LMC 12.31.2012 10K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K



ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012



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

For the transition period from to

Commission File Number 001-35707

LIBERTY MEDIA CORPORATION

(Exact name of Registrant as specified in its charter)



State of Delaware (State or other jurisdiction of incorporation or organization)		36-1699499 (I.R.S. Employer Identification No.)
12300 Liberty Boulevard
Englewood, Colorado (Address of principal executive offices)		80112 (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Name of exchange on which registered

Series A Common Stock, par value $.01 per share	The Nasdaq Stock Market LLC
Series B Common Stock, par value $.01 per share	The Nasdaq Stock Market LLC

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

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

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

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 each shorter period that the Registrant has required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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



Large accelerated filer ý	Accelerated filer o	Non-accelerated filer o (do not check if smaller reporting company)	Smaller reporting company o

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

The aggregate market value of the voting stock held by non affiliates of Liberty Media Corporation computed by reference to the last sales price of such stock, as of the closing of trading on the last trading day prior to June 30, 2012, was zero. As of June 30, 2012 Liberty Media Corporation was legally a wholly-owned subsidiary of Starz (formerly Liberty Media Corporation). The aggregate market value of Starz voting stock held by non affiliates of Starz computed by reference to the last sales price of such stock, as of the closing of trading on the last trading day prior to June 30, 2012, was $9.4 billion.

The number of outstanding shares of Liberty Media Corporation's common stock as of January 31, 2013 was:



	Series A	Series B
Liberty Media common stock	111,247,928	9,882,238

Documents Incorporated by Reference

The Registrant's definitive proxy statement for its 2013 Annual Meeting of Shareholders is hereby incorporated by reference into Part III of this Annual Report on Form 10-K

LIBERTY MEDIA CORPORATION

2012 ANNUAL REPORT ON FORM 10‑K

Table of Contents




	Part I	Page

Item 1.	Business	I‑1
Item 1A.	Risk Factors	I-21
Item 1B.	Unresolved Staff Comments	I-28
Item 2.	Properties	I-28
Item 3.	Legal Proceedings	I-28
Item 4.	Mine Safety Disclosures	I-29
	Part II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	II‑1
Item 6.	Selected Financial Data	II‑3
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	II‑4
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	II‑17
Item 8.	Financial Statements and Supplementary Data	II‑18
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	II‑18
Item 9A.	Controls and Procedures	II‑18
Item 9B.	Other Information	II‑18
	Part III
Item 10.	Directors, Executive Officers and Corporate Governance	III‑1
Item 11.	Executive Compensation	III‑1
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	III‑1
Item 13.	Certain Relationships and Related Transactions, and Director Independence	III‑1
Item 14.	Principal Accountant Fees and Services	III‑1
	Part IV
Item 15.	Exhibits and Financial Statement Schedules	IV‑1

PART I.

Item 1. Business.

(a) General Development of Business

During August 2012, the Board of Directors of Starz (formerly known as Liberty Media Corporation) authorized a plan to distribute to the stockholders of Starz shares of a wholly-owned subsidiary, Liberty Media Corporation ("Liberty" and the “Company” formerly known as Liberty Spinco, Inc.), that holds, as of January 11, 2013, all of the businesses, assets and liabilities of Starz not associated with Starz, LLC (with the exception of the Starz, LLC office building) (the "Spin-Off"). The transaction was effected as a pro-rata dividend of shares of Liberty to the stockholders of Starz. The businesses, assets and liabilities not included in Liberty are part of a separate public company which was renamed Starz. Due to the relative significance of Liberty to Starz (the legal spinnor) and senior management's continued involvement with Liberty following the Spin-Off, Liberty will be treated as the "accounting successor" to Starz for financial reporting purposes, notwithstanding the legal form of the Spin-Off previously described. Therefore, the historical financial statements of Starz will continue to be the historical financial statements of Liberty and will present Starz as discontinued operations upon completion of the Spin-Off in the first quarter of 2013. For purposes of this Form 10-K Liberty is treated as the spinnor for purposes of discussion and as a practical matter of describing all the historical information contained herein.

Liberty owns interests in subsidiaries and other companies which are engaged in the media, communications and entertainment industries. Through our subsidiaries and affiliates, we principally operate in North America. Our principal businesses and assets include our consolidated subsidiaries Starz, LLC (through January 11, 2013), Atlanta National League Baseball Club, Inc. and TruePosition, Inc. and our equity affiliates Sirius XM Radio Inc. and Live Nation Entertainment, Inc.

During the second quarter of 2010, Liberty Interactive Corporation ("Liberty Interactive" formerly named Liberty Media Corporation) announced that its board of directors had authorized its management to proceed with a plan to separate its Liberty Capital and Liberty Starz tracking stock groups from its Liberty Interactive tracking stock group (the "Split-Off"). The Split-Off was completed on September 23, 2011 following the satisfaction of all conditions to the Split-Off. The Split-Off was effected by the redemption of all of the outstanding Liberty Capital common stock and Liberty Starz common stock of Liberty Interactive in exchange for all of the common stock of Liberty, which at the time of the Split-Off held all of the businesses, assets and liabilities previously attributed to the Liberty Capital and Liberty Starz tracking stock groups of Liberty Interactive in accordance with the terms of a Reorganization Agreement. At the time of and following the Split-Off, Liberty had two tracking stock groups: its Liberty Starz common stock tracking the businesses, assets and liabilities that were previously attributed to Liberty Interactive's Liberty Starz group (the "Starz Group") and its Liberty Capital common stock tracking the businesses, assets and liabilities that were previously attributed to Liberty Interactive's Liberty Capital group (the "Capital Group").

A tracking stock is a type of common stock that the issuing company intends to reflect or "track" the economic performance of a particular business or "group," rather than the economic performance of the company as a whole. On November 28, 2011, Liberty's tracking stock structure was eliminated through the conversion of each share of Liberty Starz common stock for .88129 of a share of the corresponding series of Liberty Capital common stock, with cash paid in lieu of fractional shares (the "Conversion"). While the Starz Group and the Capital Group had separate collections of businesses, assets and liabilities attributed to them, neither group was a separate legal entity that was able to own assets, issue securities or enter into legally binding agreements. Holders of Liberty's tracking stock had no direct claim to the group's assets and were not represented by separate boards of directors. Instead, holders of Liberty's tracking stocks were stockholders of Liberty, with a single board of directors and subject to all of the risks and liabilities of Liberty.

Recent Developments

As discussed above, the Spin-Off was completed in the first quarter of 2013.

On January 18, 2013, Liberty, through a wholly-owned subsidiary, purchased 50,000,000 shares of the common stock (“SIRIUS XM Common Stock”), par value $0.001 per share, of SIRIUS XM Radio, Inc. (“SIRIUS XM”) for $3.1556 per share in a block purchase from a financial institution (the “Block Transaction”). The Company used available cash on hand to acquire the shares of SIRIUS XM Common Stock in the Block Transaction. Additionally, on January 18, 2013 a subsidiary of the Company converted

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all of its remaining shares of SIRIUS XM's Convertible Perpetual Preferred Stock, Series B-1, par value $0.001 per share, into 1,293,509,076 shares of SIRIUS XM Common Stock. As a result of these transactions, along with shares of SIRIUS XM Common Stock acquired by the Company and its subsidiaries in the fiscal year ended December 31, 2012, the Company and its subsidiaries now hold more than 50% of the capital stock of SIRIUS XM entitled to vote on any matter, including the election of directors. Therefore, Liberty will consolidate SIRIUS XM beginning in the first quarter of 2013.

* * * * *

Certain statements in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business, product and marketing strategies; new service offerings; the recoverability of our goodwill and other long-lived assets; our projected sources and uses of cash; and the anticipated impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. In particular, statements under Item 1. "Business," Item 1A. "Risk-Factors," Item 2. "Properties," Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" contain forward-looking statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:


•	consumer demand for our products and services and our ability to adapt to changes in demand;


•	competitor responses to our products and services;


•	uncertainties inherent in the development and integration of new business lines and business strategies;


•	uncertainties associated with product and service development and market acceptance, including the development and provision of programming for satellite radio and telecommunications technologies;


•	our future financial performance, including availability, terms and deployment of capital;


•	our ability to successfully integrate and recognize anticipated efficiencies and benefits from the businesses we acquire;


•	the ability of suppliers and vendors to deliver products, equipment, software and services;


•	the outcome of any pending or threatened litigation;


•	availability of qualified personnel;


•	changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations of the Federal Communications Commission, and adverse outcomes from regulatory proceedings;


•	changes in the nature of key strategic relationships with partners, vendors and joint venturers;


•	general economic and business conditions and industry trends including the current economic downturn;


•	consumer spending levels, including the availability and amount of individual consumer debt;


•	rapid technological changes;


•	capital spending for the acquisition and/or development of telecommunications networks and services; and


•	threatened terrorist attacks and ongoing military action in the Middle East and other parts of the world and political unrest in international markets.

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

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

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(b) Financial Information About Operating Segments

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

We identify our reportable segments as (A) those consolidated subsidiaries that represent 10% or more of our annual consolidated revenue, pre-tax earnings or total assets and (B) those equity method affiliates whose share of earnings represent 10% or more of our annual pre-tax earnings. Financial information related to our operating segments can be found in note 20 to our consolidated financial statements found in Part II of this report.

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

Consolidated Subsidiaries

Starz, LLC (through January 11, 2013)

Atlanta National League Baseball Club, Inc.

TruePosition, Inc.

Equity and Cost Method Investments

Sirius XM Radio Inc. (Nasdaq:SIRI) (1)

Live Nation Entertainment, Inc. (NYSE:LYV)

Barnes & Noble, Inc. (NYSE:BKS) (2)


(1)	As of January 18, 2013, Liberty obtained a controlling interest in SIRIUS XM Radio Inc. and will consolidate SIRIUS XM Radio Inc. as of such date.


(2)	Represents an available-for-sale security in the form of a preferred share ownership interest that is convertible into an approximate 17% ownership interest.

Starz, LLC

Starz, LLC ("Starz"), a wholly-owned subsidiary, provides premium subscription video programming to United States multichannel video programming distributors ("MVPDs"), including cable operators, satellite television providers and telecommunications companies. Starz also develops, produces and acquires entertainment content and distributes this content to consumers in the United States and throughout the world. Starz is managed by and organized around the following business units: Starz Networks (previously referred to as Starz Channels), Starz Distribution and Starz Animation.

Starz Networks' flagship premium networks are Starz and Encore. As of December 31, 2012, these networks were available for subscription in approximately 100 million U.S. multichannel households, defined as households subscribing to services offered by MVPDs, as well as over the Internet. As of December 31, 2012, Starz Networks had 21.2 million Starz subscribers and 34.8 million Encore subscribers. The Starz and Encore subscriber numbers do not include subscribers who receive Starz programming over the Internet. Starz's third network, MoviePlex, offers a variety of art house, independent films and classic movie library content. Starz and Encore, along with MoviePlex, air over 1,000 movies monthly across 17 linear channels complemented by On Demand and Internet services.

Starz and Encore air recently released and library film content, along with original series and specials without advertisements. Starz and Encore are offered by MVPDs to their subscribers either for a fixed monthly price as part of a programming tier or package or on an à-la-carte basis. Subscribers to premium networks have the exclusive opportunity to watch “first run” or new movies when they are first aired on linear television after their initial theatrical release.

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Starz Networks has exclusive long-term first-run output licensing agreements with major Hollywood film studios owned by the Walt Disney Company ("Disney") through 2015 and Sony Pictures Entertainment, Inc. ("Sony") through 2021. On February 11, 2013, Starz announced a new, multi-year output licensing agreement for theatrically released motion pictures from Sony that extended its relationship with Sony through 2021. The previous agreement had covered motion pictures released theatrically through 2016. Pursuant to these output agreements, Starz's networks have exclusive rights to air new movies on its linear television channels, on demand or over the Internet during two or three separate windows over approximately eight to ten years beginning 8-13 months after their initial theatrical release. Generally, except on a video on demand or pay-per-view basis, no other network, Internet streaming or other video service may air or stream these recent releases during Starz's first two windows and no other subscription service may air or stream these releases between Starz's first two windows. Examples of recent Hollywood blockbusters that are exclusively aired or will be aired by Starz's networks in early 2013 include The Amazing Spiderman, Brave, Men in Black 3, Pirates of the Caribbean: On Stranger Tides, 21 Jump Street and Wreck-it Ralph. In December 2012, Disney informed Starz that they would not extend their output agreement with Starz beyond its expiration on December 31, 2015. Starz will continue to receive films from Disney's Walt Disney Pictures, Walt Disney Animation Studios, Disney‑Pixar, Touchstone Pictures, Marvel Entertainment and Hollywood Pictures labels through December 31, 2015 with initial license periods for such films extending into 2017. Starz is evaluating its options with respect to replacement of the Disney content following expiration of the output agreement, including the production of additional original content. Additionally, Starz's networks air older library films, as well as a growing line-up of original programming, including Spartacus, its highly successful original series entering its fourth and final season in January 2013. Joining Spartacus: War of the Damned in Starz's 2013 original programming line-up is the debut of Da Vinci's Demons, the second season of Magic City and the premiere of The White Queen.

The majority of Starz Networks' revenue is derived from the delivery of premium subscription video programming services comprised of movies and original programming to subscribers under affiliation agreements with cable providers (such as Comcast and Time Warner), satellite television providers (such as DIRECTV and Dish Network) and telecommunications companies (such as AT&T and Verizon). Certain of Starz Networks' affiliation agreements provide for payments based on the number of subscribers that receive Starz Networks' services. Starz Networks also has affiliation agreements with certain of its distributors pursuant to which those distributors pay an agreed-upon rate regardless of the number of subscribers. The affiliation agreements have various terms ranging from rolling month to month extensions with certain distributors to agreements which last into 2019. Starz's affiliation agreements expire from time to time and are subject to renegotiation with its distributors. Starz agreed to multi‑year extensions with several of our distributors during the fourth quarter of 2012. The financial terms of the extensions related to two distributors are generally less favorable than the financial terms in the prior affiliation agreements. The financial terms of the extensions would have resulted in an approximate reduction of 3% of Starz Networks' revenue for the year ended December 31, 2012, on a proforma basis had the extended agreements been in effect on January 1, 2012. The agreements with these two distributors provide for contractually agreed upon increases in the amounts Starz receives on an annual basis beginning on the first anniversary of the extensions. During the year ended December 31, 2012, approximately 58% of Starz Networks' revenue was generated by its three largest distributors, Comcast, DIRECTV, and Dish Network, each of which individually generated 10% or more of the Starz Networks' revenue for such period.

The cost of acquiring rights to programming, including Internet rights, represents Starz Networks' single largest expense. As mentioned above, Starz Networks has exclusive long-term output licensing agreements with Disney and Sony to air first-run theatrical movies released by their studios through 2015 and 2021, respectively. Starz Networks also sources, on a long-term basis, library content from many of Hollywood's major studios, including Lionsgate, Sony, Paramount, MGM, Warner Brothers, Universal, and Fox. These library agreements expire between 2013 and 2025.

Starz Networks uplinks its programming to five non-preemptible, protected transponders on three satellites positioned in geo-synchronous orbit. These satellites feed Starz's signals to various swathes of the Americas. Starz Networks leases these transponders under long-term lease agreements. At December 31, 2012, these transponder leases had termination dates ranging from 2018 to 2021. Starz Networks transmits to these transponders from its uplink center in Englewood, Colorado.

The Starz Distribution business unit includes the operations of its Home Video, Digital Media and Worldwide Distribution businesses.

Starz's Home Video business unit, through its majority owned (75% ownership interest) subsidiary Anchor Bay Entertainment, sells or rents DVDs (standard definition and Blu-ray™) under the Anchor Bay and Manga brands, in the United States, Canada, United Kingdom and Australia and other international territories to the extent it has rights to such content in international territories.

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Anchor Bay Entertainment ("Anchor Bay") develops and produces certain of its content and also acquires and licenses various titles from third parties. Certain of the titles produced or acquired by Anchor Bay air on Starz Networks' Starz and Encore networks. Anchor Bay also distributes other titles acquired or produced by Starz, including Starz Networks' original programming content and Overture Films' titles (as further discussed below). In addition, Anchor Bay, under a distribution agreement entered into in 2010, distributes titles for The Weinstein Company LLC (“TWC”). These titles are sold to and distributed by regional and national retailers and other distributors, including Wal-Mart, Target, Best Buy, Ingram Entertainment, Amazon and Netflix. Generally, these retailers have the right to return unsold products.

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

Starz's Digital Media business unit is a distributor of digital and on demand content for its owned content and content for which it has licensed the non-pay television ancillary rights (including Overture Films' titles) in the United States and throughout the world to the extent Starz has rights to such content in international territories. Digital Media receives fees for such services from a wide array of partners and distributors. These range from traditional MVPDs, Internet/mobile distributors, game developers/publishers and consumer electronics companies. Digital Media also distributes Starz Networks' original programming content and TWC's titles. Production and acquisition costs represent the single largest operating expense for the Starz Digital Media business unit.

Starz's Worldwide Distribution business unit (previously referred to as Television) is a global distributor of movies, television series, documentaries, children's programming and other video content. Worldwide Distribution exploits Starz's owned content and content for which Starz has licensed ancillary rights (including Overture Films' titles) on free or pay television in the United States and throughout the world on free or pay television and other media to the extent that Starz has rights to such content in international territories. Worldwide Distribution also distributes Starz Networks' original programming content. Amortization of production costs represents the single largest operating expense related to the exploitation of its titles.

The Starz's Animation business unit, through its subsidiary Film Roman, LLC develops and produces 2D animated content on a for-hire basis for distribution theatrically and on television for various third party entertainment companies. For-hire revenue is recognized for each project based on the percentage of costs incurred-to-date relative to the estimated total costs of the project. Revenue recognized is proportional to the work performed-to-date under the contracts.

In July 2010, Starz elected to shut down its theatrical production and distribution operations conducted by its subsidiary Overture Films. Overture Films produced and acquired live action theatrical motion pictures for release domestically and throughout the world. Overture Films distributed its movies theatrically in the United States. Overture Films' final three films were released theatrically during the fourth quarter of 2010. The Overture Films' film library, of 19 released films, was retained and will continue to be exploited by Starz Distribution.

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Atlanta National League Baseball Club, Inc.

Atlanta National League Baseball Club, Inc., or ANLBC, a wholly owned subsidiary, owns and operates the Atlanta Braves Major League Baseball (“MLB”) franchise and five minor league baseball clubs (the Gwinnett Braves, the Mississippi Braves, the Rome Braves, the Danville Braves and the GCL Braves). Turner Field, which is leased from the City of Atlanta and Fulton County Recreation Authority, is the home stadium of the Atlanta Braves. Turner Field is located just outside the downtown area of Atlanta and offers a range of activities and eateries for fans, from interactive gaming and family-themed areas to social gathering places such as the Braves Chop House. ANLBC also operates a baseball academy in the Dominican Republic and leases a baseball facility from a third party in connection with its academy

With respect to the Braves MLB franchise, ANLBC derives revenue from both local and national sources. Locally, ANLBC receives revenue from the sale of tickets for games played at Turner Field, as well as from in-stadium advertising, game-day sales of concessions and other goods and services in and around Turner Field. ANLBC also derives substantial revenue from the sale of broadcasting rights to the Atlanta Braves baseball games. ANLBC has long-term local broadcasting agreements with Turner Regional Entertainment Network, Inc. and Sportsouth Network, Ltd. Nationally, ANLBC participates in the revenue generated from the national broadcasting and radio arrangements negotiated by MLB on behalf of the 30 baseball clubs with ESPN, Turner Broadcasting, Inc., Fox Sports and SIRIUS XM (the “National Broadcast Rights”).

Under the MLB rules, the Commissioner of Major League Baseball (the “Commissioner”) has the authority, acting as the agent on behalf of all of the MLB Clubs, to enter into and administer all contracts for the sale of National Broadcast Rights.

As the owner of a MLB franchise, ANLBC must comply with rules promulgated by the MLB Commissioner and MLB's constitution and bylaws. Each franchise is required to share locally derived revenue with the other MLB franchises and their owners through MLB's revenue sharing plan. Under the MLB rules, each MLB franchise participates in the MLB Central Fund, which acts as a conduit of centrally derived revenue (primarily from National Broadcast Rights, national sponsorships and licensing deals, and the MLB All Star Game) to the clubs, and funds certain expenses (such as contributions to the MLB Players Benefit Plan, administrative and operational expenses of the Commissioner's office, a reserve fund for the Commissioner's office, and administrative expenses of the Central Fund) on behalf of the MLB Clubs. Each MLB Club's share of the Central Fund, following certain adjustments which are made under the MLB revenue share arrangements, are paid to each MLB Club by the end of each year, unless otherwise determined by the Commissioner. Also under the MLB rules, each MLB franchise is required to participate in and contribute to certain profit sharing initiatives, such as MLB Advanced Media L.P., MLB's interactive media and internet company which runs MLB's official website and all of the MLB teams' websites.

