Cautionary Note Regarding Forward-Looking Statements

Certain statements in this Item 2 or elsewhere in this Form 10-Q, or that are otherwise made by us or on our behalf about our financial condition, results of operations and business constitute "forward-looking statements" within the meaning of federal securities laws. Hollywood Media Corp. ("Hollywood Media" or "Company") cautions readers that certain important factors may affect Hollywood Media's actual results, levels of activity, performance or achievements and could cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements anticipated, expressed or implied by any forward-looking statements that may be deemed to have been made in this Form 10-Q or that are otherwise made by or on behalf of Hollywood Media. Without limiting the generality of the foregoing, "forward-looking statements" are typically phrased using words such as "may," "will," "should," "expect," "plans," "believe," "anticipate," "intend," "could," "estimate," "pro forma" or "continue" or the negative variations thereof or similar expressions or comparable terminology. Factors that may affect Hollywood Media's results and the market price of our common stock include, but are not limited to:

· our continuing operating losses,

· negative cash flows and accumulated deficit,

· the need to manage our growth,

· our ability to develop and maintain strategic relationships, including but not limited to relationships with live theater venues,

· our ability to compete with other online ticketing services and other competitors,

· our ability to maintain and obtain sufficient capital to finance our growth and operations,

· our ability to realize anticipated revenues and cost efficiencies,

· technology risks and risks of doing business over the Internet,

· government regulation,

· adverse economic factors such as recession, war, terrorism, international incidents or labor strikes and disputes,

· our ability to achieve and maintain effective internal controls,

· dependence on our founders, and our ability to recruit and retain key personnel, and

· the volatility of our stock price.

Hollywood Media is also subject to other risks detailed herein or detailed in our Annual Report on Form 10-K for the year ended December 31, 2008 and in other filings made by Hollywood Media with the Securities and Exchange Commission.

Because these forward-looking statements are subject to risks and uncertainties, we caution you not to place undue reliance on these statements, which speak only as of the date of this Form 10-Q. We do not undertake any responsibility to review or confirm analysts' expectations or estimates or to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this Form 10-Q, except as required by law. As a result of the foregoing and other factors, no assurance can be given as to the future results, levels of activity or achievements and neither we nor any other person assumes responsibility for the accuracy and completeness of such statements.

Overview

Hollywood Media is comprised of various businesses focusing primarily on online ticket sales, deriving revenue primarily from Broadway, Off-Broadway and London's West End ticket sales to individuals and groups, as well as advertising and book development license fees and royalties. Our Broadway Ticketing business includes Broadway.com, 1-800-Broadway, Theatre Direct and Theatre.com. Hollywood Media's businesses also include an intellectual property business, the U.K. based CinemasOnline companies and a minority interest in MovieTickets.com, Inc.
("MovieTickets.com")

Broadway Ticketing Division.

Hollywood Media's Broadway Ticketing Division is comprised of Broadway.com, 1-800-BROADWAY, Theatre Direct International ("TDI") and Theatre.com (collectively called "Broadway Ticketing"). Broadway tickets are sold online through our Broadway.com website and by telephone through our 1-800-BROADWAY number. Broadway Ticketing is a live theater ticketing seller that provides groups and individuals with access to theater tickets and knowledgeable service, covering shows on Broadway, Off-Broadway and, through a partnership arrangement between Theatre.com and a London-based ticket agency, in London's West End theatre district. Broadway.com features include shows' opening night video and photo coverage, show reviews, celebrity interviews and theater columns, as well as show information pages, including casting, synopses and venue information.

Ad Sales Division.

Hollywood Media's Ad Sales Division is comprised of the U.K. based CinemasOnline Limited, UK Theatres Online Limited, WWW.CO.UK Limited and Spring Leisure Limited (collectively known as "CinemasOnline") and holds Hollywood Media's investment in MovieTickets.com. CinemasOnline maintains websites for cinemas and theaters in the U.K. in exchange for the right to sell advertising on such websites. CinemasOnline also provides other marketing services, including advertising sales on plasma TV screens placed in various venues throughout the U.K. and Ireland, such as cinemas, hotels and car dealerships. MovieTickets.com is one of the two leading destinations for the purchase of movie tickets through the Internet. MovieTickets.com is an online ticketing service owned by a joint venture formed by Hollywood Media and several major movie exhibitor chains. Hollywood Media currently owns 26.2% of the equity of MovieTickets.com.

Intellectual Properties Division.

