic and diluted share for the nine months ended September 30, 2004 compared to a net loss of
$33.2 million or $0.24 per basic and diluted share for the nine months ended September 30, 2003.
The increase in the current year net income as compared to the prior year period net loss was due
primarily to an increase in revenues partially offset by an increase in operating costs, as well as
$11.3 million of realized net gains on investments.

# Segment Revenues and Operating Expenses

For the three and nine months ended
September 30, 2004 as compared to the same periods of the prior year, revenues increased for both the
 U.S. Media and International Media segments. The U.S. revenue increase reflects growth from existing
operations within marketing services, an increase in licensing, fees and user revenues from existing
operations, as well as from the acquisition of EDventure and Webshots, and reduced publishing revenues
due to a decline from custom publishing. Revenues from the International segment reflect increases from
existing operations, including exchange rate differences and acquisitions.  Revenue growth for international
operations growth of 42% for the three months ended September 30, 2004 as compared to the three
months ended September 30, 2003, included growth of 24% from existing operations, which included
foreign exchange rate changes.  Revenue growth for international operations of 50% for the nine months
ended September 30, 2004 as compared to the nine months ended September 30, 2003, included growth of 28%
from existing operations, which included foreign exchange rate changes.

For the three and nine months ended
September 30, 2004, both business segments have decreased operating costs as a percentage of related revenues as compared to the same period of prior year primarily due to the ability to grow revenue at a rate higher than related expense growth reflecting the operating leverage derived from product improvements and the fixed nature of expenses in our Interactive business.

LIQUIDITY AND CAPITAL RESOURCES

When evaluating our overall cash position for the purpose of assessing our liquidity, we consider our cash and cash equivalents, short-term and long-term investments in marketable debt securities and restricted cash.

|(in millions)                         | September 30, 2004 | December 31, 2003
|------------------------------------- | ------------------ | -----------------
|Cash and cash equivalents             |                    |                  
|Short-term marketable debt securities |                    |                  
|Long-term marketable debt securities  |                    |                  
|Restricted cash                       |                    |                  
|                                      |                    |                  
|Total cash and investments            |                    |                  
|                                      |                    |                  

The critical components of our cash flows include:

| | o | Net income (loss), as adjusted for noncash operating expenses
| | - | -------------------------------------------------------------

| | o | Working capital requirements
| | - | ----------------------------

| | o | Cash used for investments and acquisitions
| | - | ------------------------------------------

| | o | Capital expenditures
| | - | --------------------

| | o | Debt obligations or debt retirement
| | - | -----------------------------------

| | o | Proceeds from stock options and employee stock purchase plans.
| | - | --------------------------------------------------------------

Operating.Net cash provided by operating activities of $9.7 million for the nine months ended September 30, 2004 included net income of $2.5 million, depreciation and amortization totaling $19.1 million, a gain on sale of investments of $11.3 and a decrease in working capital of $5.1 million. Net cash used in operating activities of $7.2 million for the nine months ended September 30, 2003 included a net loss of $33.2 million, depreciation and amortization of $18.5 million offset by an increase in working capital of $5.0 million primarily due to improved collections of accounts receivable. We anticipate we will continue to require cash for working capital purposes as our business expands.

Investing.Net cash used in investing activities of $56.2 million for the nine months ended September 30, 2004 was primarily attributable to the sale of privately held investments offset by cash paid for acquisitions and capital expenditures. On August 2, 2004, we acquired Webshots, a digital photography website. Under the terms of the agreement, we paid $60.0 million in cash and $10.0 million in deferred consideration. We regularly evaluate investment opportunities, and it is likely that we will make additional investments or acquisitions.

Net cash provided by investing activities of $17.8 million for the nine months ended September 30, 2003 was primarily attributable to proceeds from the sale of marketable debt securities offset by purchases of marketable debt securities, acquisitions and capital expenditures.

On October 14, 2004, CNET announced that it has entered into a definitive agreement to acquire the assets of ZOL and Fengniao, which operate the zol.com.cn and fengniao.com Web sites, respectively, in cooperation with Chinese subsidiaries and affiliates. The transactions total approximately $16.0 million in cash payments to be paid over the next two quarters. ZOL is a provider of online personal technology-related content and shopping services, and Fengniao is one of Chinas leading digital photography properties.