TruePosition, Inc.

TruePosition is a wholly owned subsidiary that develops and markets technology for locating wireless phones and other wireless devices enabling wireless carriers, application providers and other enterprises to provide E-911 services domestically and other location-based services to mobile users both domestically and worldwide. "E-911" or "Enhanced 911" refers to an FCC mandate requiring wireless carriers to implement wireless location capability. AT&T began deploying TruePosition's technology in late 2002, and T-Mobile USA began deploying such technology in 2003. Both wireless carriers have deployed TruePosition's technology for E-911 and selected other services. AT&T is TruePosition's largest customer by a significant margin. There are can be no assurance that AT&T will remain a customer of TruePosition as wireless technology changes. T-Mobile USA is no longer under contract, having ceased using TruePosition's services at the end of 2011. In addition, as of December 31, 2012, seven smaller wireless carriers and government agencies had deployed or are deploying TruePosition's technology.

TruePosition earns revenue from the sale of hardware and licensing of software required to generate location records for wireless phones and other wireless devices on a cellular network and from the design, installation, testing and commissioning of such hardware and software. In addition, TruePosition earns software maintenance revenue through the provision of ongoing technical and software support. TruePosition has contractual rights to earn additional revenue from its deployed product base if its customers use such deployed equipment to provide commercial services. However, to date, TruePosition has not earned any significant revenue from other location-based services.

TruePosition's location system is a passive network overlay system designed to enable mobile wireless service providers to determine the location of all network wireless devices, including cellular and PCS telephones. Using its patented uplink time

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difference of arrival (U-TDOA) and angle of arrival (AOA) technology, TruePosition's location system calculates the latitude and longitude of a designated wireless telephone or transmitter and forwards the information in real time to application software. TruePosition's offerings cover major wireless air interfaces including Time Division Multiple Access (TDMA), Advanced Mobile Phone System (AMPS), Code Division Multiple Access (CDMA), Global System Mobile (GSM) and Universal Mobile Telecommunications System (UMTS).

Sirius XM Radio Inc.

Sirius XM Radio Inc. broadcasts its music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis through its two proprietary satellite radio systems. Subscribers can also receive music and other channels, plus new features such as Sirius XM On Demand, over the Internet, including through applications for mobile devices. As of December 2012, SIRIUS XM had 23,900,336 subscribers. Its subscribers include:

•subscribers under its regular and discounted pricing plans;


•	subscribers that have prepaid, including payments made or due from automakers for subscriptions included in the sale or lease price of a vehicle;

•certain radios activated for daily rental fleet programs;

•subscribers to its Internet services who do not also have satellite radio subscriptions; and

•certain subscribers to its weather, traffic, data and Backseat TV services.

SIRIUS XM's primary source of revenue is subscription fees, with most of its customers subscribing on an annual, semi-annual, quarterly or monthly basis. SIRIUS XM offers discounts for prepaid and long-term subscription plans as well as discounts for multiple subscriptions on each platform. SIRIUS XM also derives revenue from activation and other fees, the sale of advertising on select non-music channels, the direct sale of satellite radios and accessories, and other ancillary services, such as weather, traffic, data and Backseat TV services.

SIRIUS XM's satellite radios are primarily distributed through automakers (“OEMs”); retail locations nationwide; and through its website. SIRIUS XM has agreements with every major automaker to offer satellite radios in their vehicles. Satellite radio services are also offered to customers of certain rental car companies.

Programming

SIRIUS XM offers a dynamic programming lineup of commercial-free music, sports, entertainment, talk, news, traffic and weather. The channel line-ups for its services vary in certain respects and are available at siriusxm.com.

SIRIUS XM's subscription packages allow most listeners to enhance its standard programming lineup. The "XM Premier" package offers subscribers the Howard Stern channels, SiriusXM NFL Radio, SiriusXM NASCAR Radio, Playboy Radio, Sex Radio and play-by-play NFL games and college sports programming. The "Sirius Premier" package offers subscribers Oprah Radio, Opie and Anthony, SiriusXM Public Radio, MLB Network Radio, SiriusXM NHL Network Radio, SiriusXM PGA TOUR Radio, SiriusXM Fantasy Sports Radio and select play-by-play of NBA and NHL games and college sports programming. Subscribers with a la carte-capable radios may customize the programming they receive through a la carte subscription packages. SIRIUS XM also offers family friendly, "mostly music" and "mostly sports, news and talk" packages. SIRIUS XM also offers an expanded channel lineup, including music, sports and comedy channels as well as SiriusXM Latino, a suite of Latin channels. These channels, available online and over certain new radios, were the first phase of SiriusXM 2.0, an upgrade and evolution of its satellite and Internet delivered service that will span hardware, software, audio, and data services.

SIRIUS XM makes changes to its programming lineup from time to time as it strives to attract new subscribers and offer content which appeals to a broad range of audiences and to its existing subscribers.

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Music Programming

SIRIUS XM offers an extensive selection of music genres, ranging from rock, pop and hip-hop to country, dance, jazz, Latin and classical. Within each genre it offers a range of formats, styles and recordings.

All of SIRIUS XM's original music channels are broadcast commercial free. Certain of its music channels are programmed by third parties and air commercials. SIRIUS XM's channels are produced, programmed and hosted by a team of experts in their fields, and each channel is operated as an individual radio station, with a distinct format and branding. SIRIUS XM also provides special features, such as the Artist Confidential series which provides interviews and performances from some of the biggest names in music, a Town Hall series that includes a live audience and that has been expanded to include talk and sports, and an array of "pop up" channels featuring the music of particular artists.

Sports Programming

Live play-by-play sports is an important part of SIRIUS XM programming strategy. SIRIUS XM is the Official Satellite Radio Partner of the National Football League (“NFL”), Major League Baseball (“MLB”), NASCAR, National Basketball Association (“NBA”), National Hockey League (“NHL”) and PGA TOUR, and broadcasts most major college sports, including NCAA Division I football and basketball games. Soccer coverage includes matches from the Barclays Premier League. SIRIUS XM also airs FIS Alpine Skiing, FIFA World Cup events and horse racing.

SIRIUS XM offers many exclusive talk channels and programs such as MLB Network Radio, SiriusXM NASCAR Radio, SiriusXM NFL Radio and Chris "Mad Dog" Russo's Mad Dog Unleashed on Mad Dog Radio, as well as two ESPN channels, ESPN Radio and ESPN Xtra. Simulcasts of select ESPN television shows, including SportsCenter, can be found on ESPN Xtra.

Talk and Entertainment Programming

SIRIUS XM offers a multitude of talk and entertainment channels for a variety of audiences. Its diverse spectrum of talk programming is a significant differentiator from terrestrial radio and other audio entertainment providers. SIRIUS XM's talk radio offerings feature dozens of popular talk personalities, many creating radio shows that air exclusively on its services, including Howard Stern, Oprah Winfrey, Martha Stewart, Dr. Laura Schlessinger, Opie and Anthony, Bob Edwards, Senator Bill Bradley and doctors from the NYU Langone Medical Center. Its comedy channels present a range of humor such as Jamie Foxx's The Foxxhole, Laugh USA, Blue Collar Comedy and Raw Dog Comedy. Other talk and entertainment channels include SiriusXM Book Radio, Kids Place Live and Radio Disney, as well as OutQ, Road Dog Trucking and Playboy Radio. Its religious programming includes The Catholic Channel, which is programmed with the Archdiocese of New York, EWTN, a Global Catholic Radio Network, and Family Talk.

News and Information Programming

SIRIUS XM offers a wide range of national, international and financial news, including news from BBC World Service News, Bloomberg Radio, CNBC, CNN, FOX News, HLN, MSNBC, NPR and World Radio Network. It also airs a range of political call-in talk shows on a variety of channels including its exclusive channel, POTUS. SIRIUS XM offers continuous, local traffic reports for 22 metropolitan markets throughout the United States.

Internet Radio

SIRIUS XM streams music channels and select non-music channels over the Internet. Its Internet service also includes channels and features that are not available on its satellite service. Access to its Internet services is offered to subscribers for a fee. SIRIUS XM has available products that provide access to its Internet services without the need for a personal computer. SIRIUS XM also offers applications to allow consumers to access its Internet services on certain smartphones and tablet computers.

In 2012, SIRIUS XM launched SiriusXM On Demand. SiriusXM On Demand offers SIRIUS XM's Internet subscribers listening on its online media player and on smartphones the ability to choose their favorite episodes from a catalog of more than 300 shows and over 3,000 hours of content to listen to whenever they want. SiriusXM On Demand is offered to SIRIUS XM's Internet subscribers at no extra charge and offers selections from recent shows; selections from its vault of programming; updated

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content on a daily basis; regularly updated feature content; and easy navigation through the content. SiriusXM On Demand gives subscribers access to shows from sports, comedy, exclusive talk and entertainment, and commercial-free music from many genres such as: The Howard Stern Show, Tom Petty's Buried Treasure, The Opie & Anthony Show, Coach K, The Bob Edwards Show, Ripken Baseball, Bob Dylan's Theme Time Radio Hour, Jimmy Buffet concerts, The Jamie Foxx Show, Dr. Laura, Mad Dog Unleashed featuring Christopher “Mad Dog” Russo, and Rotten Tomatoes Radio.

SIRIUS XM subscribers also have access to curated selections from its archives, including its exclusive Artist Confidential series and Town Hall specials with Bruce Springsteen, Roger Waters, One Direction, Quentin Tarantino, Aerosmith, Tom Petty, Taylor Swift, Usher, John Travolta & Olivia Newton-John, Ringo Starr, Coldplay, Nirvana, Cardinal Timothy Dolan, Billy Crystal and Coach K. In addition, subscribers get access to exclusive subscriber events, music specials and interviews from across SIRIUS XM's sports and talk channels.

Distribution of Radios

Automakers. SIRIUS XM's primary means of distributing satellite radios is through the sale and lease of new vehicles. SIRIUS XM has agreements with every major automaker to offer satellite radios in their vehicles and satellite radios are available as a factory or dealer-installed option in substantially all vehicle makes sold in the United States. Many automakers include a subscription to SIRIUS XM's radio service in the sale or lease price of their vehicles. In many cases, SIRIUS XM receives subscription payments from automakers in advance of the activation of its service. SIRIUS XM shares with certain automakers a portion of the revenues it derives from subscribers using vehicles equipped to receive its service. SIRIUS XM also reimburses various automakers for certain costs associated with the satellite radios installed in their vehicles, including in certain cases hardware costs, tooling expenses and promotional and advertising expenses.

Previously Owned Vehicles. SIRIUS XM acquires an increasing number of subscribers through the sale and lease of previously owned vehicles with factory-installed satellite radios. SIRIUS XM has entered into agreements with many automakers to market subscriptions to purchasers and lessees of vehicles which include satellite radios sold through their certified pre-owned programs. In addition, SIRIUS XM works directly with many franchise and independent dealers on similar programs for non-certified vehicles. SIRIUS XM has developed systems and methods to identify purchasers and lessees of previously owned vehicles which include satellite radios and have established marketing plans to promote its services to these potential subscribers.

Retail. SIRIUS XM sells satellite and Internet radios directly to consumers through its website. Satellite and Internet radios are also marketed and distributed through major national and regional retailers. SIRIUS XM develops in-store merchandising materials and provides sales force training for several retailers.

SIRIUS XM's Satellite Radio Systems

SIRIUS XM's satellite radio systems are designed to provide clear reception in most areas despite variations in terrain, buildings and other obstructions. Subscribers can receive SIRIUS XM's transmissions in all outdoor locations in the continental U.S. where the satellite radio has an unobstructed line-of-sight with one of its satellites or is within range of one of its terrestrial repeaters. SIRIUS XM continually monitors its infrastructure and regularly evaluates improvements in technology.

The FCC has allocated the portion of the S-band located between 2320 MHz and 2345 MHz exclusively for satellite radio. Each of SIRIUS XM's services uses 12.5 MHz of this bandwidth to transmit its respective signals. Uplink transmissions (from the ground to its satellites) use 12.5 MHz of bandwidth in the 7060-7072.5 MHz band.

SIRIUS XM's satellite radio systems have three principal components: satellites, terrestrial repeaters and other satellite facilities; studios; and radios.

Satellites, Terrestrial Repeaters and Other Satellite Facilities

Satellites. SIRIUS XM currently owns a fleet of nine orbiting satellites. SIRIUS XM has invested in more technologically advanced satellites and satellite deployment to provide for improved coverage, increased redundancy and more efficient use of its spectrum. Space Systems/Loral has constructed another satellite, FM-6, for use in SIRIUS XM's system. SIRIUS XM expects to launch this satellite in mid-2013. SIRIUS XM uses four of its orbiting satellites in the SIRIUS XM system. These satellites, FM-1,

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FM-2, FM-3 and FM-5, are of the Loral FS-1300 model series. Its FM-1, FM-2 and FM-3 satellites travel in a geosynchronous orbit. Its FM-5 satellite is deployed in a geostationary orbit. SIRIUS XM owns five orbiting satellites for use in the XM system which operate in a geostationary orbit. Four of these satellites were manufactured by Boeing Satellite Systems International and one was manufactured by Space Systems/Loral.

Satellite Insurance. SIRIUS XM holds in-orbit insurance for its FM-5 and XM-5 satellites which will expire in 2014 and 2015, respectively. These policies provide coverage for a total, constructive total or partial loss of the satellites that occurs during the first five in-orbit years. SIRIUS XM also has negotiated launch and in-orbit insurance for its FM-6 satellite. This insurance provides coverage for a total, constructive total or partial loss of the FM-6 that occurs from launch through the end of the first annual in-orbit period. The insurance does not cover the full cost of constructing, launching and insuring new satellites, nor will it protect SIRIUS XM from the adverse effect on business operations due to the loss of a satellite. The policies contain standard commercial satellite insurance provisions, including coverage exclusions. SIRIUS XM uses launch and in-orbit insurance to mitigate the potential financial impact of satellite fleet launch and in-orbit failures unless the premium costs are considered to be uneconomical relative to the risk of satellite failure.

Terrestrial Repeaters. In some areas with high concentrations of tall buildings, such as urban centers, signals from SIRIUS XM's satellites may be blocked and reception of satellite signals can be adversely affected. In many of these areas, SIRIUS XM has deployed terrestrial repeaters to supplement satellite coverage. SIRIUS XM operates approximately 700 terrestrial repeaters as part of its systems.

Other Satellite Facilities. SIRIUS XM controls and communicates with its satellites from facilities in North America and maintains earth stations in Panama and Ecuador to control and communicate with several of its SIRIUS XM satellites. Its satellites are monitored, tracked and controlled by a third party satellite operator.

Studios

SIRIUS XM's programming originates principally from studios in New York City and Washington, D.C., and, to a lesser extent, from smaller studio facilities in Cleveland, Los Angeles, Memphis, Nashville and Austin. Its New York City offices house its corporate headquarters. Both its New York City and Washington D.C. offices house facilities for programming origination, programming personnel and facilities to transmit programming.

Radios

SIRIUS XM designs, establishes specifications for, sources or specifies parts and components for, and manages various aspects of the logistics and production of satellite and Internet radios. SIRIUS XM does not manufacture radios. SIRIUS XM has authorized manufacturers and distributors to produce and distribute radios, and has licensed its technology to various electronics manufacturers to develop, manufacture and distribute radios under certain brands. SIRIUS XM purchases radios from independent manufacturers that are distributed through SIRIUS XM's website. To facilitate the sale of radios, SIRIUS XM may subsidize a portion of the radio manufacturing costs to reduce the hardware price to consumers.

Radios are manufactured in four principal configurations: in-dash radios, Dock & Play radios, home or commercial units and portable radios.

SIRIUS XM has introduced an interoperable radio called MiRGE. This radio has a unified control interface allowing for easy switching between SIRIUS XM's two satellite radio networks. SIRIUS XM also offers the XM SkyDock, which connects to an Apple iPhone and iPod touch and provides live XM satellite radio using the control capability of the iPhone or iPod touch. SIRIUS XM has introduced Edge, a Dock & Play radio capable of receiving its SiriusXM 2.0 expanded channel lineup, including SiriusXM Latino, and Lynx, a portable radio with SiriusXM 2.0 satellite and Internet radio capability and features.

Telematics

SIRIUS XM has announced an agreement with Nissan North America to become the exclusive providers of a comprehensive suite of premium telematics services for Nissan branded vehicles. SIRIUS XM is also exploring other opportunities in the telematics industry, including agreements with additional automakers to install its telematics service and the acquisition of businesses or

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technology that will complement or enhance its telematics service. SIRIUS XM's telematics service will integrate information and communications technology in vehicles and will include, among other services, 24/7 emergency support for accidents, stolen vehicle tracking and roadside assistance. SIRIUS XM anticipates that subscribers will enjoy the simplicity of a consolidated bill for their audio entertainment and a central site to manage subscriptions.

Canada

SIRIUS XM also has an equity interest in the satellite radio services offered in Canada through SIRIUS XM Canada. SIRIUS XM owns approximately 38.0% of the equity of SIRIUS XM Canada.

Other Services

Commercial Accounts. SIRIUS XM's programming is also available for commercial establishments. Commercial subscription accounts are available through providers of in-store entertainment solutions and directly from SIRIUS XM. Certain commercial subscribers are included in its subscriber count.

Satellite Television Service. Certain of SIRIUS XM's music channels are offered as part of certain programming packages on the DISH Network satellite television service. Subscribers to the DISH Network satellite television service are not included in SIRIUS XM's subscriber count.

Backseat TV. SIRIUS XM offers Backseat TV, a service offering television content designed primarily for children in the backseat of vehicles.

TraveLink. SIRIUS XM offers Travel Link, a suite of data services that includes graphical weather, fuel prices, sports schedules and scores, and movie listings.

Real Time Traffic Services. SIRIUS XM also offers services that provide graphic information as to road closings, traffic flow and incident data to consumers with compatible in-vehicle navigation systems.

Real Time Weather Services. SIRIUS XM offer several real-time weather services designed for improving situational awareness in vehicle, marine and/or aviation use.

Copyrights to Programming

In connection with its music programming, SIRIUS XM must negotiate and enter into royalty arrangements with two sets of rights holders: Holders of copyrights in musical works (that is, the music and lyrics) and holders of copyrights in sound recordings (that is, the actual recording of a work).

Musical works rights holders, generally songwriters and music publishers, are represented by performing rights organizations such as the American Society of Composers, Authors and Publishers (“ASCAP”), Broadcast Music, Inc. (“BMI”), and SESAC, Inc. (“SESAC”). These organizations negotiate fees with copyright users, collect royalties and distribute them to the rights holders. SIRIUS XM has arrangements with all of these organizations.

Sound recording rights holders, typically large record companies, are primarily represented by SoundExchange, an organization which negotiates licenses, and collects and distributes royalties on behalf of record companies and performing artists. Under the Digital Performance Right in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998, SIRIUS XM may negotiate royalty arrangements with the sound recording copyright owners, or if negotiation is unsuccessful, the royalty rate is established by the Copyright Royalty Board (the “CRB”) of the Library of Congress.

In December 2012, the CRB issued its determination regarding the royalty rate payable by SIRIUS XM under the statutory license covering the performance of sound recordings over its satellite digital audio radio service, and the making of ephemeral (server) copies in support of such performances, for the five-year period starting January 1, 2013 and ending on December 31, 2017. Under the terms of the CRB's decision, SIRIUS XM will pay a royalty based on gross revenues, subject to certain exclusions, of 9.0% for 2013, 9.5% for 2014, 10.0% for 2015, 10.5% for 2016, and 11% for 2017. The rate for 2012 was 8.0%.

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The revenue subject to royalty includes subscription revenue from SIRIUS XM's U.S. satellite digital audio radio subscribers and advertising revenue from channels other than those channels that make only incidental performances of sound recordings. Exclusions from revenue subject to the statutory license fee include, among other things, revenue from channels, programming and products or other services offered for a separate charge where such channels make only incidental performances of sound recordings; revenue from equipment sales; revenue from current and future data services (including video services) offered for a separate charge; intellectual property royalties received by SIRIUS XM; credit card, invoice and fulfillment service fees; and bad debt expense. The regulations also allow SIRIUS XM to further reduce its monthly royalty fee in proportion to the percentage of its performances that feature pre-1972 recordings (which are not subject to federal copyright protection) as well as those that are licensed directly from the copyright holder, rather than through the statutory license.

