The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes thereto included elsewhere in this quarterly report on Form 10-Q. Some of the statements in this quarterly report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all passages containing verbs such as "aims", "anticipates", "believes", "estimates", "expects", "hopes", "intends", "plans", "predicts", "projects" or "targets" or nouns corresponding to such verbs. Forward-looking statements also include any other passages that are primarily relevant to expected future events or that can only be fully evaluated by events that will occur in the future. There are many risks and uncertainties that could cause actual results to differ materially from those predicted in our forward-looking statements, including, without limitation, those factors discussed under the caption "Risk Factors" in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which was filed with the Securities and Exchange Commission on March 16, 2009, as supplemented by the "Risk Factors" contained in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, which was filed with the Securities and Exchange Commission on May 11, 2009. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made in this report and in our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations. As used herein, unless the context requires otherwise, when we say "we", "us", "our", or the "Company", we are referring to Fisher Communications, Inc. and its consolidated subsidiaries.

This discussion is intended to provide an analysis of significant trends and material changes in our financial condition and operating results during the three and nine months ended September 30, 2009, compared with the corresponding periods in 2008.

Overview

We are a communications company. We own and operate 13 full power (including a 50%-owned television station) and seven low power television stations and ten owned or managed radio stations. Our television stations are located in Washington, Oregon, Idaho and California, and our radio stations are located in Washington and Montana. We also own and operate Fisher Plaza, a mixed-use commercial facility located near downtown Seattle that serves as the home for our corporate offices and our Seattle television and radio stations. We lease a majority of the space at Fisher Plaza to a variety of unaffiliated companies.

Our broadcasting operations generate revenue from the sale of local, regional and national advertising and, to a much lesser extent, from retransmission, network compensation, satellite and fiber transmission services, tower rental and commercial production activities. Our operating results are therefore sensitive to broad economic trends that affect the broadcasting industry in general, as well as local and regional trends, such as those affecting the West Coast economy. The advertising revenue of our stations is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring, and retail advertising in the period leading up to and including the holiday season. In addition, advertising revenue is generally higher during national election years due to spending by political candidates and advocacy groups. This political spending typically is heaviest during the fourth quarter.

Our television revenue is significantly affected by network affiliation and the success of programming offered by those networks. Our two largest television stations, KOMO TV and KATU TV, account for approximately 61% of our television broadcasting revenue and are affiliated with the ABC Television Network. Nine of our television stations are affiliated with the CBS Television Network (including a 50%-owned television station), six of our television stations are affiliated with Univision (Spanish-language), one of our television stations is affiliated with the FOX Television Network and the remainder of our television stations are either simulcast or independent. Our broadcasting operations are subject to competitive pressures from traditional broadcasting sources, as well as from alternative methods of delivering information and entertainment, and these pressures may cause fluctuations in operating results.

In addition to our broadcasting operations, we own and operate Fisher Plaza, and we lease space to other companies that are attracted by the location and infrastructure provided at this facility. As of September 30, 2009, approximately 96% of Fisher Plaza was occupied or committed for occupancy (43% occupied by Fisher entities). Revenue and operating income from Fisher Plaza are dependent upon the general economic climate, Seattle economic climate, outlook of the telecommunications and technology sectors and commercial real estate conditions, including the availability of space in other competing properties.

Management focuses on key metrics from operational data within our broadcasting and Fisher Plaza operations. Information on significant trends is provided in the section entitled "Consolidated Results of Operations" below.

Significant Developments

The following significant developments affect the comparability of our financial statements for the three and nine months ended September 30, 2009 and 2008.

ABC Affiliate Agreement In August 2009, we agreed to terms for the renewal of the network affiliation agreement with American Broadcasting Company, Inc ("ABC"). The renewed affiliation agreement, which requires the payment of an annual license fee to ABC for network programming, expires on August 31, 2014.

Fisher Plaza Fire On July 2, 2009, an electrical fire contained within a garage level equipment room of the east building of our Fisher Plaza facility disrupted city-supplied electrical service to that building. A third-party investigation concluded that the fire appears to have been caused by a malfunction of bus duct equipment manufactured by a third-party. We currently expect that all final repairs and equipment replacement will be completed in the fourth quarter of 2009.

We have incurred approximately $6.8 million in remediation and equipment replacement costs related to the Fisher Plaza fire, including remediation expenses of $3.2 million, capital expenditures of $2.1 million and the loss of fixed assets destroyed by the fire of $1.5 million. We are recording the Fisher Plaza fire expenses as incurred, and recording insurance reimbursements within operating results in the period the reimbursements are considered probable and certain. Insurance reimbursements of $725,000 were recorded in the third quarter of 2009.

We currently anticipate recording approximately $1 million to $2 million of additional remediation expenses and approximately $2 million to $3 million of additional capital expenditures in the fourth quarter of 2009 related to the Fisher Plaza fire.

Our insurers have indicated that the event is a covered occurrence under the applicable insurance policies, and they continue to investigate the incident. We currently expect that a significant portion of our costs will be covered by the Company's insurance policies; however, the actual amount and timing of the reimbursement of the costs remains subject to the insurance companies' investigation. We intend to vigorously assert all claims related to the Fisher Plaza fire as necessary.