Our Intellectual Properties Division includes a book development and book licensing business owned and operated by our 51% owned subsidiary, Tekno Books, which develops and executes book projects, frequently with best-selling authors. Tekno Books has worked with over 60 New York Times best-selling authors, including Isaac Asimov, Tom Clancy, Tony Hillerman, John Jakes, Jonathan Kellerman, Dean Koontz, Robert Ludlum, Nora Roberts and Scott Turow. Hollywood Media is also a 50% partner in NetCo Partners, a partnership that owns Tom Clancy's NetForce. Hollywood Media also owns directly additional intellectual property created for it by various best-selling authors such as Mickey Spillane, Anne McCaffrey and others.

Results of Operations

The following discussion and analysis should be read in conjunction with Hollywood Media's Unaudited Condensed Consolidated Financial Statements and the notes thereto included in Item 1 of Part I of this report.

The following table summarizes Hollywood Media's revenues, operating expenses and operating income (loss) from continuing operations by reportable segment for the three months ended March 31, 2009 ("Q1-09") and 2008 ("Q1-08"), respectively:

                                                                                Intellectual
                                          Broadway                               Properties
                                          Ticketing           Ad Sales              (a)                Other               Total
                                        (in millions)       (in millions)      (in millions)       (in millions)       (in millions)

Q1-09
(unaudited)

Net Revenues                           $          20.2     $           0.8     $          0.3     $             -     $          21.3
Operating Expenses                                20.1                 0.9                0.3                 2.0                23.3
Operating Income (Loss)                $           0.1     $          (0.1 )   $            -     $          (2.0 )   $          (2.0 )

% of Total Net Revenue                              95 %                 4 %                1 %                 -                 100 %

Q1-08
(unaudited)

Net Revenues                           $          25.3     $           1.3     $          0.4     $             -     $          27.0
Operating Expenses                                24.9                 1.5                0.3                 2.8                29.5
Operating Income (Loss)                $           0.4     $          (0.2 )   $          0.1     $          (2.8 )   $          (2.5 )

% of Total Net Revenue                              94 %                 5 %                1 %                 -                 100 %

a. Does not include Hollywood Media's 50% interest in NetCo Partners which is accounted for under the equity method of accounting and Hollywood Media's share of the income (loss) is reported as Equity in Earnings of Unconsolidated Investees (discussed below).

Composition of our segments is as follows:

· Broadway Ticketing - sells tickets and related hotel and restaurant packages via Broadway.com, 1-800-BROADWAY and TDI to live theater events on Broadway, Off-Broadway and London's West End, to individual consumers, groups and domestic and international travel professionals, including travel agencies, tour operators, and educational institutions. Beginning in late September 2007, sales for events in London's West End are fulfilled through a partnership arrangement between Theatre.com and an unrelated London-based ticket agency. This segment also generates revenue from the sale of sponsorships and advertisements on Broadway.com.

· Ad Sales - includes CinemasOnline, which sells advertising on cinema and theater websites in the U.K. and plasma TV displays throughout the U.K. and Ireland, and holds Hollywood Media's investment in MovieTickets.com.

· Intellectual Properties - owns or controls the exclusive rights to certain intellectual properties created by best-selling authors and media celebrities, which it licenses for books and other media. This segment includes a 51% interest in Tekno Books, and a book development business, and this segment does not include our 50% interest in NetCo Partners.

· Other - is comprised of payroll and benefits for corporate and administrative personnel as well as other corporate-wide expenses, such as legal fees, audit fees, proxy costs, insurance, centralized information technology, and includes consulting and other fees and costs relating to compliance with the provisions of the Sarbanes-Oxley Act of 2002 that require Hollywood Media to assess and report on internal control over financial reporting, and related development of controls.

Results of Discontinued Operations

Sale of Hollywood.com Business Unit to R&S Investments, LLC

On August 21, 2008, Hollywood Media entered into and simultaneously closed on a definitive purchase agreement with R&S Investments, LLC, pursuant to which R&S Investments acquired the Hollywood.com Business for a potential purchase price of $10.0 million, which includes $1.0 million in cash that was paid to Hollywood Media at closing and potential earn-out payments of up to $9.0 million. The Hollywood.com Business includes the Hollywood.com website and related URLs and celebrity fan websites and Hollywood.com Television, a free video on demand service distributed pursuant to annual affiliation agreements with certain cable operators. R&S Investments is owned by Mitchell Rubenstein, Hollywood Media's Chief Executive Officer and Chairperson of the Board, and Laurie S. Silvers, Hollywood Media's President and Vice-Chairperson of the Board. The purchase price was determined by an arms-length negotiation between a Special Committee of independent and disinterested directors of Hollywood Media on the one hand and R&S Investments on the other hand.