Terms of Investment in SIRIUS XM

At December 31, 2012, we beneficially owned 3,248,666,978 shares of SIRIUS XM common stock, which represented approximately 49% of the issued and outstanding shares as of December 31, 2012. Our SIRIUS XM securities included (i) 6,250,100 shares of SIRIUS XM Series B-1 preferred stock (each share being convertible into 206.9581409 shares of common stock, subject to anti-dilution adjustments), which represented all of the outstanding shares of such stock, and (ii) $11 million aggregate principal amount of SIRIUS XM 7% Exchangeable Senior Subordinated Notes due 2012 (the “SIRIUS XM Exchangeable Notes”).

Our Series B-1 preferred stock voted with the common stock, on an as-converted basis, on all matters voted on by the holders of the common stock other than the election of directors. The preferred stock entitled us to elect directors (of whom one must qualify as an independent director) to the 13 member SIRIUS XM board of directors. The number of directors we were entitled to elect depended upon our ownership of Series B-1 preferred stock. At December 31, 2012, five of the 13 members of SIRIUS XM's board of directors were persons elected by us. Because of our conversion on September 17, 2012, of 6,249,900 shares of Series B-1 preferred stock, at the next meeting of SIRIUS XM's stockholders for the election of directors we would have been entitled, by virtue of our ownership of Series B-1 preferred stock at December 31, 2012, to elect three members of SIRIUS XM's 13-member board of directors. We converted our remaining shares of Series B-1 preferred stock on January 18, 2013, following our receipt on January 3, 2013, of FCC approval to acquire de jure control of SIRIUS XM. As a result of this conversion, we are no longer entitled, by virtue of any preferred stock ownership, to elect any members of the SIRIUS XM board.

As of January 18, 2013, we beneficially own 3,298,774,820 shares of SIRIUS XM common stock (including shares of SIRIUS XM common stock issuable upon exchange of $11 million aggregate principal amount of the SIRIUS XM Exchangeable Notes described above), which represent more than 50% of the issued and outstanding shares of SIRIUS XM common stock.

Pursuant to an investment agreement with SIRIUS XM, we have been approved as an interested stockholder and exempted from the restrictions on business combinations set forth in Section 203 of the Delaware General Corporation Law, and SIRIUS XM is prohibited from adopting a rights plan in a manner that would materially and adversely affect our ability to acquire or dispose of SIRIUS XM equity securities.

Live Nation Entertainment, Inc.

Live Nation is considered the largest live entertainment company in the world and seeks to innovate and enhance the live entertainment experience for artists and fans: before, during and after the show. Live Nation has four business segments: Concerts, Ticketing, Artist Nation and Sponsorship & Advertising.

Live Nation's Business Segments

Concerts. Live Nation's Concerts segment principally involves the global promotion of live music events in our owned and/or operated venues and in rented third-party venues, the operation and management of music venues and the production of music festivals across the world. During 2012, Live Nation's Concerts business generated approximately $3.9 billion, or 66.5%, of Live Nation's total revenue. Live Nation promoted 22,000 live music events in 2012, including artists such as Madonna, Lady Gaga, Coldplay, Roger Waters, Bruce Springsteen & the E Street Band, Van Halen and Dave Matthews Band and through festivals such as Rock Werchter, Download, Creamfields and Reading. While its Concerts segment operates year-round, Live Nation experiences

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higher revenue during the second and third quarters due to the seasonal nature of shows at its outdoor amphitheaters and festivals, which primarily occur May through September.

As a promoter, Live Nation earns revenue primarily from the sale of tickets and pays artists under one of several formulas, including a fixed guaranteed amount and/or a percentage of ticket sales or event profits. For each event, Live Nation either uses a venue it owns and/or operates, or rents a third-party venue. Revenue is generally related to the number of events, volume of ticket sales and ticket prices. Event costs such as artist fees and production service expenses are included in direct operating expenses and are typically substantial in relation to the revenue. As a result, significant increases or decreases in promotion revenue do not typically result in comparable changes to operating income.

As a venue operator, Live Nation generates revenue primarily from the sale of concessions, parking, premium seating, rental income, venue sponsorships and ticket rebates or service charges earned on tickets sold through our internal ticketing operations or by third parties under ticketing agreements. In its amphitheaters, the sale of concessions is outsourced and Live Nation receives a share of the net revenue from the concessionaire which is recorded in revenue with no significant direct operating expenses associated with it. Revenue generated from venue operations typically have a higher margin than promotion revenue and therefore typically have a more direct relationship to operating income.

As a festival operator, Live Nation typically books artists, secures festival sites, provides for third-party production services, sells tickets and advertises events to attract fans. Live Nation also arranges for third-parties to provide operational services as needed such as concessions, merchandising and security. Live Nation earns revenue from the sale of tickets and typically pays artists a fixed guaranteed amount. Live Nation also earns revenue from the sale of concessions, camping fees, festival sponsorships and ticket rebates or service charges earned on tickets sold. For each event, Live Nation either uses a festival site it owns or rents a third-party festival site. Revenue is generally related to the number of events, volume of ticket sales and ticket prices. Event costs such as artist fees and production service expenses are included in direct operating expenses and are typically substantial in relation to the revenue. As a result, significant increases or decreases in festival promotion revenue do not typically result in comparable changes to operating income.

Ticketing. Live Nation's Ticketing segment is primarily an agency business that sells tickets for events on behalf of its clients and retains a convenience charge and order processing fee for its services. Live Nation sells tickets for its events and also for third-party clients across multiple live event categories, providing ticketing services for leading arenas, stadiums, amphitheaters, music clubs, concert promoters, professional sports franchises and leagues, college sports teams, performing arts venues, museums and theaters. Live Nation sells tickets through a combination of websites, telephone services, mobile devices and ticket outlets. During the year ended December 31, 2012, Live Nation sold 78%, 6%, 4% and 12% of primary tickets through these channels, respectively. Live Nation's Ticketing segment also manages its online activities including enhancements to websites and bundling product offerings. During 2012, the Ticketing business generated approximately $1.4 billion, or 23.6% of Live Nation's total revenue, which excludes the face value of tickets sold. Through all of its ticketing services, Live Nation sold over 148 million tickets in 2012 and sold an additional 108 million tickets through venue clients' box offices. Live Nation's ticketing sales are impacted by fluctuations in the availability of events for sale to the public, which may vary depending upon event scheduling by its clients.

Live Nation generally enters into written agreements with individual clients to provide primary ticketing services for specified multi-year periods, typically ranging from three to five years. Pursuant to these agreements, clients generally determine and then tell Live Nation what tickets will be available for sale, when such tickets will go on sale to the public and what the ticket face price will be. Agreements with venue clients generally grant Live Nation the right to sell tickets for all events presented at the relevant venue for which tickets are made available to the general public. Agreements with promoter clients generally grant Live Nation the right to sell tickets for all events presented by a given promoter at any venue, unless that venue is already covered by an existing exclusive agreement with the Live Nation ticketing business or another ticketing service provider. Where Live Nation has exclusive contracts, clients may not utilize, authorize or promote the services of third-party ticketing companies or technologies while under contract with Live Nation. While Live Nation generally has the right to sell a substantial portion of its clients' tickets, venue and promoter clients often sell and distribute group sales and season tickets in-house. In addition, under many written agreements between promoters and Live Nation clients, the client often allocates certain tickets for artist, promoter, agent and venue use and does not make those tickets available for sale by Live Nation. Live Nation also generally allows clients to make a certain limited number of tickets available for sale through fan clubs, or other similar arrangements, from which Live Nation generally derives no revenue unless selected by the club to facilitate the sales. As a result, Live Nation does not sell all of its clients' tickets and the amount of tickets that Live Nation sells varies from client to client and from event to event, and varies as to any single client from year to year.

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Live Nation currently offers ticket resale services through TicketsNow (in the United States and Canada), its TicketExchange service (in the United States, Europe and Canada) and GET ME IN! (in the United Kingdom). Through TicketsNow and GET ME IN!, Live Nation enters into listing agreements with ticket resellers to post ticket inventory for sale at a purchase price equal to a ticket resale price determined by the ticket reseller plus an amount equal to a percentage of the ticket resale price and a pre-determined service fee. Live Nation remits the reseller-determined ticket resale price to the ticket resellers and retains the remainder of the purchase price. While Live Nation does not generally acquire tickets for sale on its own behalf, Live Nation may do so from time to time on a limited basis. In addition to enabling premium primary ticket sales, the TicketExchange service allows consumers to resell and purchase tickets online for certain events that were initially sold for Live Nation venue clients who elect to participate in the TicketExchange service. Sellers and buyers each pay a fee that has been negotiated with the relevant client, a portion of which is shared with the client.

Artist Nation. Live Nation's Artist Nation segment primarily provides management services to music artists in exchange for a commission on the earnings of these artists. The Artist Nation segment also sells merchandise associated with musical artists at live performances, to retailers and directly to consumers via the internet and also provides other services to artists. During 2012, the Artist Nation business generated approximately $400 million, or 6.9%, of Live Nation's total revenue. Revenue earned from the Artist Nation segment is impacted to a large degree by the touring schedules of the artists Live Nation represents. Generally, Live Nation experiences higher revenue during the second and third quarters as the period from May through September tends to be a popular time for touring events.

Sponsorship & Advertising. Live Nation's Sponsorship & Advertising segment employs a sales force that creates and maintains relationships with sponsors, through a combination of strategic, international, national and local opportunities for businesses to reach customers through its concert, venue, artist relationship and ticketing assets, including advertising on Live Nation websites. Live Nation works with its corporate clients to help create marketing programs that promote their brand and/or product. During 2012, the Sponsorship & Advertising business generated approximately $248 million, or 4.3%, of Live Nation's total revenue.

Live Nation believes that it has a unique opportunity to connect the music fan to corporate sponsors and therefore seeks to optimize this relationship through strategic sponsorship programs. Live Nation continues to also pursue the sale of national and local sponsorships, both domestically and internationally, and placement of advertising, including signage, online advertising and promotional programs. Many of its venues have venue naming rights sponsorship programs. Live Nation believes national and international sponsorships allow it to maximize its network of venues and to arrange multi-venue branding opportunities for advertisers. Live Nation sponsorship programs include companies such as Starwood, American Express, Vodafone, Anheuser Busch, Citi and Hertz (each of the preceding brands is a registered trademark of the sponsor). Live Nation local and venue-focused sponsorships include venue signage, promotional programs, on-site activation, hospitality and tickets, and are derived from a variety of companies across various industry categories.

Terms of Live Nation Investment

At December 31, 2012, we beneficially owned approximately 50.4 million shares of Live Nation common stock, which represented approximately 27% of the issued and outstanding shares as of December 31, 2012.

Under a stockholders agreement with Live Nation, we have the right to nominate two directors (one of whom must qualify as an independent director) to the Live Nation board of directors, currently comprised of 12 directors, for so long as our ownership interest provides us with not less than 5% of the total voting power of Live Nation's equity securities. We also have the right to cause one of our nominees to serve on the audit committee and the compensation committee of the board, provided they meet the independence and other qualifications for membership on those committees.

We have agreed under the stockholders agreement not to acquire beneficial ownership of Live Nation equity securities that would result in our having in excess of 35% of the voting power of Live Nation's equity securities. That percentage is subject to decrease for specified transfers of our Live Nation stock. We have been exempted from the restrictions on business combinations set forth in Section 203 of the DGCL, and Live Nation has agreed in the stockholders agreement not to take certain actions that would materially and adversely affect our ability to acquire Live Nation securities up to the voting percentage referred to above.

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Barnes & Noble, Inc.

Barnes & Noble, Inc., one of the nation's largest booksellers, is a leading content, commerce and technology company providing customers easy and convenient access to books, magazines, newspapers and other content across its multi-channel distribution platform. As of October 27, 2012, Barnes & Noble operated 1,363 bookstores in 50 states, including 674 bookstores on college campuses, operates one of the internet's largest eCommerce sites and develops digital content products and software. Given the dynamic nature of the book industry, the challenges faced by traditional booksellers, and the robust innovation pipeline fueling new opportunities in hardware, software and content creation and delivery, Barnes & Noble is utilizing the strength of its retail footprint to bolster its leadership and fuel sales growth across multiple channels.

Of the 1,363 bookstores, 689 operate primarily under the Barnes & Noble Booksellers trade name. Barnes & Noble College Booksellers, LLC (“B&N College”), a wholly-owned subsidiary of Barnes & Noble, operates 674 college bookstores at colleges and universities across the United States. Barnes & Noble Retail (“B&N Retail”) operates the 689 retail bookstores. Retail also includes Barnes & Noble's eCommerce site and Sterling Publishing Co., Inc., a leader in general trade book publishing. The NOOK segment represents Barnes & Noble's digital business, including the development and support of Barnes & Noble's NOOK product offerings.

Barnes & Noble's principal business is the sale of trade books (generally hardcover and paperback consumer titles), mass market paperbacks (such as mystery, romance, science fiction and other popular fiction), children's books, eBooks and other digital content, NOOK® (references to NOOK® include the Company's NOOK 1st Edition™, NOOK Wi-Fi 1st Edition™, NOOK Color™, NOOK Simple Touch™, NOOK Tablet™ and NOOK Simple Touch with GlowLight™ eBook Reader devices) and related accessories, bargain books, magazines, gifts, café products and services, educational toys & games, music and movies direct to customers through its bookstores or on barnesandnoble.com. On September 30, 2009, Barnes & Noble completed the acquisition of Barnes & Noble College Booksellers, Inc. from Leonard Riggio and Louise Riggio pursuant to a Stock Purchase Agreement dated as of August 7, 2009 among Barnes & Noble and the sellers. The acquisition of B&N College has allowed Barnes & Noble to expand into sales of textbooks and course-related materials, emblematic apparel and gifts, trade books, school and dorm supplies, and convenience and café items on college and university campuses. In the fiscal year ended April 30, 2011, B&N College began offering a textbook rental option to its customers, and expanded its electronic textbooks and other course materials through a proprietary digital platform (NOOK Study™). B&N College offers its customers a full suite of textbook options-new, used, digital and rental. Barnes & Noble previously licensed the "Barnes & Noble" trade name from B&N College under certain agreements. The acquisition gave Barnes & Noble exclusive ownership of its trade name.

To address dynamic changes in the book selling industry, Barnes & Noble has been transforming its business from a store-based model to a multi-channel model centered on its retail stores, Internet and digital commerce. Barnes & Noble is currently the only enterprise to offer readers the option of store visits, eCommerce, and digital delivery of books to Barnes & Noble-branded devices or other devices of their choosing.

Barnes & Noble's strategy is to:


•	continue to invest in the digital business to fuel NOOK and content sales;


•	use its infrastructure to deliver digital content to customers wirelessly and online;


•	utilize the strong Barnes & Noble brand and retail footprint to attract customers to its multi-channel platform; and


•	expand its distribution channels through strategic partnerships with world-class hardware and software companies and retail partners.


•	Barnes & Noble has a multi-channel marketing strategy that deploys various merchandising programs and promotional activities to drive traffic to both its stores and website. At the center of this program is Barnes & Noble's website, barnesandnoble.com.

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Agreement With Microsoft and Pearson

On April 27, 2012, Barnes & Noble entered into an investment agreement among Barnes & Noble, Morrison Investment Holdings, Inc. (“Morrison”), and Microsoft Corporation (“Microsoft”), which investment was completed on October 4, 2012. Pursuant to the investment agreement, Barnes & Noble formed a Delaware limited liability company (“Nook Media LLC”), and transfered to Nook Media LLC Barnes & Noble's digital device, digital content and college bookstore businesses and Nook Media LLC sold to Morrison, and Morrison purchased, 300 million convertible preferred membership interests in Nook Media LLC for an aggregate purchase price of $300.0 million. Concurrently with its entry into this agreement, Barnes & Noble also entered into a commercial agreement with Microsoft, pursuant to which, among other things, Nook Media LLC will develop and distribute a Windows 8 application for e-reading and digital content purchases, and an intellectual property license and settlement agreement with Microsoft and Microsoft Licensing GP.

As part of the partnership with Microsoft described above, Barnes & Noble, through Nook Media LLC, plans to launch the NOOK® digital bookstore in a number of additional countries within 12 months, providing Windows™ users access to the NOOK.com websites. Once the NOOK digital bookstore is launched, customers in these countries will have access to one of the world's largest marketplaces of digital copyright content and reading technologies, enabling them to buy and consume books, magazines and other forms of content on the world's best mobile platforms, including Windows™, iOSTM, and AndroidTM. Barnes & Noble is also exploring opportunities to give consumers outside of the U.S. access to its award-winning NOOK portfolio of reading products through potential distribution partnerships yet to be announced. While there can be no assurances, Barnes & Noble intends to have one or more distribution agreements in place to sell NOOK® devices in certain countries outside the U.S. prior to the 2012 holiday season.

On December 21, 2012, NOOK Media LLC, entered into an agreement with a subsidiary of Pearson plc to make a strategic investment in NOOK Media LLC. Pearson agreed to invest approximately $89.5 million of cash in NOOK Media LLC at a post-money valuation of approximately $1.789 billion in exchange for preferred membership interests representing a 5% equity stake in NOOK Media LLC. Following the closing of the transaction, Barnes & Noble would own approximately 78.2% of the NOOK Media LLC subsidiary and Microsoft, which also holds preferred membership interests, would own approximately 16.8%, assuming no exercise of pre-emptive rights by Microsoft. In addition, NOOK Media LLC will grant warrants to Pearson to purchase up to an additional 5% of NOOK Media LLC under certain conditions at a pre-money valuation of NOOK Media LLC of approximately $1.789 billion. At closing, NOOK Media LLC and Pearson will be also entering into a commercial agreement with respect to distributing Pearson content in connection with this strategic investment.

Terms of Barnes & Noble Investment

At December 31, 2012, we beneficially owned 204,000 shares of Barnes & Noble Series J preferred stock, each share of which is convertible into 58.8235 shares of Barnes & Noble common stock, subject to anti-dilution adjustments (an aggregate 12,000,000 shares) and thus owned approximately 16.7% of the issued and outstanding shares as of that date, on an as-converted basis. The Series J preferred stock votes with the common stock on an "as converted" basis, subject to certain limitations. For so long as we hold at least 127,500 shares, we have the right to designate two directors to the board of directors (which reduces to one director if we own less than 127,500 but at least 76,500 Series J shares).

Under an investment agreement with Barnes & Noble, there were restrictions on our ability to transfer our Barnes & Noble stock prior to February 18, 2013. For so long as we own at least 102,000 shares of the Series J Preferred Stock, we have the right to participate in certain new issuances of equity securities by Barnes & Noble to maintain our interest in that company, and we have veto rights over certain corporate actions. Those veto rights cover, among other things, certain spinoffs and split-offs, certain merger and other business combination transactions, fundamental changes to the business of Barnes & Noble, certain related party transactions and any amendment to the rights plan of Barnes & Noble that would adversely affect our rights under the Series J preferred stock.

Other Minority Investments

We also own a portfolio of minority equity investments in publicly traded media companies, including CenturyLink, Inc. (NYSE: CTL), Crown Media Holdings, Inc. (Nasdaq: CRWN), Time Warner Cable Inc. (NYSE: TWC), Time Warner Inc. (NYSE: TWX) and Viacom Inc. (Nasdaq: VIA). These are assets that were acquired mostly in tax-efficient transactions and are currently

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held as non-core assets. From time to time we enter into swaps and other derivatives to monetize these investments and mitigate balance sheet risk. We intend to continue to monetize these investments, which may include further derivative and structured transactions as well as public and private sales.

Regulatory Matters

Satellite Digital Audio Radio Services

As operators of a privately owned satellite system, SIRIUS XM is regulated by the FCC under the Communications Act of 1934, principally with respect to:

•The licensing of its satellite systems;

•Preventing interference with or to other uses of radio frequencies; and

•Compliance with FCC rules established specifically for U.S. satellites and satellite radio services.

Any assignment or transfer of control of SIRIUS XM's FCC licenses must be approved by the FCC. The FCC's order approving the Merger requires SIRIUS XM to comply with certain voluntary commitments it made as part of the FCC merger proceeding. SIRIUS XM believes it complies with those commitments.

In 1997, SIRIUS XM was the winning bidder for FCC licenses to operate a satellite digital audio radio service and provide other ancillary services. SIRIUS XM's FCC licenses for its SIRIUS XM satellites expire in 2017. SIRIUS XM's FCC licenses for its XM satellites expire in 2013, 2014 and 2018. SIRIUS XM anticipates that, absent significant misconduct on its part, the FCC will renew its licenses to permit operation of its satellites for their useful lives, and grant a license for any replacement satellites.