Capital expenditures are expected to be between $14.0 million and $14.5 million for the full year 2004.

Financing.Cash provided by financing activities of $12.3 million for the nine months ended September 30, 2004 was primarily due to the issuance of common stock through the exercise of stock options and the employee stock purchase plan and the receipt of $125.0 million in proceeds from the offering of our 0.75% Convertible Senior Notes offset by the repayment of $113.7 million of our 5% Convertible Subordinated Notes. Cash provided by financing activities of $6.5 million for the nine months ended September 30, 2003 was primarily attributable to proceeds from the issuance of common stock through the exercise of stock options.

As of September 30, 2004, we had obligations outstanding under notes payable totaling $129.3 million. Notes payable included $125.0 million of 0.75% Convertible Senior Notes due in 2024. These notes are convertible, under certain circumstances, for shares of CNET Networks, Inc. common stock based on an initial effective conversion price of approximately $15.00 per share. The notes may be called by us at any time after five years, and may be put to CNET by the holders in five, ten and fifteen years. We used the majority of the proceeds to redeem the $113.7 million outstanding principal of our 5% Convertible Subordinated Notes due 2006. This refinancing significantly lowers the carrying cost of our debt, and extends the maturity date of the $125.0 million notes to March 2009, which improves our flexibility to consider investment opportunities.

On October 14, 2004, CNET entered into a $30.0 million, 2-year credit agreement with Bank of America, N.A. The borrowings may be drawn down as revolving loans or, where the purpose is to fund a permitted acquisition or replacement of revolver used to fund a permitted acquisition, term loans. Interest rates applicable to amounts outstanding under term loans or revolvers are, at CNETs option, either the base rate or the Eurodollar rate, where the base rate is the higher of the Federal Funds rate plus 0.5% and the lenders prime rate, and the Eurodollar rate is LIBOR plus 1.25%. The credit facility carries a non-use fee of 0.275%. The borrowings are collateralized by security interests in certain of our assets. The credit agreement contains restrictive covenants with which CNET must comply. These restrictive covenants, in some circumstances, limit the incurrence of additional indebtedness, payment of dividends, transactions with affiliates,
asset purchases and sales, mergers, acquisitions, prepayment of other indebtedness, liens and encumbrances. Additionally, CNET is required to meet certain financial tests, including minimum levels of consolidated EBITDA (as defined in the agreement), consolidated net income, and unrestricted net liquidity. A copy of this agreement is filed as an exhibit to CNETs Quarterly Report on Form 10-Q for the three months ended September 30, 2004.

As of September 30, 2004, our aggregate cash balances totaled $93.6 million, consisting of $73.8 million cash and equivalents, short-term and long-term investments in marketable debt securities as well as $19.8 million of restricted cash. We believe that existing funds will be sufficient to meet our anticipated cash needs to cover operations and for working capital fluctuations and for capital expenditures for the next 12 months, including the $16.0 million for the acquisitions of ZOL and Fengnaio. However, any significant acquisitions completed in the future could reduce our cash balances and may affect our liquidity and funding needs. As a result, we may determine to raise proceeds for potential acquisitions through the issuance of debt or equity securities. Our ability to raise such additional capital will depend on market conditions at the time.

On October 26, 2004, we filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission covering the issuance of up to $300.0 million in securities. This shelf registration and the revolving credit facility enables us to take advantage of favorable market conditions and opportunistically access the capital markets and strengthens our liquidity position and provides financial flexibility to fund growth and further expansion opportunities

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements. The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a number of estimates and assumptions relating to the reporting of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate these estimates, including those related to collectibility of receivables, investments, goodwill and intangible assets and contingencies. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those
estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue recognition

We recognize revenues once the following criteria are met:

| | o | Persuasive evidence of an arrangement exists
| | - | --------------------------------------------

| | o | Delivery of our obligation to our customer has occurred
| | - | -------------------------------------------------------

| | o | The price to be charged to the buyer is fixed or determinable
| | - | -------------------------------------------------------------

| | o | Collectibility of the fees to be charged is reasonably assured
| | - | --------------------------------------------------------------

We have several revenue streams. For each revenue
stream, evidence of the arrangement, delivery and pricing may be different. For all revenue streams, we
determine that collectibility is reasonably assured through a standardized credit review to determine
each customers credit worthiness.