Beginning in September 2009, R&S Investments will be contractually obligated to make periodic earn-out payments equal to the greater of (i) 10 percent of gross revenue and (ii) 90 percent of EBITDA (as defined in the purchase agreement) for the Hollywood.com Business until the full earn-out is paid. If a change of control of Hollywood.com occurs before the earn-out is fully paid, the remaining portion of the earn-out would be payable immediately upon such a change of control, up to the amount of consideration received by R&S Investments less related expenses. If the consideration in such a change of control is less than the remaining balance of the earn-out, then the surviving entity which owns the Hollywood.com Business will be obligated to pay the difference in accordance with the same earn-out terms. In addition, if the Hollywood.com Business is resold prior to August 21, 2011, Hollywood Media will also receive 5 percent of any proceeds above $10.0 million. Pursuant to the purchase agreement, Hollywood Media was required to place $2.6 million into an escrow account to fund any negative EBITDA of the Hollywood.com Business through August 21, 2010. There was $1.8 million disbursed to the Hollywood.com Business through March 31, 2009, leaving a balance of $0.8 million in the escrow.

The net loss from discontinued operations includes the operating loss from the Hollywood.com Business which has been classified in the accompanying condensed consolidated statements of operations as "Loss from discontinued operations." Summarized results of discontinued operations for the three months ended March 31, 2008 are as follows:

Three Months Ended March 31, 2008

Operating revenue $ 1,372,219

Loss from discontinued operations $ (845,973 )

NET REVENUES

Total net revenues were $21.3 million for Q1-09 as compared to $27.0 million for Q1-08, a decrease of $5.7 million, or 21%. The decrease in net revenue from Q1-09 to Q1-08 was primarily due to a decrease in revenues in each of our divisions, as discussed below. In Q1-09 net revenues were derived 95% from Broadway Ticketing, 4% from Ad Sales and 1% from Intellectual Properties. In Q1-08 net revenues were derived 94% from Broadway Ticketing, 5% from Ad Sales and 1% from Intellectual Properties.

Broadway Ticketing net revenues were $20.2 million and $25.3 million Q1-09 and Q1-08, respectively, a decrease of $5.1 million, or 20%. The decrease in Broadway Ticketing net revenues in Q1-09 from Q1-08 was primarily attributable to a decrease in number of tickets sold of $5.3 million, a decrease in net sales of hotel and dinner packages of $0.2 million, decreases in sales of cancellation insurance of $0.1 million, decreases in sponsorship sales of $0.1 million, decreases in sales related to Theatre.com of $0.1 million and a decrease in revenue related to a change in gift certificate policy of $0.1 million, partially offset by increases in ticket prices by theaters of $0.6 million and increases in service fees on individual ticket sales of $0.2 million.

Ad Sales division net revenues by our CinemasOnline business were $0.8 million for Q1-09 as compared to $1.3 million for Q1-08, a decrease of $0.5 million or 38%. The decrease in Ad Sales revenues in Q1-09 from Q1-08 is primarily due to decreases in the brochure and web advertising revenues of $0.3 million along with a decrease of $0.2 million revenues in the plasma business.

Net revenues from our Intellectual Properties division were $0.3 million for Q1-09 as compared to $0.4 for Q1-08, a decrease of $0.1 million or 25%. The Intellectual Properties division generates revenues from several different activities including book development and licensing and intellectual property licensing. Revenues vary quarter to quarter depending on the timing of the delivery of the manuscripts to the publishers. Revenues are recognized when the earnings process is complete and ultimate collection of such revenues is no longer subject to contingencies. The Intellectual Properties division revenues do not include our 50% interest in NetCo Partners, which is accounted for under the equity method of accounting and under which Hollywood Media's share of the income is reported as Equity in Earnings of Unconsolidated Investees (discussed below).