In some areas with high concentrations of tall buildings, such as urban centers, signals from SIRIUS XM's satellites may be blocked and reception can be adversely affected. In many of these areas, SIRIUS XM has installed terrestrial repeaters to supplement its satellite signal coverage. The FCC has established rules governing terrestrial repeaters and has granted SIRIUS XM a license to operate its repeater network.

SIRIUS XM designs, establishes specifications for, sources or specifies parts and components for, manages various aspects of the logistics and production of, and, in most cases, obtains FCC certifications for, satellite radios, including satellite radios that include FM modulators. SIRIUS XM believes it radios that are in production comply with all applicable FCC rules.

SIRIUS XM is required to obtain export licenses from the United States government to export certain ground control equipment, satellite communications/control services and technical data related to its satellites and the operations thereof. The delivery of such equipment, services and technical data to destinations outside the United States and to foreign persons is subject to strict export control and prior approval requirements from the United States government (including prohibitions on the sharing of certain satellite-related goods and services with China). Changes in law or regulations relating to communications policy or to matters affecting SIRIUS XM's services could adversely affect its ability to retain its FCC licenses or the manner in which SIRIUS XM operates.

Internet Services

To the extent that the businesses in which we have interests engage in the provision of goods and services over the Internet they must comply with federal and state laws and regulations applicable to online communications and commerce. For example, the Children's Online Privacy Protection Act ("COPPA") prohibits web sites from collecting personally identifiable information online from children under age 13 without parental consent and imposes a number of operational requirements. On December 19, 2012, the Federal Trade Commission ("FTC") adopted revised COPPA regulations amending certain definitions and modifying certain operational requirements regarding notice and parental consent, among other matters. Certain email activities are subject to the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, commonly known as the CAN-SPAM Act. The CAN-SPAM Act regulates the sending of unsolicited commercial email by requiring the email sender, among other things, to comply with specific disclosure requirements and to provide an "opt-out" mechanism for recipients. Both of these laws include statutory penalties for non-compliance. Various states also have adopted laws regulating certain aspects of Internet

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communications. In 2007, Congress enacted legislation extending the moratorium on state and local taxes on Internet access and commerce until 2014.

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

Other Regulation

We also have ownership interests in other entities, such as Time Warner Cable Inc. and Viacom, Inc., which are extensively regulated. For example, Time Warner Cable and Centurylink are subject not only to federal regulation but also to regulation in varying degrees, depending on the jurisdiction, by state and local regulatory authorities.

Proposed Changes in Regulation

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

Competition

ANLBC faces competition from many alternative forms of leisure entertainment. During the baseball season, ANLBC competes with other sporting and live events for game day attendance, which is integral to ANLBC's ticket, concession and souvenir sales revenue. The broadcasting of ANLBC's games, which is another significant source of revenue for ANLBC, competes against a multitude of other media options for viewers, including premium programming, home video, pay-per-view services, online activities, movies and other forms of news and information. In addition, ANLBC competes with the other Major League Baseball teams for a limited pool of player talent. Player talent contributes to ANLBC's winning record and league standings, which are critical components of ANLBC's competitiveness.

TruePosition faces competition from Commscope and smaller providers, which provide similar location-based product and services to TrueProsition. More cell phones are being equipped with GPS chips which eventually could make the TruePosition product and service less relevant, although TruePosition's products work in areas where GPS is not currently available due to lack of connection to satellites.

SIRIUS XM faces significant competition for both listeners and advertisers. In addition to pre-recorded entertainment purchased or playing in cars, homes and using portable players, SIRIUS XM competes with numerous other providers of radio or other audio services. Unlike satellite radio, traditional AM/FM radio has had a well-established demand for its services and generally offers free broadcasts paid for by commercial advertising rather than by a subscription fee. In addition, many radio stations have begun broadcasting high definition digital signals, which have sound quality similar to SIRIUS XM signals, and have reduced the number of commercials, expanded the range of music played and experimented with new formats in order to lure customers away from satellite radio. Several automakers currently install or plan to install high definition radio equipment in select models. Major media companies and online-only providers, including Clear Channel, CBS and Pandora, also make high fidelity digital streams available through the Internet for free or, in some cases, for a fraction of the cost of a satellite radio subscription. Internet-enabled smartphones, most of which have the capability of interfacing with vehicles, can play recorded or cached content and access Internet radio via dedicated applications (such as Pandora, last.FM, Slacker, iheartradio and Stitcher) or browsers, often for free, and offer music and talk content. Certain of these applications also include advanced functionality, such as personalization, and allow the user to access large libraries of content and podcasts on demand. SIRIUS XM expects that improvements from higher bandwidths, wider programming selection and advancements in functionality are likely to increase competition from Internet radio and smartphone applications, particularly in vehicles. In addition, SIRIUS XM faces competition

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as a result of the deployment or planned deployment by nearly all automakers of integrated multimedia systems in dash boards. These systems can combine control of audio entertainment from a variety of sources, including AM/FM/HD radio broadcasts, satellite radio, Internet radio, smartphone applications and stored audio, with navigation and other advanced applications such as restaurant bookings, movie show times and financial information. SIRIUS XM also faces competition from a number of providers that offer specialized audio services through either direct broadcast satellite or cable audio systems and that are targeted to fixed locations, mostly in-home. The radio service offered by direct broadcast satellite and cable audio is often included as part of a package of digital services with video service, and video customers generally do not pay an additional monthly fee for the audio service. In addition, the audio entertainment marketplace continues to evolve rapidly, with a steady emergence of new media platforms and portable devices that compete with SIRIUS XM's services now or that could compete with its services in the future. The in-dash navigation market is also being threatened by increasingly capable smartphones that provide advanced navigation functionality, including live traffic. Android, Blackberry, and Apple iOS-based smartphones all include GPS mapping and navigation functionality.

Live Nation faces competition in the live music industry, in attracting touring artists to the venues it owns and operates, from ticketing services primarily through online channels but also through phone, outlet and box office channels, and in its artist management and sponsorships businesses. Competition in the live entertainment industry is intense. Live Nation believes that it competes primarily on the basis of its ability to deliver quality music products, sell tickets and provide enhanced fan and artist experiences. It believes that its primary strengths include the quality of service delivered to its artists, fans and corporate sponsors, its track record in promoting and producing live music events and tours both domestically and internationally, artist relationships, ticketing software and services, distribution platform (venues), the scope and effectiveness in its expertise of marketing and sponsorship programs and its financial stability.

Barnes & Noble's divisions face strong competition. B&N Retail competes with other bookstores, including Books-A-Million and faces competition from many online businesses, notably Amazon.com and Apple. Increases in consumer spending via the Internet may significantly affect its ability to generate sales in B&N Retail stores. B&N Retail also faces competition from mass merchandisers, such as Costco, Target and Wal-Mart. Some of Barnes & Noble's competitors have greater financial and other resources and different business strategies than B&N Retail does. B&N Retail stores also compete with specialty retail stores that offer books in particular subject areas, independent store operators, variety discounters, drug stores, warehouse clubs, mail-order clubs and other retailers offering books, music, toys, games, gifts and other products in its market segments. The Barnes & Noble store experience is customized for its customer base, and considered by Barnes & Noble to be a differentiating factor. B&N College competes with educational institutions themselves as well as online textbook rental companies. In addition, publishers are increasing efforts to sell directly to students, and technology companies like Apple and Amazon are increasing their digital offerings to students. The eReader business, in particular, is highly competitive. NOOK competes primarily on price and device functionality. The importance of price varies depending on the competitor, with some of NOOK's competitors engaging in significant discounting and other promotional activities. NOOK competes primarily with other eReaders and smart tablets on functionality, consumer appeal, availability of digital content and price. NOOK competes with many online digital businesses, notably Amazon.com and Apple. Some of Barnes & Noble's competitors may have greater financial and other resources and different business strategies than those utilized for the NOOK.

Employees

As of December 31, 2012, we had 78 corporate employees, and our consolidated subsidiaries had an aggregate of approximately 2,100 full and part-time employees. We believe that our employee relations are good. As discussed previously, in January 2013, Starz, LLC ceased to be consolidated with LMC which comprised almost 1,000 of the aggregate 2,100 full and part-time employees reported above. Additionally, in the first quarter of 2013, we obtained a controlling interest in SIRIUS XM which has approximately 1,600 full-time employees.

(d) Financial Information About Geographic Areas

We do principally all our business domestically, so a discussion regarding financial information about geographic areas is not considered necessary.

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(e) Available Information

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

Our corporate governance guidelines, code of business conduct and ethics, compensation committee charter, nominating and corporate governance committee charter, and audit committee charter are available on our website. In addition, we will provide a copy of any of these documents, free of charge, to any shareholder who calls or submits a request in writing to Investor Relations, Liberty Media Corporation, 12300 Liberty Boulevard, Englewood, Colorado 80112, Tel. No. (877) 772-1518.

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

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Item 1A. Risk Factors

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

Risk Factors Relating to our Businesses

The historical consolidated financial information of Liberty is not necessarily representative of Liberty's future financial position, future results of operations or future cash flows nor does it reflect what Liberty's financial position, results of operations or cash flows would have been as a stand-alone company during the periods presented. Starz, LLC was considered disposed of in the first quarter of 2013 with the completion of the Spin-Off and will no longer be included in our financial statements as of that time. Starz, LLC is included in our financial statements as of the year ended December 31, 2012. Additionally, subsequent to December 31, 2012, Liberty acquired additional interests in SIRIUS XM which allows Liberty to control the vote of greater than 50% of SIRIUS XM's outstanding voting common stock. Therefore, in the first quarter of 2013, Liberty will consolidate SIRIUS XM which at December 31, 2012 was an equity method affiliate.

As described previously, Liberty is considered the divesting entity in the Spin-Off and treated as the "accounting successor" to Starz for financial reporting purposes in accordance with GAAP due to the relative significance of our company to Starz (which was the legal spinnor) and the continued involvement of senior management with Liberty following the Spin-Off. Liberty will report the historical consolidated results of operations of the Starz, LLC businesses in discontinued operations in the first quarter of 2013. Because the historical consolidated financial information of Liberty includes the results of the Starz, LLC business, it is not representative of Liberty's future financial position, future results of operations or future cash flows nor does it reflect what Liberty's financial position, results of operations or cash flows would have been as a stand-alone company during the periods presented. See note 1 of the accompanying financial statements for a discussion about the potential impacts on these financial statements of the Spin-Off and the acquisition of a controlling interest in SIRIUS XM.

In addition, the Split-Off occured in the third quarter of 2011. Prior to the Split-Off, the assets, liabilities and businesses of our company at that time were part of the larger Liberty Interactive organization. Hence, portions of our company's historical financial information were also extracted from Liberty Interactive's consolidated financial statements for the relevant periods prior to the Split-Off. As a result, our historical financial information may not necessarily reflect what our respective results of operations, financial condition and cash flows would have been had we existed as a separate, stand-alone entity pursuing independent strategies during the periods presented. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Financial Statements."

As a result of the Spin-Off, we do not have access to the cash flow generated by Starz, LLC. For the past three fiscal years, a significant portion of Liberty's reported total revenue has been generated by the businesses of Starz, LLC. Prior to the Split-Off, Starz, LLC was the second-largest generator of cash flow for Liberty's former parent company, Liberty Interactive (the largest generator being QVC, Inc., which is currently a subsidiary of Liberty Interactive). As a result of the Spin-Off, Liberty does not have access to the cash flow generated by Starz, LLC. Additionally, the remainder of Liberty's businesses which became the businesses of Liberty following the Spin-Off either (i) have historically generated cash flows at a comparatively lower level than that historically generated by Starz, LLC or (ii) do not provide Liberty with access to the cash flow they generate. Thus, as a result of the Spin-Off, Liberty does not have any significant annual operating cash flow.

We may be subject to significant tax liabilities related to the Spin-Off. In connection with the Spin-Off, our former parent company, Starz, received an IRS private letter ruling (the “Ruling”) and an opinion of tax counsel, in each case to the effect that the Spin-Off will qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code (the “Code”). Although the Ruling is generally binding on the IRS, the Ruling does not address certain requirements necessary to obtain tax-free treatment to Starz and its shareholders as a result of the IRS's ruling policy with respect to transactions under Section 355 of

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the Code (and instead is based upon representations made by Starz that these requirements have been satisfied), and the continuing validity of the Ruling is subject to the accuracy of representations and factual statements made by Starz to the IRS. Further, an opinion of tax counsel is not binding on the IRS or the courts, and the conclusions expressed in such opinion could be challenged by the IRS, and a court could sustain such challenge. Under U.S. Treasury Regulations, each member of a consolidated group is severally liable for the U.S. federal income tax liability of each other member of the consolidated group. Accordingly, because we were a member of the Starz consolidated group through the date of the Spin-Off, we could be liable directly to the U.S. government for any U.S. federal income tax liabilities resulting from the Spin-Off that are incurred, but not discharged, by Starz. In addition, in connection with the Spin-Off, we and Starz entered into a tax sharing agreement, pursuant to which (i) we are required to indemnify Starz (subject to certain limited exceptions) for taxes and losses resulting from the failure of the Spin-Off to qualify as a tax-free transaction described under Sections 355 and 368(a)(1)(D) of the Code, and (ii) Starz is required to indemnify our company, for any such taxes or losses that result primarily from the breach of certain covenants made by Starz (applicable to actions or failures to act by Starz and its subsidiaries following the completion of the Spin-Off) or that result from Section 355(e) of the Code applying to the Spin-Off as a result of the Spin-Off being part of a plan (or series of related transactions) pursuant to which one or more persons acquire a 50-percent or greater interest (measured by vote or value) in the stock of Starz (or any successor). Our indemnification obligations to Starz are not limited in amount or subject to any cap, and, to the extent we are entitled to indemnification from Starz, we are subject to the risk of non-payment by Starz of its indemnification obligations. If we are required to indemnify Starz under the circumstances set forth in the tax sharing agreement, or if Starz does not fulfill any tax or indemnification obligations relating to the Spin-Off for which it is responsible under the tax sharing agreement, we may be subject to substantial liabilities, which could materially adversely affect our financial position.

Certain of our subsidiaries and business affiliates depend on their relationships with third party distribution channels, suppliers and advertisers and any adverse changes in these relationships could adversely affect our results of operations. An important component of the success of our subsidiaries and business affiliates, including TruePosition and SIRIUS XM, is their ability to maintain their existing, as well as build new, relationships with third party distribution channels, including local and national satellite providers, suppliers, manufacturers, retailers and advertisers, among other parties. Adverse changes in existing relationships or the inability to enter into new arrangements with these parties on favorable terms, if at all, could have a significant adverse effect on our results of operations. In addition, if certain of these parties do not perform in a satisfactory or timely manner, the business of our subsidiaries and business affiliates could be adversely affected.

Rapid technological advances could render the products and services offered by our subsidiaries and business affiliates obsolete or non-competitive. Our subsidiaries and business affiliates, including, for example, TruePosition, SIRIUS XM, Live Nation and Barnes & Noble, must stay abreast of rapidly evolving technological developments and offerings to remain competitive and increase the utility of their products and services. These subsidiaries and business affiliates must be able to incorporate new technologies into their products and services in order to address the needs of their customers. There can be no assurance that they will be able to compete with advancing technology, and any failure to do so could result in customers seeking alternative service providers thereby adversely impacting our revenue and operating income.

The business of SIRIUS XM depends in significant part on the operation of its satellites. As a satellite radio broadcaster, SIRIUS XM's business depends on the lives and proper operation of its satellites. The lives of SIRIUS XM's satellites will vary and depend on a number of factors, including degradation and durability of solar panels, quality of construction, random failure of satellite components (which could result in significant damage to or loss of a satellite), the amount of fuel the satellite consumes and damage or destruction by electrostatic storms, collisions with other objects in space or other events (such as nuclear detonations) occurring in space. In the ordinary course of operation, satellites experience failures of component parts and operational and performance anomalies. Components on SIRIUS XM's in-orbit satellites have failed, and from time to time SIRIUS XM has experienced anomalies in the operation and performance of these satellites. These failures and anomalies are expected to continue in the ordinary course, and SIRIUS XM cannot predict if any of these possible future events will have a material adverse effect on its operations or the life of its existing in-orbit satellites. In addition, Space Systems/Loral has constructed a new satellite for the SIRIUS XM system that is expected to be launched during mid-2013. Satellite launches have significant risks, including launch failure, damage or destruction of the satellite during launch and failure to achieve a proper orbit or operate as planned. SIRIUS XM's agreement with Space Systems/Loral does not protect it against the risks inherent in a satellite launch or in-orbit operations. SIRIUS XM maintains in-orbit insurance policies covering only two of its satellites (its XM-5 and FM-5 satellites). These policies will expire in 2014 and 2015, respectively, and SIRIUS XM may not renew these in-obit insurance policies when they expire. Any insurance proceeds will not fully cover SIRIUS XM's losses in the event of a satellite failure or significant degradation in the service provided by such satellites. For example, the policies covering the insured satellites do not cover the full cost of constructing,

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launching and insuring new satellites, nor will they cover, and SIRIUS XM does not have protection against, business interruption, loss of business or similar losses. SIRIUS XM's insurance contains customary exclusions, material change and other conditions that could limit recovery under those policies. Further, any insurance proceeds may not be received on a timely basis in order to launch a spare satellite or construct and launch a replacement satellite or take other remedial measures. In addition, the polices are subject to limitations involving uninsured losses, large satellite performance deductibles and policy limits.

Interruption or failure of SIRIUS XM's information technology and communications systems could negatively impact its results and brand, and therefore the value of our investment in SIRIUS XM. SIRIUS XM's business is dependent on the operation and availability of its information technology and communication systems and those of certain third party service providers. Any degradation in the quality, or any failure, of SIRIUS XM's systems (due to events such as unplanned outages, natural disasters, technical difficulties or loss of data or processing capabilities) could reduce its revenues, cause it to lose customers and damage its brand. Although SIRIUS XM has implemented practices designed to maintain the availability of its information technology systems and mitigate the harm of any unplanned interruptions, SIRIUS XM does not have complete redundancy for all of its information technology systems, and its disaster recovery planning cannot anticipate all eventualities. SIRIUS XM is involved in continuing efforts to upgrade and maintain its information technology systems, which is costly, and problems with the design or implementation of system enhancements could harm its business and its results of operations. In addition, SIRIUS XM relies on internal systems and external systems maintained by manufactures, distributors and service providers to take, fulfill and handle customer service requests and host certain online activities. Any interruption or failure of SIRIUS XM's internal or external systems could prevent SIRIUS XM from serving customers or cause data to be unintentionally disclosed.

Our subsidiaries and business affiliates are subject to risks of adverse government regulation. Providers of internet, telephony and satellite service are subject to varying degrees of regulation in the United States by the Federal Communications Commission ("FCC") and other entities and in foreign countries by similar regulators. Such regulation and legislation are subject to the political process and have been in constant flux over the past decade. For example, SIRIUS XM holds various FCC licenses and authorizations to operate commercial satellite radio services in the United States, which are generally granted for a fixed term, and although SIRIUS XM expects that such licenses and authorizations will be renewed in the ordinary course upon their expiration, there can be no assurance that this will be the case. Non-compliance by SIRIUS XM with the FCC's requirements or other conditions or with other applicable FCC rules and regulations could result in fines, additional license conditions, license revocation or other detrimental FCC actions. In addition, SIRIUS XM is subject to various consumer protection laws, rules and regulations, which are extensive and have developed rapidly, particularly at the state level, and, in certain jurisdictions, cover nearly all aspects of SIRIUS XM's marketing efforts, including the content of its advertising, the terms of consumer offers and the manner in which it communicates with existing and prospective subscribers. Material changes in the law and regulatory requirements must be anticipated, and there can be no assurance that the businesses and assets of our subsidiaries and business affiliates will not become subject to increased expenses or more stringent restrictions as a result of any future legislation, new regulation or deregulation.

The success of SIRIUS XM and Live Nation, in part, depends on audience acceptance of their programs and services, which is difficult to predict. Entertainment content production, satellite radio services and live entertainment events are inherently risky businesses because the revenue derived from these businesses depends primarily upon the public's acceptance of these programs and services, which is difficult to predict. The commercial success of a satellite radio program or live entertainment production depends upon the quality and acceptance of competing programs, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible and intangible factors, many of which are difficult to predict. In the case of ad-supported programming and satellite radio service, audience size is an important factor when advertising rates are negotiated. Audience size is also an important factor when determining ticket pricing for live entertainment productions. Consequently, low public acceptance of the programs and services offered by SIRIUS XM and Live Nation, which we account for as equity affiliates as of December 31, 2012, could hurt the ability of these companies to maintain rates charged to customers, subscribers and, as applicable, advertisers.