Marketing Services.We recognize revenues from the sale of impression-based advertisements on our online network in the period in which the advertisements are delivered. The arrangements are evidenced either by insertion order or contract that stipulate the types of advertising to be delivered and pricing. Our customers are billed based on a discounted list price with no amounts subject to refund. When recognizing revenues, the discounts granted are applied to each type of advertisement purchased based on the relative fair value of each element.

We refer to the fees charged to merchants based on the number of users who click on an advertisement or text link to visit websites of our merchant partners as activity-based advertising. For activity-based advertising, the arrangement is evidenced by a contract that stipulates the fee per activity. The fee becomes fixed and determinable upon delivery of a user clicking on an advertisement. These revenues are recognized in the period in which the activity occurs and are therefore not subject to refund.

In certain arrangements, we sell multiple deliverables to customers as part of a multiple-element arrangement. For these arrangements, we allocate revenue to each deliverable based on the relative fair value of each deliverable. Revenue is recognized in these arrangements as we deliver on our obligation.

We trade marketing services in exchange for
marketing services of other companies, referred to as barter revenue. These revenues are
recognized in the period in which the advertisements are delivered based on the fair market value of the
services delivered. We determine the fair market value of the service delivered based upon amounts charged
for similar services in non-barter deals within the previous six-month period.

Licensing, Fees and User.Revenues for subscriptions to our Internet sites, print publications, product database and procurement services are recognized on a straight-line basis over the term of the subscription. Upon execution of a contract, billing and commencement of the services, we record deferred revenue for the fee charged. This deferred revenue is recognized on a straight-line basis over the period of the arrangement. The amounts under contract are not refundable after the customer has used the service.

Publishing.Advertising revenues from our print and custom print publications are recognized in the month that the related publications are sent to subscribers or become available at newsstands. Newsstand revenue from our print publications is recognized when the publications are delivered to the newsstand at which time a reserve is recorded against the value of the publications delivered based on the number of magazines that we expect to be returned. To ensure these reserves are adequate, we review the sell-through history of the publications on a monthly basis.

# Collectibility of receivables

We maintain allowances for doubtful accounts
for estimated losses resulting from the inability of our customers to make required payments. We base
our allowances on periodic assessment of our customers liquidity and financial condition through
credit rating agencies reports, financial statement reviews and historical collection trends. If the
financial condition of our customers were to deteriorate and thereby result in an inability to make
payments, additional allowances would be required.   As of September 30, 2004 and
December 31, 2003, our allowance for doubtful accounts amounted to $10.4 million and $11.9 million,
respectively.

# Goodwill and intangibles impairment

Effective January 1, 2002 under SFAS 142,
Goodwill and Other Intangible Assets. goodwill and intangible assets with indefinite useful lives are to be tested for impairment at least annually. Intangible assets with definite useful lives will continue to be amortized over their respective estimated useful lives. Although the provisions of SFAS 142 were not effective in their entirety until January 1, 2002, the goodwill acquired in business combinations which occurred after September 30, 2001 fell under the condition of SFAS 142 requiring no amortization of goodwill arising from transactions completed after June 30, 2001. Therefore, goodwill arising from any such transactions has not been amortized.

Goodwill and intangible assets of a reporting
unit are reviewed for impairment if events or changes in circumstances indicate that the carrying amount
of its goodwill or intangible assets may not be recoverable. Impairment of reporting unit goodwill is
evaluated based on a comparison of the reporting units carrying value to the implied fair value
of the reporting unit. Conditions that indicate that impairment of goodwill should be evaluated include
a sustained decrease in our market value or an adverse change in business climate. On an ongoing basis, we will review goodwill for impairment on at least an annual basis with a valuation date of August 31 having been established as the date on which this annual review will take place.