EQUITY IN EARNINGS OF UNCONSOLIDATED INVESTEES

Equity in earnings of unconsolidated investees consisted of the following:

                                             Three Months Ended
                                                  March 31,
                                                 (unaudited)
                                        2009                    2008
                                    (in millions)           (in millions)

            NetCo Partners (a)     $             -         $             -
            MovieTickets.com (b)               1.9                       -
                                   $           1.9         $             -

(a) NetCo Partners

NetCo Partners owns Tom Clancy's NetForce and is primarily engaged in the development and licensing of Tom Clancy's NetForce. NetCo Partners recognizes revenues when the earnings process has been completed based on the terms of the various agreements, generally upon the delivery of the manuscript to the publisher and at the point where ultimate collection is substantially assured. When advances are received prior to completion of the earnings process, NetCo Partners defers recognition of revenue until the earnings process has been completed. Hollywood Media owns 50% of NetCo Partners and accounts for its investment under the equity method of accounting. Hollywood Media's 50% share of earnings by NetCo Partners was a net de minimus loss for Q1-09 as compared to a net de minimus gain for Q1-08. NetCo Partners did not recognize any income during Q1-09.

(b) MovieTickets.com

Hollywood Media owns 26.2% of the total equity in the MovieTickets.com joint venture. Hollywood Media records its investment in MovieTickets.com under the equity method of accounting, recognizing its percentage interest in MovieTickets.com's income or loss as equity in earnings of unconsolidated investees. Under applicable accounting principles, Hollywood Media has not recorded income from its investment in MovieTickets.com for Q1-09 and Q1-08 because accumulated losses from prior years exceed MovieTickets.com's accumulated net income. The MovieTickets.com web site generates revenues from service fees charged to users for the purchase of movie tickets online and the sale of advertising. The results above consist of a $1.9 million dividend received by Hollywood Media in Q1-09.

OPERATING EXPENSES

Cost of revenues - ticketing. Cost of revenues - ticketing was $17.0 million for Q1-09 compared to $21.0 million for a decrease of $4.0 million, or 19%. Cost of revenues-ticketing consists primarily of the cost of tickets and credit card fees for the Broadway Ticketing segment, partially offset by rebates received from certain producers based on exceeding certain ticketing sales goals. As a percentage of ticketing revenue, Cost of revenues-ticketing was 84% and 83% for Q1-09 and Q1-08, respectively.

The decrease in Cost of revenues - ticketing in Q1-09 from Q1-08 was primarily attributable to the following: a decrease in cost of revenue due to a reduction in tickets sold of $4.5 million, a decrease in cost of revenue due to an increase in advertising revenue from shows of $0.2 million, offset in part by an increase in cost of revenues of $0.5 million attributable to ticket price increases by theaters, and a $0.2 million attributable to increases in unsold inventory.

Editorial, Production, Development and Technology. Editorial, production, development and technology costs include commissions, royalties, media buying, production services and internet access for the UK based CinemasOnline companies and fees and royalties paid to authors and co-editors for the Intellectual Properties segment. Editorial, production, development and technology costs were $0.6 million for Q1-09 as compared to $1.0 million for Q1-08, a decrease of $0.4 million or 40%. As a percentage of revenues from our Ad Sales and Intellectual Properties segments, these costs were 60% and 58% for Q1-09 and Q1-08 respectively. The Q1-09 decrease as compared to Q1-08 in Editorial, Production, Development and Technology costs was primarily due to decreases in Ad Sales along with a minimal decrease in payments to writers/co-editors. The decreases in Ad Sales were in the categories of commission ($0.2 million), media buying ($0.1 million), and production services and royalties ($0.1 million).

Selling, General and Administrative.

Selling, general and administrative (SG&A) expenses consist of occupancy costs, professional and consulting service fees, telecommunications costs, provision for doubtful accounts receivable, general insurance costs and selling and marketing costs (such as advertising, marketing, promotional, business development, public relations, and commissions due to advertising agencies, advertising representative firms and other parties). SG&A expenses for Q1-09 were $2.7 million compared to $3.7 million for Q1-08, a decrease of $1.0 million or 27%. As a percentage of net revenue, SG&A expenses were 13% in Q1-09 and 14% in Q1-08. The decrease in SG&A expenses in Q1-09 as compared to Q1-08 was due primarily to decreases of the following expenses: $0.2 million in marketing expenses, $0.2 million in legal expenses, $0.2 million in travel expenses, $0.1 million in occupancy expenses, $0.1 million in bad debt expenses, $0.1 million in temporary service expenses and $0.1 million in telephone expenses.

Payroll and Benefits.

Payroll and benefits expenses include payroll and benefits and other types of compensation expense as well as human resources and administrative functions.