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The ability of SIRIUS XM to attract and retain subscribers at a profitable level in the future is uncertain. SIRIUS XM spends substantial amounts on advertising and marketing and in transactions with automakers, retailers and others to obtain and attract subscribers, and its ability to retain subscribers, or increase the number of subscribers to its service, in any given period is subject to many factors, including the price of SIRIUS XM' service, the health of the economy, the production and sale of new vehicles in the United States, SIRIUS XM's ability to convince owners and lessees of new and previously owned vehicles that include satellite radios to purchase subscriptions to its service, the effectiveness of its marketing programs, the entertainment value of its programming, and actions by its competitors, such as terrestrial radio and other audio entertainment and information providers. As part of SIRIUS XM's business, SIRIUS XM experiences, and expects to experience in the future, subscriber turnover (i.e., churn). If SIRIUS XM is unable to retain current subscribers at expected rates, or the costs of retaining subscribers are higher than expected, its financial performance and operating results could be adversely affected. SIRIUS XM cannot predict how successful it will be at retaining customers who purchase or lease vehicles that include a prepaid promotional subscription to its satellite radio service. Average monthly revenue per subscriber, or ARPU, is another key metric used by SIRIUS XM to analyze its business. Over the past several years, SIRIUS XM has focused substantial attention and efforts on balancing ARPU and subscriber additions. Its ability to maintain ARPU over time is uncertain and depends upon various factors, including the value customers receive in SIRIUS XM's service, SIRIUS XM's ability to add and retain compelling programming, the increasing competition SIRIUS XM experiences from terrestrial and Internet radio and other entertainment providers, and pricing and other offers SIRIUS XM may make to attract new subscribers and retain existing subscribers. If SIRIUS XM is unable to consistently attract new subscribers, and retain its current subscribers, at a sufficient level of revenues to be profitable, the value of its common stock could decline, and without sufficient cash flow it may not be able to make the required payments on its indebtedness and could ultimately default on its commitments.

Continuingly weak economic conditions may reduce consumer demand for our products and services. A weak economy in the United States could adversely affect demand for our products and services. A substantial portion of our revenue is derived from discretionary spending by individuals, which typically falls during times of economic instability. A reduction in discretionary spending could adversely affect revenue through potential downgrades by satellite and cable television subscribers and satellite radio subscribers, affecting SIRIUS XM, reduced live-entertainment expenditures, affecting Live Nation and ANLBC, and a slowdown in auto sales (which is an important source of satellite radio subscribers), affecting SIRIUS XM. Accordingly, our ability to increase or maintain revenue and earnings could be adversely affected to the extent that relevant economic environments remain weak or decline further. We currently are unable to predict the extent of any of these potential adverse effects.

The success of ANLBC, in part, depends on its ability to recruit and retain key persons. The financial success of ANLBC is influenced by the record of the Atlanta Braves Major League baseball team during each season, which is directly impacted by their ability to employ and retain top performing players, coaches and managers. We cannot assure you that if the Atlanta Braves Major League baseball team experiences turnover of these key persons, they will be able to recruit and retain acceptable replacements, in part, because the market for such employees is very competitive and limited.

The business of SIRIUS XM depends in large part upon automakers. A substantial portion of SIRIUS XM's new subscription growth has come from purchasers and lessees of new and previously owned automobiles. The sale and lease of vehicles with satellite radios is an important source of subscribers for its satellite radio service. SIRIUS XM has agreements with every major automaker to include satellite radios in new vehicles, although these agreements do not require automakers to install specific or minimum quantities of radios in any given period. Automotive production and sales are dependent on many factors, including the availability of consumer credit, general economic conditions, consumer confidence and fuel costs. To the extent vehicles sales by automakers decline or the penetration of factory-installed satellite radios in those vehicles is reduced, subscriber growth for SIRIUS XM' satellite radio services may be adversely impacted.

Royalties for music rights, which are paid by SIRIUS XM, have increased and may continue to do so in the future. SIRIUS XM must maintain music programming royalty arrangements with, and pay license fees to, BMI, ASCAP and SESAC. These organizations negotiate with copyright users, collect royalties and distribute them to songwriters and music publishers. SIRIUS XM has agreements with ASCAP, BMI and SESAC through 2016. There can be no assurance that the royalties SIRIUS XM pays to ASCAP, SESAC and BMI will not increase upon expiration of these arrangements. Under the Digital Performance Right in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998, SIRIUS XM pays royalties to copyright owners of sound recordings. Those royalty rates may by established through negotiation or, if negotiation is unsuccessful, by the CRB. Owners of copyrights in sound recordings have created SoundExchange, a collective organization to collect and distribute royalties. SoundExchange is exempt by statute from certain U.S. antitrust laws and exercises significant market power in the licensing of

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sound recordings. New royalty rates for SIRIUS XM's use of sound recordings during the five-year period beginning in January 2013 were announced by the CRB in December 2012. Under the terms of the CRB's decision, SIRIUS XM will pay a royalty based on gross revenues, subject to certain exclusions, of 9.0% for 2013, 9.5% for 2014, 10.0% for 2015, 10.5% for 2016, and 11% for 2017. The rate for 2012 was 8.0%.

Our subsidiaries and business affiliates, in particular SIRIUS XM and Barnes & Noble, face substantial competition, which may increase over time. SIRIUS XM faces substantial competition from other providers of music and talk radio and other audio services and its ability to retain and attract customers is based on its successful programming. SIRIUS XM's subscribers can obtain similar content through terrestrial radio or internet radio services, and a number of automakers and aftermarket manufacturers have introduced factory-installed radios capable of seamlessly accessing internet-delivered auto entertainment and easily connecting to Internet-delivered content on smartphones. Such competition could lower subscription, advertising or other revenue or increase expenses related to marketing, promotion or other expenses, which would lower SIRIUS XM's earnings and free cash flow. Similarly, Barnes & Noble faces competition from traditional and internet retail sources, as well as from other suppliers of digital content. Its retail stores compete primarily on the quality of the shopping and store experience and the price and availability of products, which take into account promotional activities. Barnes & Noble's eBook reader, the NOOK ® , competes with other eBook readers and smart tablets on functionality, consumer appeal, availability of digital content and price. In addition, Barnes & Noble faces competition from large bookstores such as Books-A-Million, wholesalers such as Costco and online retailers such as Amazon.com and Apple. Increases in consumer spending online may significantly affect Barnes & Noble's ability to generate sales in its retail stores. Barnes & Noble also faces competition from a variety of sources with respect to sales of music and DVDs. Increased competition faced by any of our subsidiaries or business affiliates may adversely affect their, and hence our, results of operations,

The success of SIRIUS XM, Live Nation and Barnes & Noble, in part, depends on the integrity of their systems and infrastructures and the protection of consumer data. The businesses of SIRIUS XM, Live Nation and Barnes & Noble involve the receipt and storage of personal information about consumers. While the receipt and storage of such information is subject to regulation by international, federal and state law, and although SIRIUS XM, Live Nation and Barnes & Noble may take steps to protect personal information, these companies could experience a data security breach, which could result in a disruption of operations and potential violations of applicable privacy laws and other laws or standards which could result in fines, penalties and/or the loss of consumer trust.

We do not have the right to manage our business affiliates, which means we are not able to cause those affiliates to operate in a manner that is favorable to us. We do not have the right to manage the businesses or affairs of any of our business affiliates (those companies in which we have less than a majority voting stake), including Live Nation and Barnes & Noble. Rather, our rights take the form of representation on the board of directors and, in some cases, board committees that supervise management and possession of veto rights over certain significant or extraordinary actions. The scope of our veto rights varies from company to company. Although our board representation and veto rights may enable us to exercise influence over the management or policies of a business affiliate, enable us to prevent the sale of material assets by a business affiliate or prevent a business affiliate from paying dividends or making distributions to its stockholders or partners, they will not enable us to cause these actions to be taken.

Our equity method investments may have a material impact on our net earnings. We have investments in Live Nation and other business affiliates, which we account for under the equity method of accounting. At December 31, 2012, SIRIUS XM was treated as an equity affiliate. Under the equity method, we report our proportionate share of the net earnings or losses of our equity affiliates in our statement of operations under "share of earnings (losses) of affiliates," which contributes to our earnings (loss) from continuing operations before income taxes. If the earnings or losses of our equity affiliates is material in any year, those earnings or losses may have a material effect on our net earnings. Notwithstanding the impact on our net earnings, we do not have the ability to cause our equity affiliates to pay dividends or make other payments or advances to their stockholders, including us. In addition, our investment in Live Nation is in publicly traded securities which are not reflected at fair value on our balance sheet and are also subject to market risk that is not directly reflected in our statement of operations.

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The liquidity and value of our public investments may be affected by market conditions beyond our control that could cause us to record losses for declines in their market value. Included among our assets are equity interests in one or more publicly-traded companies that are not consolidated subsidiaries or equity affiliates, such as Time Warner Inc., Time Warner Cable Inc. and Viacom. The value of these interests may be affected by economic and market conditions that are beyond our control. In addition, our ability to liquidate these interests without adversely affecting their value may be limited.

No assurance can be made that we will be successful in integrating any acquired businesses. Our businesses and those of our subsidiaries may grow through acquisitions in selected markets. Integration of new businesses may present significant challenges, including: realizing economies of scale; eliminating duplicative overhead; and integrating networks, financial systems and operational systems. No assurance can be made that, with respect to any acquisition, we will realize anticipated benefits or successfully integrate any acquired business with our existing operations. In addition, while we intend to implement appropriate controls and procedures as we integrate acquired companies, we may not be able to certify as to the effectiveness of these companies' disclosure controls and procedures or internal control over financial reporting (as required by U.S. federal securities laws and regulations) until we have fully integrated them.

We may have future capital needs and may not be able to obtain additional financing on acceptable terms. In connection with the Spin-Off, Starz, LLC distributed approximately $1.8 billion in cash to Liberty, of which $600 million was distributed in the third and fourth quarters of 2012. Due to the size and nature of our consolidated subsidiaries at December 31, 2012 (other than Starz, LLC), ANLBC and TruePosition, together with their assets and operating cash flow, would be insufficient to support any significant financing in the future. In addition, although we will begin consolidating SIRIUS XM in the first quarter of 2013, we will not have access to the cash flow of SIRIUS XM. Hence, our ability to obtain significant financing in the future, on favorable terms or at all, may be limited. If debt financing is not available to us in the future, we may obtain liquidity through the sale or monetization of our available for sale securities, or we may issue equity securities. If additional funds are raised through the issuance of equity securities, our stockholders may experience significant dilution. If we are unable to obtain sufficient liquidity in the future, we may be unable to develop our businesses properly, complete acquisitions or otherwise take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition and results of operations.

SIRIUS XM's indebtedness could adversely affect its operations and could limit its ability to react to changes in the economy or its industry. As of December 31, 2012, SIRIUS XM had an aggregate principal amount of approximately $2.5 billion of indebtedness. SIRIUS XM also has entered into a senior secured revolving credit facility with a syndicate of financial institutions for $1.25 billion, which had not been drawn upon as of December 31, 2012. SIRIUS XM's indebtedness has important consequences. For example, it increases its vulnerability to general adverse economic and industry conditions; requires it to dedicate a portion of its cash flow from operations to payments on indebtedness, reducing the availability of cash flow to fund capital expenditures, marketing and other general corporate activities; limits its ability to borrow additional funds or make capital expenditures; limits its flexibility in planning for, or reacting to, changes in its business and the audio entertainment industry; and may place it at a competitive disadvantage compared to other competitors. The instruments governing SIRIUS XM's indebtedness contain covenants that, among other things, place certain limitations on its ability to incur more debt, exceed a specified leverage ratio, pay dividends, make distributions, make investments, repurchase stock, create liens, enter into transactions with affiliates, enter into sale lease-back transactions, merge or consolidate, and transfer or sell assets. Failure to comply with the covenants associated with SIRIUS XM's indebtedness could result in an event of default, which, if not cured or waived, could cause SIRIUS XM to seek the protection of the bankruptcy laws, discontinue operations or seek a purchaser for its business or assets.

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Risk Factors Relating to Ownership of Our Common Stock

Transactions in our common stock by our insiders could depress the market price of our common stock. Sales of or hedging transactions, such as collars, in our shares by our Chairman of the Board or any of our other directors or executive officers could cause a perception in the marketplace that our stock price has peaked or that adverse events or trends have occurred or may be occurring at our company. This perception could result notwithstanding any personal financial motivation for these insider transactions. As a result, insider transactions could depress the market price for shares of one or more series of our common stock.

Our company has overlapping directors and management with Liberty Interactive and one overlapping director with Starz, which may lead to conflicting interests. As a result of the Spin-Off and the Split-Off, most of the executive officers of Liberty also serve as executive officers of Liberty Interactive, and there is significant board overlap between our company and Liberty Interactive. Following the Spin-Off, John C. Malone is the Chairman of the Board of our company and Liberty Interactive. Gregory B. Maffei is the Chief Executive Officer of our company and Liberty Interactive and serves on the boards of directors of each of our company, Liberty Interactive and Starz, where he serves as the Chairman of the Board of Starz. None of Liberty, Starz and Liberty Interactive has any ownership interest in any of the others. Our executive officers and members of our company's board of directors have fiduciary duties to our stockholders. Likewise, any such persons who serve in similar capacities at Liberty Interactive or Starz have fiduciary duties to that company's stockholders. Therefore, such persons may have conflicts of interest or the appearance of conflicts of interest with respect to matters involving or affecting more than one of the companies to which they owe fiduciary duties. For example, there may be the potential for a conflict of interest when Liberty or Liberty Interactive looks at acquisitions and other corporate opportunities that may be suitable for each of them. Moreover, most of our company's directors and officers continue to own Starz and Liberty Interactive stock and options to purchase Starz stock and Liberty Interactive stock. These ownership interests could create, or appear to create, potential conflicts of interest when the applicable individuals are faced with decisions that could have different implications for our company, Starz and/or Liberty Interactive. Any potential conflict that qualifies as a "related party transaction" (as defined in Item 404 of Regulation S-K) is subject to review by an independent committee of the applicable issuer's board of directors in accordance with its corporate governance guidelines. Any other potential conflicts that arise will be addressed on a case-by-case basis, keeping in mind the applicable fiduciary duties owed by the executive officers and directors of each issuer. From time to time, we may enter into transactions with Liberty Interactive or Starz and/or their subsidiaries or other affiliates. There can be no assurance that the terms of any such transactions will be as favorable to our company, Starz, Liberty Interactive or any of their respective subsidiaries or affiliates as would be the case where there is no overlapping officer or director.

Holders of a single series of our common stock may not have any remedies if an action by our directors has an adverse effect on only that series of our common stock. Principles of Delaware law and the provisions of our certificate of incorporation may protect decisions of our board of directors that have a disparate impact upon holders of any single series of our common stock. Under Delaware law, the board of directors has a duty to act with due care and in the best interests of all of our stockholders, including the holders of all series of our common stock. Principles of Delaware law established in cases involving differing treatment of multiple classes or series of stock provide that a board of directors owes an equal duty to all common stockholders regardless of class or series and does not have separate or additional duties to any group of stockholders. As a result, in some circumstances, our directors may be required to make a decision that is viewed as adverse to the holders of one series of our common stock. Under the principles of Delaware law and the business judgment rule, holders may not be able to successfully challenge decisions that they believe have a disparate impact upon the holders of one series of our stock if our board of directors is disinterested and independent with respect to the action taken, is adequately informed with respect to the action taken and acts in good faith and in the honest belief that the board is acting in the best interest of all of our stockholders.

It may be difficult for a third party to acquire us, even if doing so may be beneficial to our stockholders. Certain provisions of our restated charter and bylaws may discourage, delay or prevent a change in control of our company that a stockholder may consider favorable. These provisions include:


•	authorizing a capital structure with multiple series of common stock, a Series B common stock that entitles the holders to ten votes per share, a Series A common stock that entitles the holder to one vote per share, and a Series C common stock that, except as otherwise required by applicable law, entitles the holder to no voting rights;

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•	classifying our board of directors with staggered three-year terms, which may lengthen the time required to gain control of our board of directors;


•	limiting who may call special meetings of stockholders;


•	prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of the stockholders;


•	establishing advance notice requirements for nominations of candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;


•	requiring stockholder approval by holders of at least 66 ² / 3 % of our aggregate voting power or the approval by at least 75% of our board of directors with respect to certain extraordinary matters, such as a merger or consolidation of our company, a sale of all or substantially all of our assets or an amendment to our restated charter; and


•	the existence of authorized and unissued stock, including "blank check" preferred stock, which could be issued by our board of directors to persons friendly to our then current management, thereby protecting the continuity of our management, or which could be used to dilute the stock ownership of persons seeking to obtain control of our company.

In addition, our chairman, John C. Malone, beneficially owns shares representing the power to direct approximately 40% of the aggregate voting power in our company, due to his beneficial ownership of approximately 88% of the outstanding shares of LMCB as of January 31, 2013.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties.

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

In addition to their corporate headquaters, Starz leases office space for executive offices, distribution and sales operations in Burbank, California; Troy, Michigan; Beverly Hills, California; Media, Pennsylvania; Atlanta, Georgia; New York, New York; Toronto, Ontario, London, England and Melbourne and Sydney, Australia.

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

Item 3. Legal Proceedings

In re SIRIUS XM Shareholder Litigation, Consol. C.A. No. 7800-CS (Del. Ch.). On August 21, 2012, plaintiff City of Miami Police Relief and Pension Fund (the “Fund”) filed a complaint in the Court of Chancery of the State of Delaware against Liberty, SIRIUS XM, Liberty Radio LLC and certain Liberty designees on the board of directors of SIRIUS XM (David J.A. Flowers, Gregory B. Maffei, John C. Malone, Carl E. Vogel, and Vanessa A. Wittman (together, the “SIRIUS XM Designees”)). On August 23, 2012, plaintiff Brian Cohen filed a complaint in the Court of Chancery of the State of Delaware against the same individuals and seeking substantially similar relief as set forth in the complaint filed by the Fund. By Order of the Court dated October 2, 2012, the two actions were consolidated under the caption In re SIRIUS XM Shareholder Litigation. Plaintiffs the Fund and Brian Cohen filed an Amended Verified Class Action and Derivative Complaint (the "Amended Complaint") in the consolidated action on October 5, 2012. The Amended Complaint alleges that Liberty and the SIRIUS XM Designees breached their fiduciary duty

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in connection with the investment agreement entered into in 2009 (the "Investment Agreement") relating to Liberty's original investment in SIRIUS XM and Liberty's subsequent acquisition of SIRIUS XM shares and Liberty's application to the Federal Communications Commission for consent to the transfer of de jure control of the various FCC licenses and authorizations held by SIRIUS XM or its subsidiaries. The Amended Complaint also seeks a declaration that a provision in the Investment Agreement that prohibits SIRIUS XM from adopting certain anti-takeover provisions is invalid under Delaware law and a declaration that upon the expiration of the three year standstill in the Investment Agreement Liberty became an interested stockholder subject to the restrictions and limitations set forth by Section 203 of the Delaware General Corporation Law. Plaintiffs have filed a series of amended complaints in the action and the parties have agreed to a briefing schedule for motions to dismiss the latest amended complaint.

Cohen v. SIRIUS XM Radio Inc., et al., Case No. 7806 (Del. Ch.). On August 23, 2012, plaintiff Brian Cohen filed a complaint in the Court of Chancery of the State of Delaware. The allegations and relief sought in this action are against the same individuals and are substantially similar to those in the In re SIRIUS XM Shareholder Litigation discussed above.

Montero v. SIRIUS XM Radio Inc., Index No. 653012/2012 (N.Y. Sup. Ct. Cnty. of New York). On August 27, 2012, plaintiff Andrew Montero brought a shareholder class action on behalf of the shareholders of the common stock of SIRIUS XM against SIRIUS XM, the SIRIUS XM Designees, Liberty and Liberty Radio LLC. The action was commenced in the Supreme Court for the State of New York in New York County. Mr. Montero alleges breaches of fiduciary duty, aiding and abetting breach of fiduciary duty, and seeks a declaratory judgment, with allegations and relief sought substantially similar to those in the City of Miami litigation above. Although the parties have discussed acceptance of service in the matter, no agreement on service has yet been filed.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II.