# Contingencies

We evaluate whether a liability must be
recorded for contingencies based on whether a liability is probable and estimable. Our most
significant contingency relates to our lease guarantee for office space in New York City
(as described in Item 3  Legal Proceedings and Note 10 of Item 8
 Financial Statements in our Annual Report on Form 10-K, respectively). 
 If the financial condition of the primary lessee or any of its sublessees were to
deteriorate and thereby result in an inability to make their lease payments, we would be
required to make additional lease payments under the guarantee. Currently, all of the floors of the
building that we guarantee are subject to a lease in good standing with Ziff-Davis Media. 
As of December 31, 2003, our maximum exposure under the lease guarantee was $178.5 million,
which we believe would be offset by replacement leases and subleases.

RECENT ACCOUNTING PROUNOUNCEMENTS

On March 31, 2004, the Financial Accounting
Standards Board (FASB) ratified the consensus reached by the Emerging Issues Task Force (EITF)
on Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and its Application
to Certain Investments. The consensus reached was regarding disclosures about unrealized losses
on available-for-sale debt and equity securities accounted for under FASB No. 115, Accounting for
Certain Investments in Debt and Equity Securities, and No. 124 Accounting for Certain
Investments Held by Not-for-Profit Organizations. The guidance for evaluating whether an investment
is other-than-temporarily impaired should be applied in other-than-temporary impairment evaluations made
in reporting periods beginning after June 15, 2004. The disclosures are effective in annual financial
statements for fiscal years ending after December 15, 2003, for investments accounted for under Statements
115 and 124.  For all other investments within the scope of this issue, the disclosures are effective
in annual financial statements for fiscal years ending after June 15, 2004. The additional disclosures for
cost method investments are effective for fiscal years ending after June 15, 2004. In September 2004, the FASB
delayed the accounting provusions of EITF Issue No. 03-l; however, the disclosure requirements are
effective for our annual period ending December 31, 2004. We are currently analyzing this
consensus to determine its impact on our consolidated financial statements.

In October 2004, the FASB concluded that the proposed Statement 123R, Share-Based Payment, which would require all companies to measure compensation cost for all share-based payments, including employee stock options, at fair value, would be effective for public companies for interim or annual periods beginning after June 15, 2005. The FASB has tentatively concluded that companies could adopt the new standard using either the modified prospective transition method or the modified retrospective transition method. Under the modified prospective transition method, a company would recognize share-based employee compensation cost from the beginning of the fiscal period in which the recognition provisions are first applied as if the fair-value-based accounting method had been used to account for all employee awards granted, modified, or settled after the effective date and to any awards that were not fully vested as of the effective date.
Measurement and attribution of compensation cost for awards that are not vested as of the effective date
of the proposed Statement would be based on the same estimate of the grant-date fair value and the same
attribution method used previously under Statement 123 (either for recognition or pro forma purposes).
Under the modified retrospective transition method, a company would recognize employee compensation cost
for periods presented prior to the adoption of Statement 123R in accordance with the original provisions
of Statement 123; that is, an entity would recognize employee compensation cost in the amounts reported in
the pro forma disclosures provided in accordance with Statement 123. A company would not be permitted to
make any changes to those amounts upon adoption of the proposed Statement unless those changes represent
a correction of an error (and are disclosed accordingly). For periods after the date of adoption of
Statement 123R, the modified prospective transition method described above
would be applied. Since we currently report stock-based compensation using the intrinsic-value method,
this requirement to expense stock-based compensation based on fair-value measurements rather than allow
voluntary reporting could reduce our future earnings or increase our future losses. We are in the process
of determining the impact of this statement on our consolidated financial statements, which could be
material.

On July 1, 2004, the EITF reached a tentative
conclusion regarding Issue No. 04-8, The Effect of Contingently Convertible Instruments on
Diluted Earnings per Share which proposed that contingently convertible debt instruments
should be included in diluted earnings per share computations. On October 13, 2004, the FASB
ratified this consensus to be effective for periods ending after December 15, 2004. On April 27, 2004,
CNET issued $125.0 million of 0.75% Convertible Senior Notes due in 2024 and includes the provisions of
contingent conversion. Under this consensus, the 8,333,337 shares of CNET Networks, Inc. common stock
issuable under the provisions of the 0.75% Convertible Senior Notes will be included in future diluted
earnings per share computation. If EITF No. 04-8 had been in effect in the third quarter of 2004, there
would have no effect on our diluted earnings per share for the three and nine months ended
September 30, 2004.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS

This Quarterly Report on Form 10-Q contains
forward- looking statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements are any statements other than statements of historical fact. Examples of forward-looking
statements include projections of earnings, revenues or other financial items, statements of the plans
and objectives of management for future operations, and statements concerning proposed new products and
services, and any statements of assumptions underlying any of the foregoing. In some cases, you can
identify forward-looking statements by the use of words such as may, will, expects,
 should, believes, plans, anticipates, estimates, predicts, potential, or continue, and any
other words of similar meaning.

Statements regarding our future financial performance
or results of operations, including expected revenue growth, operating income growth, growth in leads,
future expenses, future operating margins and other future or expected performance are subject to the
following risks: decreases in advertising spending on the Internet, especially in the technology sector,
or on our properties in particular, which could be prompted by increased weakness in corporate or consumer
spending, competition from other media or other factors; the failure of existing advertisers to meet or
renew their advertising commitments; the loss of marketing revenue and users to our competitors, especially
in the highly-competitive field of comparative shopping services; the inability to develop or maintain a
customer base with attractive product offerings, which could adversely affect our revenues; a decline in
revenues from our print publications as more marketing spending shifts
to the Internet; seasonal weakness in Internet usage during the summer months; consolidation among
technology customers who are advertisers on our properties; the acquisition of businesses or the launch
of new lines of business, which could decrease our cash position, increase operating expense and dilute
operating margins; an increase in intellectual property licensing fees, which could increase operating
expense, including amortization; failure to successfully integrate acquired companies, which could result
in increased expenses or loss of anticipated revenues; changes in domestic and international laws and
regulations that could affect our operations; system disruptions or security breaks to our systems,
which could disrupt our operations; and the general risks associated with our businesses.

Any shortfall in revenue or earnings compared to
analysts or investors expectations could cause, and has in the past, caused an immediate
and significant decline in the trading price of our common stock. In addition, we may not learn of such
shortfalls until late in the fiscal quarter, which could result in an even more immediate and greater
decline in the trading price of our common stock.

The Securities and Exchange Commission, as directed
by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring public companies to include a
report of management on the companys internal controls over financial reporting in its annual reports
on Form 10-K that contain an assessment by management of the effectiveness of the CNETs internal
controls over financial reporting. In addition, our independent registered public accounting firm must
attest to and report on managements assessment of the effectiveness of our internal controls over
financial reporting. This requirement will first apply to our Annual Report on Form 10-K for the fiscal
year ending December 31, 2004. While we are expending significant resources in developing the necessary
documentation and testing procedures required by Section 404, there can be no assurances that we will
comply with all of the
requirements imposed by Section 404. If we do not effectively complete our assessment or if our internal
controls are not designed or operating effectively, our independent registered public accounting firm may
either disclaim an opinion as it relates to management's assessment of the effectiveness of our internal
control or may issue a qualified opinion on the effectiveness of our internal controls.

For a more detailed discussion of risks about our business, see CNET Networks, Inc. Annual Report on Form 10-K for the year ended December 31, 2003 and subsequent Forms 10-Q and Forms 8-K, as well as our definitive proxy statement dated March 18, 2004 and other Securities and Exchange Commission filings, including under the captions Risk Factors and Managements Discussion and Analysis of Results of Operations.

Any or all of our forward-looking statements in this
report and in any other public statements we make may turn out to be wrong. They can be affected by
inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned
in the discussion in this report will be important in determining future results. Consequently, no
forward-looking statement can be guaranteed. Actual future results may vary materially. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our reports to the Securities and Exchange Commission. Also note that we provide cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our businesses. These are factors that we think could cause our actual results to differ materially
from expected and historical results. Other factors besides those listed here could also adversely affect us. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

# ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to the impact of interest rate changes and changes in the market values of our investments.