Payroll and benefits expenses for Q1-09 were $2.6 million compared to $3.3 million for Q1-08, a decrease of $0.7 million or 21%. As a percentage of net revenues, payroll and benefits expenses were approximately 12% for each of Q1-09 and Q1-08.

The decrease in payroll and benefits expenses from Q1-09 as compared to Q1-08 was due to the following factors: (i) a decrease of $0.3 million in the Broadway Ticketing segment due to headcount reduction as part of a restructuring of the organization; (ii) a decrease of $0.3 million in Corporate overhead payroll primarily because of the divestment of the Hollywood.com Business; and (iii) a $0.1 million reduction in payroll in the Ad Sales segment.

Depreciation and amortization.

Depreciation and amortization expense consists of depreciation of property and equipment, furniture and fixtures, web site development, leasehold improvements, and equipment under capital leases and amortization of intangible assets. Depreciation and amortization expense was $0.4 million for Q1-09 as compared to $0.5 million for Q1-08, a decrease of $0.1 million or 20%. The decrease in Q1-09 as compared to Q1-08 was primarily due to assets becoming fully depreciated during or prior to Q1-09 as well as a decrease in the amortization of intangible assets due to a write-off of certain intangible assets of the CinemasOnline companies in Q4-08.

Interest, net.

Interest, net was de minimus income for Q1-09 as compared to income of $0.2 million for Q1-08. The decrease in Interest, net from Q1-09 to Q1-08 was related to less income earned from cash on hand.

LIQUIDITY AND CAPITAL RESOURCES

Hollywood Media's cash and cash equivalents were $10.8 million at March 31, 2009 as compared to $12.7 million at December 31, 2008. Our net working capital of our continuing operations (defined as current assets less current liabilities) was $8.7 million at March 31, 2009 as compared to $8.9 million at December 31, 2008.

Net cash used in operating activities from continuing operations during Q1-09 was $1.2 million, which cash usage was primarily attributable to $1.2 million used to secure a bond for future Broadway ticketing purchases. By comparison, net cash used in operating activities from continuing operations during Q1-08 was $1.7 million.

Net cash used in investing activities from continuing operations during Q1-09 was $0.6 million, which net cash outlays were primarily attributable to capital expenditures associated with the development of the new Broadway.com website. Net cash used in investing activities from continuing operations during Q1-08 was $0.5 million.

Net cash used in financing activities from continuing operations during Q1-09 was $0.1 million, which cash usage included payments under capital lease obligations, outstanding notes payable and payments for the repurchase of stock under the Company's approved stock repurchase plan. Net cash used in financing activities from continuing operations during Q1-08 was de minimus.

Sale of Hollywood.com Business Unit to R&S Investments, LLC

On August 21, 2008, Hollywood Media entered into and simultaneously closed on a definitive purchase agreement with R&S Investments, LLC, pursuant to which R&S Investments acquired the Hollywood.com Business for a potential purchase price of $10.0 million, which includes $1.0 million in cash that was paid to Hollywood Media at closing and potential earn-out payments of up to $9.0 million. The Hollywood.com Business includes the Hollywood.com website and related URLs and celebrity fan websites and Hollywood.com Television, a free video on demand service. R&S Investments is owned by Mitchell Rubenstein, Hollywood Media's Chief Executive Officer and Chairperson of the Board, and Laurie S. Silvers, Hollywood Media's President and Vice-Chairperson of the Board. The purchase price was determined by an arms-length negotiation between a Special Committee of independent and disinterested directors of Hollywood Media on the one hand and R&S Investments on the other hand.

Beginning in September 2009, R&S Investments will be contractually obligated to make periodic earn-out payments equal to the greater of (i) 10 percent of gross revenue and (ii) 90 percent of EBITDA (as defined in the purchase agreement) for the Hollywood.com Business from the transaction date until the full earn-out is paid. If a change of control of Hollywood.com occurs before the earn-out is fully paid, the remaining portion of the earn-out would be payable immediately upon such a change of control, up to the amount of consideration received by R&S Investments less related expenses. If the consideration in such a change of control is less than the remaining balance of the earn-out, then the surviving entity which owns the Hollywood.com Business will be obligated to pay the difference in accordance with the same earn-out terms. In addition, if the Hollywood.com Business is resold prior to August 21, 2011, Hollywood Media will also receive 5 percent of any proceeds above $10.0 million. Pursuant to the Purchase Agreement, Hollywood Media was required to place $2.6 million into an escrow account to fund any negative EBITDA of the Hollywood.com Business through . . .