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

Market Information

On November 28, 2011, we completed a conversion of our Liberty Starz tracking stock (ticker symbols LSTZA and LSTZB) for Liberty Capital tracking stock which changed their ticker symbols from LCAPA and LCAPB to LMCA and LMCB, respectively. Holders of Liberty Starz tracking stock received .88129 of a share of the corresponding series of Liberty Capital stock for each share of Liberty Starz tracking stock, with any fractional shares paid out in cash (the "Conversion"). Accordingly, as of December 31, 2011 only the Liberty Capital Series A and B shares are outstanding. Our Series A and Series B Liberty Capital tracking stock have been, and, prior to the Conversion, our Series A and Series B Liberty Starz tracking stock had been, outstanding since September 23, 2011 following the completion of the Split-Off. Prior to the Split-Off, Liberty Interactive's Series A and Series B Liberty Capital tracking stock (LCAPA and LCAPB, respectively) and its Series A and Series B Liberty Starz tracking stock (formerly Liberty Entertainment tracking stock) (LSTZA and LSTZB, formerly LMDIA and LMDIB, respectively) had been outstanding since March 4, 2008 when each share of its previous Liberty Capital tracking stock was reclassified into one share of the same series of new Liberty Capital and four shares of the same series of Liberty Entertainment. On November 19, 2009, Liberty Interactive completed the split off (the "LEI Split-Off") of its subsidiary Liberty Entertainment, Inc. ("LEI"). The LEI Split-Off was accomplished by a redemption of 90% of the outstanding shares of Liberty Entertainment common stock in exchange for all of the outstanding shares of common stock of LEI. LEI had been attributed to Liberty Interactive's Entertainment Group. Subsequent to the LEI Split-Off, the Entertainment Group was renamed the Starz Group. Each series of our common stock has traded on the Nasdaq Global Select Market. Subsequent to year-end the following table sets forth the range of high and low sales prices of shares of our common stock for the years ended December 31, 2012 and 2011.



	Liberty Capital
	Series A (LMCA)			Series B (LMCB)
	High		Low	High	Low
2011
First quarter	$	75.68	61.98	75.21	62.61
Second quarter	$	92.55	72.72	91.36	74.66
Third quarter	$	87.99	62.29	85.94	63.27
Fourth quarter	$	104.34	58.51	79.64	60.85
2012
First quarter	$	91.64	77.34	89.17	77.95
Second quarter	$	90.56	79.22	90.08	80.66
Third quarter	$	106.15	88.00	104.51	88.16
Fourth quarter	$	116.92	99.27	116.22	102.92



	Liberty Starz
	Series A (LSTZA)			Series B (LSTZB)
	High		Low	High	Low
2011
First quarter	$	80.21	64.20	78.00	66.33
Second quarter	$	81.36	68.78	79.99	72.62
Third quarter	$	78.91	61.54	78.08	64.16
Fourth quarter (through November 28, 2011)	$	71.00	59.01	66.96	60.57

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Holders

As of January 31, 2013, there were approximately 1,600 and 100 record holders of our Series A and Series B common stock, respectively. The foregoing numbers of record holders do not include the number of stockholders whose shares are held nominally by banks, brokerage houses or other institutions, but include each such institution as one shareholder.

Dividends

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

Securities Authorized for Issuance Under Equity Compensation Plans

Information required by this item is incorporated by reference to our definitive proxy statement for our 2013 Annual Meeting of stockholders that will be filed with the Securities and Exchange Commission on or before April 30, 2013.

Purchases of Equity Securities by the Issuer

Share Repurchase Programs

As of the date of the Conversion, discussed above the board of directors authorized $1.25 billion of repurchases of Liberty Capital common stock from that day forward. All previous authorizations were replaced by the conversion date authorization. Fourth quarter repurchases and remaining availability under the repurchase program for Liberty Capital common stock was as follows:



	Series A Liberty Capital Common Stock
					(d) Maximum Number
					(or Approximate Dollar
				(c) Total Number of	Value) of Shares that
	(a) Total Number	(b) Average		Shares Purchased as Part	May Yet be Purchased
	of Shares	Price Paid per		of Publicly Announced	Under the Plans or
Period	Purchased	Share		Plans or Programs	Programs
October 1 -31, 2012	191,468	$	105.93	191,468	$918 million
November 1 - 30, 2012	325,724	$	105.52	325,724	$883 million
December 1 - 31, 2012	240,987	$	104.92	240,987	$858 million
Total	758,179			758,179

In addition to the shares listed in the table above, 3,561 shares of Series A Liberty Capital common stock were surrendered in the fourth quarter of 2012 by certain of our officers to pay withholding taxes in connection with the vesting of their restricted stock.

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Item 6. Selected Financial Data.

The following tables present selected historical financial statement information relating to our financial condition and results of operations for the past five years. The following data should be read in conjunction with the accompanying consolidated financial statements.



	December 31,
	2012		2011	2010	2009	2008
	amounts in millions
Summary Balance Sheet Data:
Cash	$	1,353	2,070	2,090	3,951	2,228
Investments in available-for-sale securities and other cost investments	$	1,392	1,859	4,550	3,386	2,118
Investment in affiliates, accounted for using the equity method (3)	$	3,341	563	91	135	235
Assets of discontinued operations	$	—	—	—	—	14,211
Total assets	$	8,325	7,719	10,792	11,915	24,688
Current portion of debt	$	4	754	37	1,269	441
Long-term debt	$	536	541	2,101	2,432	2,674
Deferred tax liabilities, noncurrent	$	802	409	—	736	1,144
Stockholders' equity	$	6,440	5,259	5,026	3,315	13,300



		Years ended December 31,
		2012			2011		2010		2009		2008
		amounts in millions, except per share amounts
Summary Statement of Operations Data:
Revenue (1)		$	1,999		3,024		2,050		1,853		1,738
Operating income (loss)(1)(2)		$	326		957		195		9		(1,664	)
Interest expense		$	(33	)	(21	)	(65	)	(132	)	(194	)
Share of earnings (loss) of affiliates, net (3)		$	1,346		87		(98	)	(44	)	(71	)
Realized and unrealized gains (losses) on financial instruments, net		$	232		68		260		(34	)	(20	)
Gains (losses) on dispositions, net		$	22		(10	)	36		242		13
Other than temporary declines in fair value of investments		$	—		—		—		(9	)	(1	)
Earnings (loss) from continuing operations attributable to Liberty Media Corporation stockholders (3)(4):
	Liberty Capital common stock	$	1,414		607		794		127		(592	)
	Liberty Starz common stock	NA			229		206		213		(960	)
		$	1,414		836		1,000		340		(1,552	)
Basic earnings (loss) from continuing operations attributable to Liberty Media Corporation stockholders per common share (3)(5):
	Series A and Series B Liberty Capital common stock	$	11.78		7.14		8.82		1.32		(5.24	)
	Series A and Series B Liberty Starz common stock	NA			4.49		4.12		0.46		(1.86	)
Diluted earnings (loss) from continuing operations attributable to Liberty Media Corporation stockholders per common share (3)(5):
	Series A and Series B Liberty Capital common stock	$	11.40		6.90		8.54		1.31		(5.24	)
	Series A and Series B Liberty Starz common stock	NA			4.32		3.96		0.46		(1.86	)


(1)	In 2011 TruePosition recognized $1,029 million of previously deferred revenue and $409 million of deferred costs associated with two separate contracts.


(2)	Includes $1,513 million of long-lived asset impairment charges in 2008.

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(3)	As discussed in note 3 in the accompanying consolidated financial statements, Liberty changed the accounting for certain equity method affiliates from a three month lag to current reporting of our investment in such equity method affiliates and applied the change in accounting principal on a retrospective basis.


(4)	Earnings (loss) from continuing operations attributable to Liberty stockholders have been allocated to the Liberty Starz Group and Liberty Capital Group for all the periods based on businesses and assets of each respective group prior to the conversion.

(5)

Basic and diluted earnings per share have been calculated for Liberty Capital and Liberty Starz common stock, prior to the Split-Off date, based on the earnings attributable to the businesses and assets to the respective groups divided by the weighted average shares on an as if converted basis for the periods assuming a 4 to 1 and 1 to 1 exchange ratio of Liberty Capital shares into Liberty Starz shares and Liberty Capital shares, respectively, in the March 2008 reclassification and a 1 to 1 exchange ratio for the Split-Off.

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

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

Explanatory Note

On January 11, 2013 Liberty Media Corporation ("Liberty" or "the Company" formerly known as Liberty Spinco, Inc.) was spun-off, through the distribution of shares of Liberty by means of a pro-rata dividend from Starz (previously Liberty Media Corporation) (the "Spin-Off"), which was previously an indirect, wholly owned subsidiary of Liberty Interactive Corporation ("Liberty Interactive," formerly known as Liberty Media Corporation). Liberty Interactive's capital structure previously utilized three tracking stocks: Liberty Interactive common stock, Liberty Starz common stock and Liberty Capital common stock. During the third quarter of 2011, Liberty Interactive completed the separation of its Liberty Capital and Liberty Starz tracking stock groups from its Liberty Interactive tracking stock group (the "Split-Off"). The Split-Off was effected by means of a redemption of all of the Liberty Capital common stock and the Liberty Starz common stock in exchange for all of the common stock of Liberty, which at the time of the Split-Off held all of the assets, liabilities and businesses attributed to Liberty Interactive's Liberty Capital and Liberty Starz tracking stock groups.

Due to the relative significance of Liberty to Starz (the legal spinnor) and senior management's continued involvement with Liberty following the Spin-Off, Liberty will be treated as the "accounting successor" to Starz for financial reporting purposes, notwithstanding the legal form of the Spin-Off previously described. Therefore, the historical financial statements of Starz will continue to be the historical financial statements of Liberty and will present Starz as discontinued operations upon completion of the Spin-Off in the first quarter of 2013. Therefore, for purposes of this Form 10-K Liberty is treated as the spinnor for purposes of discussion and as a practical matter of describing all the historical information contained herein.

Overview

We own controlling and non-controlling interests in a broad range of media, communications and entertainment companies. Our more significant operating subsidiaries, which are significant reportable segments, are Starz, LLC (as used in the discussion herein, "Starz") and Atlanta National League Baseball Club, Inc., ("ANLBC"). Starz, LLC provides premium subscription video programming to United States multichannel video distributors, including cable operators, satellite television providers and telecommunications companies. Starz also develops, produces and acquires entertainment content and distributes this content to consumers in the United States and throughout the world. ANLBC owns the Atlanta Braves, a major league baseball club, as well as certain of the Atlanta Braves' minor league clubs.

Our "Corporate and Other" category includes our other consolidated subsidiaries, including TruePosition, Inc. and our revenue sharing arrangement with CNBC, and corporate expenses.

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In addition to the foregoing businesses, we hold ownership interests in Sirius XM Radio, Inc. ("SIRIUS XM") (our other reportable segment) and Live Nation Entertainment, Inc. ("Live Nation"), which we account for as equity method investments at December 31, 2012; and we maintain investments in public companies such as Barnes & Noble, Inc., Time Warner Inc., Time Warner Cable Inc. and Viacom Corporation, which are accounted for at their respective fair market values and are included in corporate and other.

Tracking Stocks

Tracking stock is a type of common stock that the issuing company intends to reflect or "track" the economic performance of a particular business or "group," rather than the economic performance of the company as a whole. On November 28, 2011, our tracking stock structure was eliminated through the conversion of each share of Liberty Starz common stock for .88129 of a share of the corresponding series of Liberty Capital common stock (plus cash in lieu of fractional share interests) (the "Conversion"). Prior to the Conversion, Liberty had two tracking stocks—Liberty Starz common stock and Liberty Capital common stock, which were intended to track and reflect the economic performance of the Starz Group and Capital Group, respectively. While the Starz Group and the Capital Group had separate collections of businesses, assets and liabilities attributed to them, no group was a separate legal entity and therefore no group could own assets, issue securities or enter into legally binding agreements. Holders of our tracking stocks had no direct claim to the group's stock or assets and were not represented by separate boards of directors. Instead, holders of the tracking stocks were stockholders of the Company, with a single board of directors and subject to all of the risks and liabilities of the Company.

On February 9, 2011, Liberty Interactive's board of directors approved the change in attribution of (i) approximately $1.138 billion principal amount of Liberty Interactive LLC's (formerly known as Liberty Media LLC) 3.125% Exchangeable Senior Debentures due 2023 (the "TWX Exchangeable Notes"), (ii) approximately 22 million shares of Time Warner Inc. common stock, approximately 5 million shares of Time Warner Cable Inc. common stock and approximately 2 million shares of AOL, Inc. common stock, which collectively represent the basket of securities into which the TWX Exchangeable Notes are exchangeable and (iii) $263.8 million in cash from its Capital Group to its Interactive Group, effective as of the aforementioned date (the "TWX Reattribution"). The TWX Reattribution had no effect on the assets and liabilities attributed to the Starz Group, nor did it effect any change to the obligor of the TWX Exchangeable Notes, which remains Liberty Interactive LLC.

Liberty Interactive had made changes in the attribution of certain assets, liabilities and businesses between the tracking stock groups in prior periods, as discussed in previous financial statements filed with the Securities and Exchange Commission and in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

Strategies and Challenges of Business Units

Starz, LLC. Starz is focused on several initiatives to increase its revenue. Starz's goal is to provide its distributors and their subscribers with high-quality, differentiated premium video services available on multiple viewing platforms (linear, On-Demand and over the Internet). Starz also intends to utilize its integrated business units to exploit its original programming content in the home video, digital (Internet) and non-pay television markets. To achieve these goals, Starz intends to:

•Renew and extend affiliation agreements with key distributors on favorable terms.

•Expand its original programming lineup over time.

•Rationalize valuable digital rights with both traditional distributors, as well as online video distributors.

•Continue to invest in the Starz brand by focusing its marketing investment on its original series.

Starz faces certain key challenges in its attempt to meet these goals, including;


•	Its ability to continue to acquire or produce affordable programming content, including original programming content, that appeals to its distributors and its viewers.


•	Its ability to renew and extend affiliation agreements with key distributors on favorable terms.


•	Potential loss of subscribers due to economic conditions and competition from other networks and other video programming services.


•	Potential consolidation of its distributors.


•	Increased rates paid by its distributors to carry broadcast networks and sports networks may make it more difficult for consumers to afford premium video services.

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•	Its distributors' willingness to market Starz networks and other services.


•	Its ability to react to changes in viewer habits related to technologies such as DVRs, video-on-demand, Internet-based content delivery, Blu-ray players and mobile devices.

ANLBC, Inc. ANLBC is focused on providing the best team, ballpark and entertainment experience to every member of its community (both locally and nationally). It owns and operates the Atlanta Braves Major League Baseball franchise as well as other minor league teams, which creates a player talent pipeline. The Atlanta Braves have earned 14 division championships, five National League pennants, and a World Series title. Based in Atlanta since 1966, the Braves franchise is the longest continuously operating franchise in Major League Baseball dating back to the late 1800s in Boston. ANLBC derives revenue from the sale of tickets for home games (played at Turner Field), game-day sales of concessions and other goods and services and broadcasting rights (local, regional and national). Key initiatives to help achieve these activities are as follows:

•Investment in acquisition and development of players, coaches and management talent;

•Strategic partnerships with Sponsors to mutually grow brand recognition;


•	Providing patrons with a positive experience regardless of on-field performance by providing top-notch customer service and facility amenities from its expansive HD scoreboard to all-inclusive SunTrust homeplate club;


•	Catering to a broad patron base by having a variety of game viewing options from suites and club level to general admission tickets;


•	Expanding season ticket base, group sales and game-day sales through marketing efforts and pricing; and


•	Brand recognition that is reflective of a top tier operation in its industry.

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Results of Operations—Consolidated

General. We provide in the tables below information regarding our Consolidated Operating Results and Other Income and Expense, as well as information regarding the contribution to those items from our reportable segments . The "corporate and other" category consists of those assets or businesses which do not qualify as a separate reportable segment. For a more detailed discussion and analysis of the financial results of our principal reporting segments , see "Results of Operations—Businesses" below.

Consolidated Operating Results



	December 31,
	2012			2011		2010
	amounts in millions
Revenue
Starz, LLC	$	1,631		1,615		1,626
ANLBC	225			208		203
Corporate and other	143			1,201		221
	$	1,999		3,024		2,050
Adjusted OIBDA
Starz, LLC	445			449		343
ANLBC	22			(6	)	6
Corporate and other	(17		)	617		(25	)
	$	450		1,060		324
Operating Income (Loss)
Starz, LLC	406			424		281
ANLBC	(6		)	(39	)	(47	)
Corporate and other	(74		)	572		(39	)
	$	326		957		195

Revenue. Our consolidated revenue decreased $1,025 million and increased $974 million for the years ended December 31, 2012 and 2011, as compared to the corresponding prior year periods. The current year decrease was primarily due to a decrease in revenue at TruePosition (included in Corporate and other) which had a one-time recognition of deferred revenue in the prior year. The prior year increase was primarily due to a one time recognition of previously deferred revenue from two separate contracts at TruePosition which aggregated $1,029 million. TruePosition recognized $538 million of deferred revenue associated with their AT&T contract due to a material modification of the contract in the first quarter of 2011. Additionally, in the fourth quarter of 2011 all the remaining obligations were satisfied under the T-Mobile contract as the contract expired and the maintenance period associated with the contract lapsed. Therefore, TruePosition recognized another $491 million of deferred revenue in the fourth quarter of 2011. TruePosition had deferred costs associated with these contracts as well that were recorded in the first and fourth quarters of 2011 for $167 million and $242 million, respectively. These one-time accounting anomalies explain the 2011 increases in TruePosition's Adjusted OIBDA and Operating Income. See Results of Operations—Businesses below for a more complete discussion of the results of operations of certain of our significant subsidiaries.

Adjusted OIBDA. We define Adjusted OIBDA as revenue less operating expenses and selling, general and administrative ("SG&A") expenses (excluding stock compensation). Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure allows us to view operating results, perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. See note 18 to the accompanying consolidated financial statements for a reconciliation of Adjusted OIBDA to Earnings (loss) from continuing operations before income taxes.

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Consolidated Adjusted OIBDA decreased $610 million and increased $736 million for the years ended December 31, 2012 and 2011, as compared to the corresponding prior year periods. The decrease in the current year was primarily due to the one-time recognition of deferred revenues and costs at TruePosition, discussed above. The prior year increase was primarily driven by the one time recognition of previously deferred revenues and costs at TruePosition which accounted for $620 million of the increase in 2011. See Results of Operations—Businesses below for a more complete discussion of the results of operations of certain of our significant subsidiaries.

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

We recorded $66 million, $32 million and $83 million of stock compensation expense for the years ended December 31, 2012, 2011 and 2010, respectively. The increase in stock compensation in 2012 was primarily due to the option exchange in the fourth quarter of 2012 which caused incremental compensation of approximately $24 million. See note 14 in the accompanying consolidated financial statements for further discussion of the option exchange. The decrease in stock compensation expense for the year ended December 31, 2011 is due to a less significant increase in our stock prices as compared to the year ended December 31, 2010 as it relates to our liability classified awards and a decreased number of stock options granted during the year ended December 31, 2011. As of December 31, 2012, the total unrecognized compensation cost related to unvested Liberty equity awards was approximately $150 million. Such amount will be recognized in our consolidated statements of operations over a weighted average period of approximately 1.8 years.

Operating income. Our consolidated operating income decreased $631 million and increased $762 million for the years ended December 31, 2012 and 2011 as compared to the corresponding prior year periods. The changes for the periods, as discussed above, are primarily the result of changes at TruePosition.

Other Income and Expense

Components of Other Income (Expense) are presented in the table below.



	Years ended December 31,
	2012			2011		2010
	amounts in millions
Other income (expense):
Interest expense	$	(33	)	(21	)	(65	)
Dividend and interest income	78			79		88
Share of earnings (losses) of affiliates	1,346			87		(98	)
Realized and unrealized gains (losses) on financial instruments, net	232			68		260
Gains (losses) on dispositions, net	22			(10	)	36
Other, net	41			5		10
	$	1,686		208		231

Interest expense. Interest expense increased $12 million and decreased $44 million for the years ended December 31, 2012 and 2011, as compared to the corresponding prior year periods, respectively. The overall increase in interest expense in the current year related to a higher interest rate on outstanding debt during the period, as compared to the corresponding prior year period. The Liberty Bank Facility was repaid early in 2012 which had a interest rate under 1%. The average interest rate increased in the current period as Starz entered into a new 5.00% Senior Note during the period the proceeds of which were used to repay the outstanding term loan under the Starz Bank Facility which had an average variable interest rate of approximately 2.5%. The overall decreases in interest expense in the prior year related to a lower average debt balance throughout the period, as compared to the corresponding prior year period. The lower average debt balance in the prior year is primarily due to the changes in attribution of certain debt of Liberty Interactive,LLC to Liberty Interactive's Interactive Group prior to the Split-Off.