Interest Rate Risk.Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We have not used derivative financial instruments in our investment portfolio. We invest our excess cash in debt instruments of the United States Government and its agencies, and in high-quality corporate issuers that, by policy, limit the amount of credit exposure to any one issuer. We protect and preserve our invested funds by limiting default, market and reinvestment risk. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we
may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates.

Investment Risk.We invest in equity instruments of privately held, information technology companies for business and strategic purposes. These investments are included in other long-term assets and are accounted for under the cost method, as we do not have the ability to exert significant influence over the investee or their operations. For these non-quoted investments, our policy is to regularly review the assumptions underlying the operating performance and cash flow forecasts in assessing the carrying values. We identify and record impairment losses on investments when events and circumstances indicate that such assets might be impaired.

Foreign Currency Risk.The revenues and
expenses associated with our overseas operations are exposed to foreign currency risk. Changes in value of the U.S. dollar against the currencies in which those operations are conducted causes increases or decreases in the ongoing financing of those operations, and results in an increase or decrease in our recorded revenues and expenses and may impact our operating income. We monitor our foreign currency exposures regularly to assess our risk and to determine if we should hedge our currency positions.

# ITEM 4. Controls and Procedures

|(a) |  | Evaluation of disclosure controls and procedures. Our chief executive officer and our chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934, as of a date (the Evaluation Date) within 90 days before the filing date of this quarterly report, have concluded that as of the Evaluation Date our disclosure controls and procedures were adequate and designed to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | Changes in internal controls. There were no significant changes in our internal controls or, to our knowledge, in other factors that could significantly affect our disclosure controls and procedures subsequent to the Evaluation Date.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Given the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, which the company may have detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Further, the design of a control system must reflect the fact that there are resource constraints, and that benefits of controls must be considered relative to their costs. The design of any system of controls is also based in part on certain assumptions regarding the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# PART II. OTHER INFORMATION

# ITEM 1. Legal Proceedings.

In August 1999, Simon Property Group (SPG) filed a trademark infringement suit in federal district court in Indianapolis against mySimon, Inc. (mySimon), a subsidiary of CNET acquired on February 29, 2000. SPG alleged that the mySimon trademark infringed SPGs Simon trademark. On August 31, 2000, following a trial on the subject, the jury found in favor of SPG and awarded damages against mySimon in the amount of $11.5 million in compensatory damages, $5.3 million for corrective advertising, and $10.0 million in punitive damages. On September 25, 2000, the court entered an order establishing an escrow for royalties pending final resolution of the litigation where mySimon pays into escrow 2% of its gross cash receipts each month.

On December 7, 2001, mySimon filed a motion for a dismissal of the case or, alternatively a new trial based on newly discovered evidence it believes SPG should have produced prior to the August 2000 trial. On March 26, 2003, the court granted mySimons motion for a new trial on all issues, thereby eliminating the original jury verdict. The court also granted mySimons motion that sanctions be imposed against SPG and reserved a decision about what the appropriate sanctions should be until later proceedings.

On July 1, 2004, the federal district court
entered a judgment enforcing a settlement reached by the parties. Pursuant to the terms of the settlement,
mySimon may continue to use the Simon name in exchange for the payment of a royalty to SPG and
an on-going monthly royalty fee, and the placement of a disclaimer on mySimons website. The amount
of the royalty payment, as well as the on-going monthly fee is not material to CNETs business,
operating results or financial condition.

On August 3, 2004, a class action lawsuit was
filed in the Superior Court of the State of California, County of San Francisco by Mario Cisneros
and Michael Voigt on behalf of themselves, all others similarly situated and the general public
against CNET and numerous other defendants. The complaint alleges that certain search results
displayed by the defendants facilitate illegal internet gambling in violation of California state law.
The proceeding is in its early stages, and accordingly, CNET cannot predict the impact of this litigation
on its business, financial condition or results of operations.

ITEM 2. Changes in Securities and Use of Proceeds.    None.

ITEM 3. Defaults Upon Senior Securities.     None.

ITEM 4. Submission of Matters to a Vote of
Security Holders.      None.

ITEM 5. Other Information.

The Audit Committee of CNET has approved the
provision by our indepedent auditors, KPMG LLP, of non-audit services in the areas of tax return
preparation and tax planning advice in an aggregate amount not to exceed $540,000.