Retransmission Agreements We executed final retransmission consent agreements with several of our cable distribution partners in the third quarter of 2009. The periods covered by these agreements began on January 1, 2009. Accordingly, our third quarter financial results include approximately $2.0 million of cable retransmission fees attributable to those contracts for the period from January 1, 2009 to June 30, 2009. Excluding this $2.0 million of retransmission revenue attributable to the first half of 2009, total retransmission revenue increased $1.5 million, or 197%, from the third quarter of 2008.

Repurchase of Senior Notes During the first half of 2009, we repurchased $28.0 million aggregate principal amount of our 8.625% senior notes due in 2014 ("Senior Notes") for a total consideration of $24.4 million in cash plus accrued interest of $637,000. We recorded a gain on extinguishment of debt, net of a charge for related unamortized debt issuance costs of $557,000, resulting in a net gain of approximately $3.0 million on the extinguishment of debt for the nine months ended September 30, 2009. We did not repurchase any of our Senior Notes during the three months ended September 30, 2009 and the three and nine months ended September 30, 2008.

Local Marketing Agreement In May 2009, we entered into a three year Local Marketing Agreement ("LMA") with South Sound Broadcasting LLC ("South Sound") to manage one of South Sound's FM radio stations licensed to Oakville, Washington. The station broadcasts our KOMO News Radio programming to FM listeners in the Seattle - Tacoma radio market. Contemporaneously with the LMA, we entered into an option agreement with South Sound, whereby we have the right to acquire the station until May 8, 2012. If we do not exercise the option prior to its expiration date, we are obligated to pay South Sound up to approximately $1.4 million. Advertising revenue earned under this LMA is recorded as operating revenue and LMA fees and programming expenses are recorded as operating costs.

Dividends on Safeco Corporation Common Stock During the three and nine months ended September 30, 2008, we recorded dividends on our shares of Safeco Corporation common stock in the amount of $259,000 and $2.1 million, respectively. No dividend income was recorded in the three months and nine months ended September 30, 2009, as we sold our remaining Safeco shares in 2008.

Sale of Safeco Corporation Common Stock During the third quarter of 2008, we sold 753,720 shares of Safeco Corporation common stock. The shares were sold at an average price of $65.38 per share, resulting in pre-tax net proceeds of $49.3 million. The book basis of the shares sold totaled $256,000, resulting in a pre-tax gain on sale of $49.0 million.

For the nine months ended September 30, 2008, we sold all 2.3 million shares of our Safeco Corporation common stock resulting in pretax net proceeds of $153.4 million. The book basis of the shares sold totaled $782,000, resulting in a pre-tax gain on sale of $152.6 million, which is included in other income, net.

Special Dividend On July 30, 2008 our Board of Directors declared a special dividend of $3.50 per share on our common stock totaling $30.7 million, which was paid on August 29, 2008 to shareholders of record on August 15, 2008.

Expiration of Seattle Mariners Radio Rights Agreement In July 2008, we announced that we would not renew our radio rights agreement with the Seattle Mariners (the "Mariners Agreement"). Accordingly, the 2008 season was the final year of our commitments under the Mariners Agreement. Our results for the three and nine months ended September 30, 2008, reflect $4.1 million and $8.7 million of advertising revenue, respectively, and $7.7 million and $15.8 million of expenses, respectively, related to the Mariners Agreement. No such advertising revenue or expenses are reflected in our results for the nine months ended September 30, 2009.

Termination of National Advertising Representation Agreement In April 2008, we terminated the agreement with our national advertising representation firm. The successor firm will satisfy our contractual termination obligation to the predecessor firm with no cash payment made by us. In the second quarter of 2008, we recognized a net non-cash charge of $5.0 million to selling, general and administrative expenses, and we are amortizing the related net liability as a non-cash benefit over the five-year term of the new agreement. We recognized a $365,000 and $1.1 million benefit due to this amortization for the three and nine months ended September 30, 2009, respectively. In 2008, we recognized a $365,000 and $898,000 benefit due to this amortization for the three and nine months ended September 30, 2008, respectively.

Reclassifications The results of operations of Pegasus News, Inc. have been reclassified from continuing operations to discontinued operations in the condensed consolidated statement of operations for the three and nine months ended September 30, 2008 to reflect our sale of Pegasus on December 31, 2008. Additionally, the results of operations of five small-market radio stations in Montana, previously classified as discontinued operations in the condensed consolidated statement of operations for the three and nine months ended September 30, 2008, have been presented as continuing operations. See Note 8 to the condensed consolidated financial statements. The reclassifications had no effect on net income (loss), shareholders' equity or cash flows from operating, investing or financing activities.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates including, but not limited to, those affecting revenue, goodwill, intangibles and television and broadcast rights impairment, the useful lives of tangible and intangible assets, valuation allowances for deferred tax assets, accounts and insurance receivables and broadcast rights, stock-based compensation expense, income tax provisions and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, or if management made different judgments or utilized different estimates. Many of our estimates or judgments are based on anticipated future events or performance, and as such are forward-looking in nature, and are subject to many risks and uncertainties, including those discussed in our Form 10-K for the year ended December 31, 2008, as updated in our Form 10-Q for the quarter ended March 31, 2009, and elsewhere in this quarterly report on Form 10-Q. Except as otherwise required by law, we do not undertake any obligation to update or revise this discussion to reflect any future events or circumstances.