Dividend and interest income. Dividend and Interest income has been fairly consistent from period to period.

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Share of earnings (losses) of affiliates. The following table presents our share of earnings (losses) of affiliates:



	Years ended December 31,
	2012			2011		2010
	amounts in millions
SIRIUS XM	$	1,367		94		(41	)
Live Nation	(45		)	(22	)	(34	)
Other	24			15		(23	)
	$	1,346		87		(98	)

SIRIUS XM recognized approximately $3.0 billion of tax benefit during the year ended December 31, 2012. SIRIUS XM recorded the tax benefit as the result of significant positive evidence that a valuation allowance was no longer necessary for its recorded deferred tax assets. The Company recognized our portion of this benefit ($1,229 million) based on our ownership percentage at the time of the recognition of the deferred tax benefit by SIRIUS XM.

During the year ended December 31, 2012 we made additional investments in Live Nation common stock, obtaining approximately 11 million shares for $107 million.

We previously recorded our share of earnings (loss) for SIRIUS XM and Live Nation on a three-month lag due to timeliness considerations. We have made additional investments in SIRIUS XM and Live Nation throughout the year and the individual companies have allowed us access to financial information we did not previously have prior to the fourth quarter and we determined it was preferable to start recording our share of earnings (loss) in these entities using the same fiscal periods we use. We note that under relevant GAAP when a Company transitions from a lag in reporting for a subsidiary (consolidated or treated as equity method affiliate) the appropriate presentation is to retrospectively apply the recognition of share of earnings (losses) in the appropriate periods. We have retroactively applied our share of earnings (loss) for all periods presented on a comparable basis. See note 3 in the accompanying consolidated financial statements for additional details.

In January 2013, we acquired an additional 50,000,000 shares of SIRIUS XM's common stock and converted all of our remaining shares of SIRIUS XM's Convertible Perpetual Preferred Stock into 1,293,509,076 shares of SIRIUS XM common stock, giving us more than 50% of the common stock of SIRIUS XM entitled to vote on any matter, including the election of directors. Therefore, we will begin consolidating SIRIUS XM in the first quarter of 2013. We believe that through the application of purchase accounting we will recognize a significant gain on our ownership interest in SIRIUS XM based on the current fair value of SIRIUS XM and our basis in SIRIUS XM. The consolidation of SIRIUS XM will alter the overall financial statement presentation of our company. See note 1 to the accompanying consolidated financial statements to see supplemental information on the Pro Forma impacts of consolidating SIRIUS XM and the impact of the Spin-Off.

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



	Years ended December 31,
	2012			2011		2010
	amounts in millions
Non-strategic Securities(1)	$	310		254		669
Borrowed shares(1)	—			(104	)	(254	)
Net change in Non-strategic Securities(1)	310			150		415
Exchangeable senior debentures (2)	—			(85	)	(111	)
Other derivatives	(78		)	3		(44	)
	$	232		68		260

___________________________

(1)

Based on the nature of the borrowed share accounting, as described in note 9 in the accompanying consolidated financial statements, gains and (losses) on borrowed shares completely offset the gains and (losses) on the same Non-strategic Securities owned by the Company. During the year ended December 31, 2011 we settled all borrowed share arrangements through the release of those shares, held as collateral, to the counterparty.

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(2)	Prior to the Split-Off, all the Exchangeable Senior Debentures were transferred to Liberty Interactive through reattributions in the current or prior years.

Gains (losses) on dispositions. Gains on dispositions primarily related to gains associated with the repayment of certain SIRIUS XM debt securities in the prior years.

Other, net. The other category increased for the year ended December 31, 2012 as a result of a reversal of a contingent liability as discussed in more detail in note 17 in the accompanying financial statements.

Income taxes. Our effective tax rate for the years ended December 31, 2012 and 2011 were 30% and 29%, respectively. During the year ended December 31, 2010 we recognized net income tax benefits of $571 million. Our effective tax rate for all three years were impacted for the following reasons:


•	During 2012, our effective tax rate was lower than the federal tax rate of 35% due to tax benefits related to a capital loss realized on the taxable liquidation of a consolidated subsidiary, dividends received deductions and a change in valuation allowance offset slightly by state income taxes.


•	During the fourth quarter of 2011, we recognized previously unrecognized tax benefits of $104 million as we reached an agreement with the IRS with respect to all disputed items reported on our 2010 income tax return.

•

During the fourth quarter of 2010, we recognized a net federal tax benefit of $211 million as we reached an agreement with the IRS with respect to the settlement of derivative contracts reported on our 2009 income tax return. Also during the fourth quarter of 2010, we recognized a deferred tax benefit of $462 million from the sale of certain consolidated subsidiaries (this item was settled as part of the agreement reached with the IRS during the fourth quarter of 2011).

Net earnings. We had net earnings of $1,412 million, $832 million and $997 million for the years ended December 31, 2012, 2011 and 2010, respectively. The change in net earnings was the result of the above-described fluctuations in our revenue, expenses and other gains and losses.

Liquidity and Capital Resources

As of December 31, 2012, substantially all of our cash and cash equivalents are invested in U.S. Treasury securities, other government securities or government guaranteed funds, AAA rated money market funds and other highly rated financial and corporate debt instruments.

The following are potential sources of liquidity: available cash balances, cash generated by the operating activities of our privately-owned subsidiaries (to the extent such cash exceeds the working capital needs of the subsidiaries and is not otherwise restricted), proceeds from asset sales, monetization of our public investment portfolio, debt and equity issuances, and dividend and interest receipts.

Liberty does not have a debt rating subsequent to the Split-Off because it has no corporate public debt outstanding.

As of December 31, 2012, the Company had a cash balance of $1,353 million along with additional sources of liquidity of $67 million in short term marketable securities and $1,079 million of Non-strategic AFS securities. To the extent the Company recognizes any taxable gains from the sale of assets we may incur tax expense and be required to make tax payments, thereby reducing any cash proceeds. Our operating businesses have provided, on average, approximately $200 million in annual operating cash flow over the prior three years, almost all this operating cash flow is generated by Starz and with the completion of Spin-Off the operating cash flow of Starz will no longer be available to the Company. At the time of Spin-Off, a cash distribution was made of approximately $1.2 billion from Starz to Liberty which will replace that operating cash flow for the near term. Additionally, on January 18, 2013 the Company obtained a controlling interest in SIRIUS XM which has significant operating cash flows, although due to SIRIUS XM being a separate public company and the significant noncontrolling interest we will not have ready access to such cash flows.

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		Years ended December 31,
		2012		2011		2010
Cash Flow Information		amounts in millions
	Net cash provided (used) by operating activities	236		276		44
	Net cash provided (used) by investing activities	214		(274	)	(484	)
	Net cash provided (used) by financing activities	(1,167	)	(22	)	(1,421	)

Our primary uses of cash during the years ended December 31, 2012, 2011 and 2010 were additional investments in cost and equity method investees ($1,716 million (primarily purchases of SIRIUS XM and Live Nation common shares during the period), $350 million and $405 million, respectively), the reattribution of cash to Liberty Interactive (prior to the Split-Off) (zero, $264 million and $807 million, respectively), repurchases of shares of Series A common stock of Liberty's various tracking stocks ($323 million, $465 million and $754 million, respectively) and debt repayments ($1,254 million, $59 million and $1,047 million, respectively). These uses of cash were funded by cash provided by operating activities, net sales of short term investments, repayments of loans by cost and equity method investees, proceeds from the settlement of financial instruments, debt borrowings and cash on hand.

The projected uses of Liberty cash are primarily the investment in new or existing businesses. In January 2013, we acquired an additional 50,000,000 shares of SIRIUS XM for approximately $160 million. Additionally, we may use cash for the potential buyback of common stock under our share buyback programs. Between the end of the year and January 31, 2013 we have acquired approximately 620,031 shares of our Series A common stock for $70 million. As of January 11, 2013 the Company no longer has any outstanding debt to service on a go forward basis as all outstanding debt obligations remained with Starz in the Spin-Off. We expect that we will be able to use a combination of cash on hand, including the $1.2 billion discussed above, and other sources of liquidity to fund future cash needs.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Starz has entered into an exclusive long-term licensing agreement for theatrically released films from Disney through 2015. The agreement provides Starz with exclusive pay TV rights to exhibit qualifying theatrically released live-action and animated feature films under the Disney, Touchstone, Pixar and Marvel labels. Theatrically released films produced by DreamWorks are not licensed to Starz under the agreement. In addition, Starz is obligated to pay programming fees for all qualifying films that are released theatrically in the U.S. by Sony's Columbia Pictures, Screen Gems, Sony Pictures Classics and Tristar labels through 2021, subject to certain limitations. On February 11, 2013, Starz announced a new, multi-year output licensing agreement for theatrically released motion pictures from Sony that extends its relationship with Sony through 2021. The previous agreement had covered motion pictures released theatrically through 2016. The programming fees to be paid by Starz to Disney and Sony are based on the quantity and domestic theatrical exhibition receipts of qualifying films. Starz has also entered into agreements with a number of other motion picture producers and is obligated to pay fees for the rights to exhibit certain films that are released by these producers.

The unpaid balance of Programming Fees for films that were available for exhibition by Starz at December 31, 2012, is reflected as a liability in the accompanying consolidated balance sheet. The balance due as of December 31, 2012, is payable as follows: $57 million in 2013 and $1 million in 2014.

Under the above output agreements, Starz is also obligated to pay fees for the rights to exhibit films that have been released theatrically, but are not available for exhibition by Starz until some future date. Starz's estimate of amounts payable for rights to future programming (that have been released), including the Disney and Sony agreements, is as follows: $325 million in 2013; $101 million in 2014; $72 million in 2015; $64 million in 2016; $64 million in 2017 and $266 million thereafter.

Starz is also obligated to pay fees for films that have not been released in theatres. Starz is unable to estimate the amounts to be paid under these output agreements for films that have not yet been released in theatres; however, such amounts are expected to be significant.

Liberty guarantees Starz's obligations under certain of its studio output agreements. At December 31, 2012, Liberty's guarantees for obligations for films released by such date aggregated $399 million. While the guarantee amount for films not yet released is not determinable, such amount is expected to be significant. As noted above, Starz has recognized the liability for a portion of its

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obligations under the output agreements. As this represents a direct commitment of Starz, LLC, then a wholly-owned subsidiary of Liberty, at December 31, 2012, Liberty has not recorded a separate indirect liability for its guarantee of these obligations as of such date. Following the Spin-Off we will continue to guarantee certain Starz obligations under certain of its studio output agreements and will determine the financial statement impact, if any, in the first quarter of 2013.

The Atlanta Braves have entered into long-term employment contracts with certain of their players and coaches whereby such individuals' compensation is guaranteed. Amounts due under guaranteed contracts as of December 31, 2012 aggregated $151 million, which is payable as follows: $60 million in 2013, $30 million in 2014, $28 million in 2015, $16 million in 2016 and $17 million thereafter. In addition to the foregoing amounts, certain players and coaches may earn incentive compensation under the terms of their employment contracts.

Information concerning the amount and timing of required payments, both accrued and off-balance sheet, under our contractual obligations, excluding uncertain tax positions as it is indeterminable when payments will be made, is summarized below (including Starz obligations).



		Payments due by period
		Total		Less than 1 year	2 - 3 years	4 - 5 years	After 5 years
Consolidated contractual obligations		amounts in millions
Long-term debt(1)		$	540	4	9	15	512
Interest payments(2)		184		27	54	52	51
Programming Fees(3)		950		382	174	128	266
Operating lease obligations		57		12	20	9	16
Employment agreements		151		60	58	33	—
Purchase orders and other obligations		336		292	36	8	—
	Total consolidated	$	2,218	777	351	245	845
	Starz obligations	$	2,025	704	283	207	831
	Contractual obligations without Starz	$	193	73	68	38	14


(1)	Amounts are stated at the face amount at maturity of our debt instruments and capital lease obligations. Amounts do not assume additional borrowings or refinancings of existing debt.


(2)	Amounts (i) are based on our outstanding debt at December 31, 2012, (ii) assume the interest rates on our variable rate debt remain constant at the December 31, 2012 rates and (iii) assume that our existing debt is repaid at maturity.


(3)	Does not include Programming Fees for films not yet released theatrically, as such amounts cannot be estimated.

Critical Accounting Estimates

The preparation of our financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Listed below are the accounting estimates that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported. All of these accounting estimates and assumptions, as well as the resulting impact to our financial statements, have been discussed with our audit committee.

Non-Financial Instruments. Our non-financial instrument valuations are primarily comprised of our annual assessment of the recoverability of our goodwill and other nonamortizable intangibles, such as trademarks and our evaluation of the recoverability of our other long-lived assets upon certain triggering events. If the carrying value of our long-lived assets exceeds their estimated fair value, we are required to write the carrying value down to fair value. Any such writedown is included in impairment of long-lived assets in our consolidated statement of operations. A high degree of judgment is required to estimate the fair value of our long-lived assets. We may use quoted market prices, prices for similar assets, present value techniques and other valuation techniques to prepare these estimates. We may need to make estimates of future cash flows and discount rates as well as other assumptions in order to implement these valuation techniques. Due to the high degree of judgment involved in our

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estimation techniques, any value ultimately derived from our long-lived assets may differ from our estimate of fair value. As each of our operating segments has long-lived assets, this critical accounting policy affects the financial position and results of operations of each segment.

As of December 31, 2012, the intangible assets not subject to amortization for each of our significant reporting units was as follows (amounts in millions):



	Goodwill		Other	Total
Starz, LLC	$	132	—	132
ANLBC	180		143	323
Other	20		—	20
Consolidated	$	332	143	475

We perform our annual assessment of the recoverability of our goodwill and other nonamortizable intangible assets as of December 31, except for ANLBC which is evaluated as of October 31. The Company adopted current accounting guidance, in the prior and current year, relating to the annual assessments of recoverability of goodwill and other non-amortizable intangibles and utilized a qualitative assessment for determining whether step one of the goodwill impairment analysis was necessary. The accounting guidance adopted was issued to simplify how entities test goodwill for impairment by permitting entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. In evaluating goodwill on a qualitative basis the Company reviewed the business performance of each reporting unit and evaluated other relevant factors as identified in the relevant accounting guidance to determine whether it were more likely than not that an indicated impairment existed for any of our reporting units. The Company considered whether there were any negative macroenomic conditions, industry specific conditions, market changes, increased competition, increased costs in doing business, management challenges, the legal environments and how these factors might impact company specific performance in future periods. As part of the analysis the Company also considered fair value determinations for certain reporting units that had been made at various points throughout the year for other purposes. We utilized a qualitative assessment for determining whether step one of the goodwill impairment analysis was necessary.

Carrying Value of Investments. We periodically evaluate our investments to determine if decreases in fair value below our cost bases are other than temporary. If a decline in fair value is determined to be other than temporary, we are required to reflect such decline in our consolidated statement of operations. Other than temporary declines in fair value of our cost investments are recognized on a separate line in our consolidated statement of operations, and other than temporary declines in fair value of our equity method investments are included in share of losses of affiliates in our consolidated statement of operations.

The primary factors we consider in our determination of whether declines in fair value are other than temporary are the length of time that the fair value of the investment is below our carrying value; the severity of the decline; and the financial condition, operating performance and near term prospects of the investee. In addition, we consider the reason for the decline in fair value, be it general market conditions, industry specific or investee specific; analysts' ratings and estimates of 12 month share price targets for the investee; changes in stock price or valuation subsequent to the balance sheet date; and our intent and ability to hold the investment for a period of time sufficient to allow for a recovery in fair value. Fair value of our publicly traded cost and equity investments is based on the market prices of the investments at the balance sheet date. We estimate the fair value of our non-public cost and equity investments using a variety of methodologies, including cash flow multiples, discounted cash flow, per subscriber values, or values of comparable public or private businesses. Impairments are calculated as the difference between our carrying value and our estimate of fair value. As our assessment of the fair value of our investments and any resulting impairment losses and the timing of when to recognize such charges requires a high degree of judgment and includes significant estimates and assumptions, actual results could differ materially from our estimates and assumptions.

Our evaluation of the fair value of our investments and any resulting impairment charges are made as of the most recent balance sheet date. Changes in fair value subsequent to the balance sheet date due to the factors described above are possible. Subsequent decreases in fair value will be recognized in our consolidated statement of operations in the period in which they occur to the extent such decreases are deemed to be other than temporary. Subsequent increases in fair value will be recognized in our consolidated statement of operations only upon our ultimate disposition of the investment.

II-13

Program Rights. Programming costs are Starz's most significant individual operating cost. Program rights for films and television programs exhibited by Starz Networks are generally amortized on a film-by-film basis over the anticipated number of exhibitions. Starz estimates the number of exhibitions based on the number of exhibitions allowed in the agreement and the expected usage of the content. Starz generally has rights to two or three separate windows under its pay-television output agreements. For films with multiple windows, the license fee is allocated between the windows based upon the proportionate estimated value of each window. Starz has allocated a substantial portion of the programming costs to the first window as first-run content is believed to have greater appeal to subscribers when it is newer and therefore deemed to have greater value to Starz in acquiring and retaining subscribers. Certain other program rights are amortized to expense using the straight-line method over the respective lives of the agreements.

Additionally, Starz allocates programming costs associated with its original productions between the pay television window and the ancillary revenue markets (e.g. home video, digital platforms, international television, etc.) based on the estimated relative fair values of these markets. Costs allocated to the pay television window are amortized to expense over the anticipated number of exhibitions for each original production while costs associated with the ancillary revenue markets are amortized to expense based on the proportion that current revenue from the original productions bears to an estimate of the remaining unrecognized revenue (ultimate revenue). Estimates of fair value for the pay television and ancillary markets involve uncertainty as well as estimates of ultimate revenue.

Changes in management's estimate of the anticipated exhibitions of films and original productions on Starz's networks and the estimate of ultimate revenue could result in the earlier recognition of programming costs than anticipated. Conversely, scheduled exhibitions may not capture the appropriate usage of the program rights in current periods which could lead to the write-off of additional program rights in future periods and have a significant impact on Starz's future results of operations and financial position.

Income Taxes. We are required to estimate the amount of tax payable or refundable for the current year and the deferred income tax liabilities and assets for the future tax consequences of events that have been reflected in our financial statements or tax returns for each taxing jurisdiction in which we operate. This process requires our management to make judgments regarding the timing and probability of the ultimate tax impact of the various agreements and transactions that we enter into. Based on these judgments we may record tax reserves or adjustments to valuation allowances on deferred tax assets to reflect the expected realizability of future tax benefits. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate, our inability to generate sufficient future taxable income or unpredicted results from the final determination of each year's liability by taxing authorities. These changes could have a significant impact on our financial position.

Results of Operations - Businesses

Starz, LLC. Starz provides premium subscription video programming to U.S. Mulitchannel Video Programming Distributors, including cable operators, satellite television providers and telecommunications companies. Starz also develops, produces and acquires entertainment content and distributes this content to consumers in the U.S. and throughout the world. Starz is managed by and organized around the Starz Networks (previously referred to as Starz Channels), Starz Distribution and Starz Animation business units. Starz Distribution includes the Home Video, Digital Media and Worldwide Distribution (previously referred to as Television) businesses.

A large portion of Starz's revenue is derived from the delivery of movies and original programming content to consumers through Starz Networks' distributors. Certain of Starz's affiliation agreements with its distributors provide for payments to Starz based on the number of subscribers that receive the Starz Networks' services (“consignment agreements”). Starz also has fixed-rate affiliation agreements with certain of its distributors. Pursuant to these agreements, distributors pay an agreed-upon rate regardless of the number of subscribers. The agreed-upon rate may be increased annually to the extent the contract provides for an increase. The affiliation agreements have various terms ranging from rolling month to month extensions with certain distributors to agreements which last into 2019. Starz's affiliation agreements expire from time to time and are subject to renegotiation with its distributors. Starz agreed to multi‑year extensions with several of its distributors during the fourth quarter of 2012. The financial terms of the extensions related to two distributors are generally less favorable than the financial terms in the prior affiliation agreements. The financial terms of the extensions would have resulted in an approximate reduction of 3% of Starz Networks' revenue for the year ended December 31, 2012, on a proforma basis had the extended agreements been in effect on January 1,

II-14

2012. The agreements with these two distributors provide for contractually agreed upon increases in the amounts Starz receives on an annual basis beginning on the first anniversary of the extensions. During the year ended December 31, 2012, approximately 58% of the Starz Networks' revenue was generated by its three largest distributors, Comcast, DIRECTV, and Dish Network, each of which individually generated 10% or more of Starz Networks' revenue for such period.