ITEM 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

| |  |  |  | 3.1 | Amended By-laws | 
| |  |  |  | --- | --------------- | 

| |  |  |  | 4.1 | Indenture, dated as of April 27, 2004,
by and between CNET and Wells Fargo Bank, national Association, as trustee, including Form of 0.75%
Convertible Senior Note due 2024 | 
| |  |  |  | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

| |  |  |  | 10.1 | Registration Rights Agreement,
dated as of April 27, 2004 | 
| |  |  |  | ---- | --------------------------------------------------------- | 

| |  |  |  | 10.2 | Credit Agreement dated as of
October 14, 2004 between CNET Networks, Inc. and Bank of America, N.A. | 
| |  |  |  | ---- | --------------------------------------------------------------------------------------------------- | 

| |  |  |  | 31.1 |  | Certificate of Chief Executive
Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 dated August 1, 2003
| |  |  |  | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | 31.2 |  | Certificate of Chief Financial
Officer pursuant Securities Exchange Act Rules 13a-15(e) and 15d-15(e), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 dated August 1, 2003
| |  |  |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | 32.1 |  | Certificate of Chief Executive Officer
pursuant to section 18 U.S.C. Section 1350, dated August 1, 2003
| |  |  |  | ---- |  | -------------------------------------------------------------------------------------------------------

| |  |  |  | 32.2 |  | Certificate of Chief Financial Officer
pursuant to section 18 U.S.C. Section 1350, dated August 1, 2003
| |  |  |  | ---- |  | -------------------------------------------------------------------------------------------------------

|(b) |  | Reports on Form 8-K.
|--- |  | --------------------

|(1) |  | Current Report on Form 8-K dated
July 14, 2004, Item 12  Results of Operations and Financial Condition, which
furnished CNETs preliminary financial results for the second quarter ended June 30, 2004.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Current Report on Form 8-K dated
July 21, 2004, Item 2  Acquisition or Disposition of Assets and Item 5  Other
Items, which reported CNET entering into an Agreement and Plan of Merger with Cheese Acquisition
Sub,
Inc. and Twofold Photos , Inc.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Current Report on Form 8-K dated
August 9, 2004, Item 2  Acquisition or Disposition of Assets, Item 5  Other
Items and Item 7,  Regulation FD Disclosure, which reported completion of CNETs
acquisition of Twofold Photos , Inc.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

# SIGNATURES

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.

| |  | CNET Networks, Inc.(Registrant)BY: /s/ Douglas N. WoodrumDouglas N. WoodrumExecutive Vice President, Chief Financial Officer
| |  | ------------------------------------------------------------------------------------------------------------------------------------------

Dated: November 8, 2004

---

# EXHIBIT INDEX

|Exhibit Number |  | Description
|-------------- |  | -----------

| | 3.1 | Amended By-laws
| | --- | ---------------

| | 4.1 | Indenture, dated as of April 27, 2004, by and between CNET and Wells Fargo Bank, national Association, as trustee, including Form of 0.75% Convertible Senior Note due 2024 (Incorporated by reference to Exhibit 4.1 to CNETs Registration Statement on Form S-3 (Reg. No. 333-115569) filed May 17, 2004)
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.1 | Registration Rights Agreement, dated as of April 27, 2004 (Incorporated by reference to Exhibit 4.1 to CNET's Registration Statement on Form S-3 (Reg. No. 333-115569) filed May 17, 2004)
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.2* | Credit Agreement dated as of October 14, 2004 between CNET Networks, Inc. and Bank of America, N.A.
| | ----- | ---------------------------------------------------------------------------------------------------

| | 31.1* | Certificate of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated August 1, 2003
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2* | Certificate of Chief Financial Officer pursuant Securities Exchange Act Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated August 1, 2003
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1* | Certificate of Chief Executive Officer pursuant to section 18 U.S.C. Section 1350, dated August 1, 2003
| | ----- | -------------------------------------------------------------------------------------------------------

| | 32.2* | Certificate of Chief Financial Officer pursuant to section 18 U.S.C. Section 1350, dated August 1, 2003
| | ----- | -------------------------------------------------------------------------------------------------------

* Filed herein.