Starz's operating results were as follows:



	Years ended December 31,
	2012			2011		2010
	amounts in millions
Revenue	$	1,631		1,615		1,626
Operating expenses	(971		)	(928	)	(981	)
SG&A expenses	(215		)	(238	)	(302	)
Adjusted OIBDA	445			449		343
Stock-based compensation	(20		)	(7	)	(39	)
Depreciation and amortization	(19		)	(18	)	(23	)
Operating income	$	406		424		281

Starz's revenue increased $16 million or 1.0% for the year ended December 31, 2012, as compared to the corresponding prior year. Revenue for the year ended December 31, 2012 increased primarily as a result of increases in revenue from the Starz Distribution and Starz Networks' businesses which were partially offset by a decrease in revenue for the Starz Animation business. Starz Networks' revenue represented approximately 78% and 79% of Starz's total revenue for the years ended December 31, 2012 and 2011, respectively. The following table sets forth Starz's total revenue by business:



	Years ended December 31,
	2012			2011		2010
	amounts in millions
Starz Networks	$	1,277		1,270		1,224
Starz Distribution	321			311		367
Starz Animation	42			46		71
Eliminations	(9		)	(12	)	(36	)
Total Revenue	$	1,631		1,615		1,626

Revenue from Starz Networks increased $7 million or 0.6% for the year ended December 31, 2012, as compared to the corresponding prior year. The Starz Networks' growth in revenue for the year ended December 31, 2012 resulted from a $34 million increase due to higher effective rates for the Starz Networks ' services which was partially offset by a $27 million decrease in volume. The decrease in volume was due primarily to the non-renewal of the Netflix agreement and a decrease in consignment subscriptions as discussed below.

II-15

The Starz and Encore channels are the primary drivers of Starz Networks' revenue. The following table sets forth information on Starz and Encore subscribers:



	Years ended December 31,
	2012	2011	2010
	in millions
Starz:
Fixed-rate subscriptions	13.0	9.4	8.6
Consignment subscriptions	8.2	10.2	9.6
Total Starz subscriptions	21.2	19.6	18.2
Encore:
Fixed-rate subscriptions	23.2	19.6	19.5
Consignment subscriptions	11.6	13.6	13.3
Total Encore subscriptions	34.8	33.2	32.8

Starz average subscriptions increased 8.2% for the year ended December 31, 2012 as compared to the corresponding prior year and Encore average subscriptions increased 4.8% for the year ended December 31, 2012 as compared to the corresponding prior year. The impact on revenue due to subscription increases is affected by the relative percentages of increases under consignment agreements and fixed-rate agreements. In this regard, as of December 31, 2012, subscriptions under fixed-rate agreements were 36.2 million while subscriptions under consignment agreements were 19.8 million. As of December 31, 2011, subscriptions under fixed-rate affiliation agreements were 29.0 million while subscriptions under consignment agreements were 23.8 million. The increase in fixed-rate subscriptions includes 3.9 million of subscriptions for certain distributors which moved from consignment to fixed-rate agreements.

Revenue from Starz Distribution increased $10 million or 3.2% for the year ended December 31, 2012 as compared to the corresponding prior year. The increase for the year ended December 31, 2012 as compared to the corresponding prior year is primarily due to increased revenue from the Digital Media and Worldwide Distribution businesses which was offset by a decrease in revenue from the Home Video business. The Digital Media business experienced an increase in revenue from films released under the distribution agreement with The Weinstein Company (“TWC”) while Worldwide Distribution experienced an increase in revenue from distribution of Starz's original programming. The home video business experienced a decrease in revenue from the TWC films released during the year ended December 31, 2012 as compared to the corresponding prior year. This decrease was partially offset by an increase in revenue from the distribution of AMC Network's original series “The Walking Dead” and Starz's original series “Spartacus.” Home Video revenue was positively impacted in 2011 by the release of TWC's “The King's Speech,” which won four Academy Awards®, including Best Picture, Best Actor, Best Director and Best Original Screenplay.

Operating expenses increased $43 million or 4.6% during the year ended December 31, 2012 as compared to corresponding prior year. The increase for the year ended December 31, 2012 as compared to the corresponding prior year is due primarily to higher programming costs and production and acquisition costs.

Programming costs are Starz's largest expense. Programming costs increased $10 million or 1.5% for the year ended December 31, 2012 as compared to the corresponding prior year. Programming costs vary due to costs associated with original productions, the number of films licensed under Starz's output and library programming agreements and the cost per film paid under Starz's output and library agreements. Programming costs for the year ended December 31, 2012 as compared to the prior year have increased due to increased exhibitions of Starz's original programming content and higher production costs related to Starz's 2012 original series as compared to the 2011 series. Partially offsetting this increase in original programming during 2012 is higher utilization of lower cost second window films licensed under Starz's output agreements. We expect programming costs related to original programming to continue to increase in the future as Starz continues to invest in original content.

Production and acquisition costs primarily include the amortization of Starz's investments in films and television programs and participation costs. The license fee associated with original productions is included in programming costs and all remaining production and acquisition costs for original productions are amortized to production and acquisition costs based on the proportion

II-16

that current revenue bears to an estimate of Starz's ultimate revenue for each original production. The amount of production and acquisition costs that Starz will incur for original productions is impacted by both the number of original productions and the various distribution rights that Starz acquires or retains for these productions. Participation costs represent amounts paid or due to participants under agreements Starz has whereby Starz Distribution distributes content in which a participant has an ownership interest in the content (e.g., TWC, AMC Networks, producers or writers of Starz's original programming, etc.).

Production and acquisition costs increased $34 million or 21.4% for the year ended December 31, 2012 as compared to the corresponding prior year. The increase in production and acquisition costs is primarily due to higher Starz Distribution revenue associated with Starz's original series (which resulted in higher production cost amortization) and a higher gross margin in 2012 on films distributed which was primarily the result of higher advertising and marketing costs in 2011 as described below. In addition, revisions Starz made in ultimate revenue estimates resulted in impairments of $17 million in 2012 as compared to impairments of $13 million in 2011.

Starz's SG&A expenses decreased by $23 million or 9.7% for the year ended December 31, 2012 as compared to the corresponding prior year. The decrease in SG&A expenses for the year ended December 31, 2012 as compared to the corresponding prior year was due primarily to a decrease in advertising and marketing for Starz Distribution and Starz Networks. Advertising and marketing for Starz Distribution was higher in 2011 primarily as a result of the home video release of “The King's Speech.” Advertising and marketing costs for Starz Networks decreased for the year ended December 31, 2012 as compared to the corresponding prior year due to a lower number of original series premieres in 2012 than 2011. However, Starz expects that advertising and marketing costs related to original programming will increase in future periods as Starz continues to invest in original content.

Starz's Adjusted OIBDA decreased $4 million or 0.9% for year ended December 31, 2012, as compared to the corresponding prior year. Starz Distribution's adjusted OIBDA decreased approximately $9 million as increases in production and acquisition costs more than offset Starz Distribution's higher revenue. Starz Networks' adjusted OIBDA increased approximately $4 million primarily due to a decrease in advertising and marketing costs.

ANLBC, Inc. ANLBC's business is primarily driven by the results of the Atlanta Braves Major League Baseball team. Attendance, viewership, partnerships with sponsors and player talent are significant factors in the overall financial success of the organization. For the year ended December 31, 2012 the baseball club increased revenue by $17 million or 8.2% as compared to the prior year, due to slightly greater fan attendance and with a slightly higher average price per ticket. ANLBC's adjusted OIBDA was positively impacted by slightly lower player salaries in 2012. During the year ended December 31, 2011 player salaries were slightly higher as the Braves traded one of their pitchers to another baseball club and agreed to pay a portion of that player's 2012 guaranteed salary in the trade. This freed up additional salary in 2012 to be utilized in the acquisition of additional player talent. This one transaction caused Adjusted OIBDA to go from earnings to a loss for the year ended December 31, 2011. During the year ended December 31, 2012 there was a reduction in amortization which was an incremental improvement to ANLBC's operating loss, as compared to the prior year period, due to certain intangible assets becoming fully amortized throughout 2011.

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

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

We are exposed to changes in interest rates primarily as a result of our borrowing and investment activities, which include investments in fixed and floating rate debt instruments and borrowings used to maintain liquidity and to fund business operations. The nature and amount of our long-term and short-term debt are expected to vary as a result of future requirements, market conditions and other factors. We manage our exposure to interest rates by maintaining what we believe is an appropriate mix of fixed and variable rate debt. We believe this best protects us from interest rate risk. We have achieved this mix by (i) issuing fixed rate debt that we believe has a low stated interest rate and significant term to maturity, (ii) issuing variable rate debt with appropriate maturities and interest rates and (iii) entering into interest rate swap arrangements when we deem appropriate.

II-17

As of December 31, 2012, our debt is comprised of the following amounts:



Variable rate debt				Fixed rate debt
Principal amount		Weighted avg interest rate		Principal amount		Weighted avg interest rate
dollar amounts in millions
$	5	2.0	%	$	535	5.09	%

The Company is exposed to changes in stock prices primarily as a result of our significant holdings in publicly traded securities. We continually monitor changes in stock markets, in general, and changes in the stock prices of our holdings, specifically. We believe that changes in stock prices can be expected to vary as a result of general market conditions, technological changes, specific industry changes and other factors. We periodically use equity collars and other financial instruments to manage market risk associated with certain investment positions. These instruments are recorded at fair value based on option pricing models.

At December 31, 2012, the fair value of our AFS equity securities was $1,392 million. Had the market price of such securities been 10% lower at December 31, 2012, the aggregate value of such securities would have been $139 million lower. Additionally, our stock in SIRIUS XM and Live Nation (two of our equity method affiliates) are publicly traded securities which are not reflected at fair value in our balance sheet. These securities are also subject to market risk that is not directly reflected in our financial statements.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements of Liberty Media Corporation are filed under this Item, beginning on Page II-21. The financial statement schedules required by Regulation S-X are filed under Item 15 of this Annual Report on Form 10‑K.


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

None.

Item 9A. Controls and Procedures.

In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer and principal accounting and financial officer (the "Executives"), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Executives concluded that the Company's disclosure controls and procedures were effective as of December 31, 2012 to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

See page II-19 for Management's Report on Internal Control Over Financial Reporting.

See page II-20 for Report of Independent Registered Public Accounting Firm for their attestation regarding our internal control over financial reporting.

There has been no change in the Company's internal control over financial reporting that occurred during the three months ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Item 9B. Other Information.

None.

II-18

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Liberty Media Corporation's (the "Company") management is responsible for establishing and maintaining adequate internal control over the Company's financial reporting, as such term is defined in Rule 13a - 15(f) of the Securities Exchange Act of 1934. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

The Company's management assessed the effectiveness of internal control over financial reporting as of December 31, 2012, using the criteria in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation the Company's management believes that, as of December 31, 2012, its internal control over financial reporting is effective.

The Company's independent registered public accounting firm audited the consolidated financial statements and related disclosures in the Annual Report on Form 10-K and have issued an audit report on the effectiveness of the Company's internal control over financial reporting. This report appears on page II-20 of this Annual Report on Form 10-K.

II-19

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Liberty Media Corporation:

We have audited Liberty Media Corporation's internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Liberty Media Corporation's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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

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

In our opinion, Liberty Media Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Liberty Media Corporation and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive earnings (loss), cash flows, and equity for each of the years in the three-year period ended December 31, 2012, and our report dated February 27, 2013 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Denver, Colorado

February 27, 2013

II-20

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Liberty Media Corporation:

We have audited the accompanying consolidated balance sheets of Liberty Media Corporation and subsidiaries (the Company) as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive earnings (loss), cash flows, and equity for each of the years in the three‑year period ended December 31, 2012. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Liberty Media Corporation and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the three‑year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.

As discussed in note 3 to the consolidated financial statements, effective January 1, 2011, the Company adopted ASU 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements and ASU 2009-13, Revenue Recognition (Topic 605): Revenue Arrangements. Also as discussed in note 3, in the fourth quarter of 2012, the Company elected to record its share of earnings (loss) in certain equity method investments on a current basis as opposed to a three-month lag, which resulted in retrospective application for all periods presented.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Liberty Media Corporation and subsidiaries' internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 27, 2013 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ KPMG LLP

Denver, Colorado

February 27, 2013

II-21

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2012 and 2011



				Recast
	2012			2011
	amounts in millions
Assets
Current assets:
Cash and cash equivalents	$	1,353		2,070
Trade and other receivables, net	286			288
Program rights	340			388
Short term marketable securities	67			299
Restricted cash	4			709
Deferred income tax assets (note 11)	13			61
Other current assets	148			45
Total current assets	2,211			3,860
Investments in available-for-sale securities and other cost investments (note 6)	1,392			1,859
Investments in affiliates, accounted for using the equity method (note 7)	3,341			563

Property and equipment, at cost	468			504
Accumulated depreciation	(261		)	(289	)
	207			215

Intangible assets not subject to amortization (note 9)	475			475
Intangible assets subject to amortization, net (note 9)	120			135
Program rights	339			374
Other assets, at cost, net of accumulated amortization	240			238
Total assets	$	8,325		7,719

(continued)

See accompanying notes to consolidated financial statements.

II-22

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets (Continued)

December 31, 2012 and 2011



				Recast
	2012			2011
	amounts in millions
Liabilities and Equity
Current liabilities:
Accounts payable	$	10		15
Accrued liabilities	285			313
Current portion of debt (note 10)	4			754
Deferred revenue	49			63
Other current liabilities	37			85
Total current liabilities	385			1,230
Long-term debt (note 10)	536			541
Deferred revenue	39			39
Deferred income tax liabilities (note 11)	802			409
Other liabilities	131			251
Total liabilities	1,893			2,470
Stockholders' equity (note 12, 14 and 16):
Preferred stock, $.01 par value. Authorized 50,000,000 shares; no shares issued	—			—
Series A Liberty Capital common stock, $.01 par value. Authorized 2,000,000,000 shares; issued and outstanding 111,852,001 and 112,411,965 shares at December 31, 2012 and 2011, respectively	1			1
Series B Liberty Capital common stock, $.01 par value. Authorized 75,000,000 shares; issued and outstanding 9,886,838 and 9,918,454 shares at December 31, 2012 and 2011, respectively	—			—
Additional paid-in capital	3,348			3,564
Accumulated other comprehensive earnings, net of taxes	12			29
Retained earnings	3,079			1,665
Total stockholders' equity	6,440			5,259
Noncontrolling interests in equity of subsidiaries	(8		)	(10	)
Total equity	6,432			5,249
Commitments and contingencies (note 17)
Total liabilities and equity	$	8,325		7,719

See accompanying notes to consolidated financial statements.

II-23

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Consolidated Statements Of Operations

Years ended December 31, 2012, 2011 and 2010



				Recast		Recast
	2012			2011		2010
	amounts in millions,
	except per share amounts
Revenue:
Communications and programming services	$	1,999		3,024		2,050
Operating costs and expenses:
Operating	1,201			1,600		1,284
Selling, general and administrative, including stock-based compensation (note 3)	414			396		525
Legal settlement	—			2		(48	)
Depreciation and amortization	58			69		94
	1,673			2,067		1,855
Operating income	326			957		195
Other income (expense):
Interest expense	(33		)	(21	)	(65	)
Dividend and interest income	78			79		88
Share of earnings (losses) of affiliates, net (notes 3 and 8)	1,346			87		(98	)
Realized and unrealized gains (losses) on financial instruments, net (note 9)	232			68		260
Gains (losses) on dispositions, net	22			(10	)	36
Other, net (note 17)	41			5		10
	1,686			208		231
Earnings (loss) from continuing operations before income taxes	2,012			1,165		426
Income tax (expense) benefit (note 11)	(600		)	(333	)	571
Net earnings (loss)	1,412			832		997
Less net earnings (loss) attributable to the noncontrolling interests	(2		)	(4	)	(3	)
Net earnings (loss) attributable to Liberty stockholders	$	1,414		836		1,000

Net earnings (loss) attributable to Liberty stockholders:
Liberty Capital common stock	1,414			607		794
Liberty Starz common stock	NA			229		206
	$	1,414		836		1,000

Basic net earnings (loss) attributable to Liberty stockholders per common share (note 3):
Series A and Series B Liberty Capital common stock	$	11.78		7.14		8.82
Series A and Series B Liberty Starz common stock	NA			4.49		4.12
Diluted net earnings (loss) attributable to Liberty stockholders per common share (note 3):
Series A and Series B Liberty Capital common stock	$	11.40		6.90		8.54
Series A and Series B Liberty Starz common stock	NA			4.32		3.96

See accompanying notes to consolidated financial statements.

II-24

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Consolidated Statements Of Comprehensive Earnings (Loss)

Years ended December 31, 2012, 2011 and 2010



	Years Ended
	December 31,
				Recast		Recast
	2012			2011		2010
	amounts in millions
Net earnings (loss)	$	1,412		832		997
Other comprehensive earnings (loss), net of taxes:
Unrealized holding gains (losses) arising during the period	(3		)	(24	)	9
Recognition of previously unrealized (gains) losses on available-for-sale securities, net	(13		)	—		(21	)
Share of other comprehensive earnings (loss) from equity affiliates	—			2		—
Reattribution of other comprehensive earnings from Liberty Interactive	—			—		30
Other	(1		)	(3	)	1
Other comprehensive earnings (loss)	(17		)	(25	)	19
Comprehensive earnings (loss)	1,395			807		1,016
Less comprehensive earnings (loss) attributable to the noncontrolling interests	(2		)	(4	)	(3	)
Comprehensive earnings (loss) attributable to Liberty stockholders	$	1,397		811		1,019
Comprehensive earnings (loss) attributable to Liberty stockholders:
Liberty Capital common stock	1,397			584		813
Liberty Starz common stock	NA			227		206
	$	1,397		811		1,019

See accompanying notes to consolidated financial statements.

II-25

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Consolidated Statements Of Cash Flows

Years ended December 31, 2012, 2011 and 2010



				Recast		Recast
	2012			2011		2010
	amounts in millions
	(see note 4)
Cash flows from operating activities:
Net earnings (loss)	$	1,412		832		997
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	58			69		94
Amortization of program rights	759			737		729
Cash payments for program rights	(741		)	(769	)	(650	)
Stock-based compensation	66			32		83
Cash payments for stock-based compensation	(52		)	(21	)	(204	)
Excess tax benefit from stock-based compensation	(146		)	(9	)	(77	)
Noncash interest expense	6			2		—
Share of (earnings) loss of affiliates, net	(1,346		)	(87	)	98
Realized and unrealized (gains) losses on financial instruments, net	(232		)	(68	)	(260	)
Losses (gains) on disposition of assets, net	(22		)	10		(36	)
Change in tax accounts from Liberty Interactive, net	—			2		50
Deferred income tax expense (benefit)	450			72		(795	)
Other noncash charges (credits), net	(33		)	(605	)	72
Changes in operating assets and liabilities
Current and other assets	10			(78	)	—
Payables and other liabilities	47			157		(57	)
Net cash provided (used) by operating activities	236			276		44
Cash flows from investing activities:
Cash proceeds from dispositions	766			17		71
Proceeds (payments) from settlement of financial instruments, net	(9		)	—		751
Investments in and loans to cost and equity investees	(1,716		)	(350	)	(405	)
Repayment of loan by Liberty Interactive	—			—		316
Repayment of loans by cost and equity investees	110			217		200
Return of investment in equity method affiliate	165			—		—
Capital expended for property and equipment	(31		)	(14	)	(16	)
Net sales (purchases) of short term investments	232			277		(542	)
Net (increase) decrease in restricted cash	705			(153	)	(39	)
Reattribution of cash to Liberty Interactive	—			(264	)	(807	)
Other investing activities, net	(8		)	(4	)	(13	)
Net cash provided (used) by investing activities	214			(274	)	(484	)
Cash flows from financing activities:
Borrowings of debt	500			506		132
Repayments of debt	(1,254		)	(59	)	(1,047	)
Repurchases of Liberty common stock	(323		)	(465	)	(754	)
Taxes paid in lieu of shares issued for stock-based compensation	(181		)	(9	)	—
Excess tax benefit from stock-based compensation	146			9		77
Other financing activities, net	(55		)	(4	)	171
Net cash provided (used) by financing activities	(1,167		)	(22	)	(1,421	)
Net increase (decrease) in cash and cash equivalents	(717		)	(20	)	(1,861	)
Cash and cash equivalents at beginning of period	2,070			2,090		3,951
Cash and cash equivalents at end of period	$	1,353		2,070		2,090

See accompanying notes to consolidated financial statements.

II-26

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Consolidated Statement Of Equity

Years ended December 31, 2012, 2011 and 2010