For a detailed discussion of our critical accounting policies and estimates, please refer to our Form 10-K for the year ended December 31, 2008.

There have been no material changes in the application of our critical accounting policies and estimates subsequent to that report. We have discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors.

Consolidated Results of Operations

We report financial data for three segments: television, radio and Fisher Plaza. The television segment includes the operations of 20 owned and operated television stations (including a 50%-owned television station) and our internet business. The radio segment includes the operations of three Seattle radio stations and five Montana radio stations and two managed radio stations. Corporate expenses are allocated to the television and radio segments based on a pro-rata basis. The Fisher Plaza segment consists of the operations of Fisher Plaza, a communications center located near downtown Seattle that serves as the home of our Seattle-based television and radio operations, our corporate offices, and third-party tenants. Fisher-owned entities that reside at Fisher Plaza do not pay rent, but do pay common-area maintenance expenses. The segment data presented below includes additional allocation of depreciation and certain operating expenses from Fisher Plaza to our Seattle-based television and radio operations.

The following table sets forth our results of operations for the three and nine months ended September 30, 2009 and 2008, including the dollar and percentage variances between such periods. Percentage variances have been omitted where they are not considered meaningful.

                                           Nine months ended                                      Three months ended
                                             September 30,                  Variance                 September 30,                Variance
(dollars in thousands)                    2009           2008             $            %          2009           2008            $           %
(unaudited)
Revenue
Television                              $  68,120      $  86,151      $  (18,031 )     -21 %    $  25,116      $ 27,343      $  (2,227 )      -8 %
Radio                                      16,758         30,151         (13,393 )     -44 %        5,961        11,673         (5,712 )     -49 %
Fisher Plaza                               10,231          9,794             437         4 %        3,453         3,289            164         5 %
Other                                         (86 )          (50 )           (36 )      72 %           (3 )          (8 )            5

Consolidated                               95,023        126,046         (31,023 )     -25 %       34,527        42,297         (7,770 )     -18 %
Direct operating costs
Television                                 36,928         39,242          (2,314 )      -6 %       12,522        13,179           (657 )      -5 %
Radio                                       6,649          9,152          (2,503 )     -27 %        2,236         2,912           (676 )     -23 %
Fisher Plaza                                2,766          2,759               7         0 %          899           985            (86 )      -9 %
Other                                       1,605          1,526              79         5 %          613           513            100        19 %

Consolidated                               47,948         52,679          (4,731 )      -9 %       16,270        17,589         (1,319 )      -7 %
Selling, general and administrative
expenses
Television                                 22,693         29,964          (7,271 )     -24 %        7,240         7,871           (631 )      -8 %
Radio                                       7,887         13,113          (5,226 )     -40 %        2,732         4,999         (2,267 )     -45 %
Fisher Plaza                                  198            525            (327 )     -62 %          (18 )         125           (143 )    -114 %
Other                                       6,076          6,474            (398 )      -6 %        1,946         1,892             54         3 %

Consolidated                               36,854         50,076         (13,222 )     -26 %       11,900        14,887         (2,987 )     -20 %
Amortization of program rights
Television                                  7,084          6,069           1,015        17 %        2,507         2,090            417        20 %
Radio                                          -          10,749         (10,749 )    -100 %           -          5,267         (5,267 )    -100 %
Fisher Plaza                                   -              -               -                        -             -              -
Other                                          -              -               -                        -             -              -

Consolidated                                7,084         16,818          (9,734 )     -58 %        2,507         7,357         (4,850 )     -66 %
Depreciation and amortization
Television                                  6,523          5,994             529         9 %        2,184         2,018            166         8 %
Radio                                         590            642             (52 )      -8 %          218           193             25        13 %
Fisher Plaza                                2,268          2,372            (104 )      -4 %          741           740              1         0 %
Other                                         792            282             510       181 %          307           126            181       144 %

Consolidated                               10,173          9,290             883        10 %        3,450         3,077            373        12 %
Plaza fire expenses, net
Television                                     -              -               -                        -             -              -
Radio                                          -              -               -                        -             -              -
Fisher Plaza                                3,951             -            3,951                    3,951            -           3,951
Other                                          -              -               -                        -             -              -

Consolidated                                3,951             -            3,951                    3,951            -           3,951
Loss from operations
Television                                 (5,108 )        4,882          (9,990 )                    663         2,185         (1,522 )
Radio                                       1,632         (3,505 )         5,137                      775        (1,698 )        2,473
Fisher Plaza                                1,048          4,138          (3,090 )                 (2,120 )       1,439         (3,559 )
Other                                      (8,559 )       (8,332 )          (227 )                 (2,869 )      (2,539 )         (330 )

Consolidated                              (10,987 )       (2,817 )        (8,170 )                 (3,551 )        (613 )       (2,938 )
Gain on extinguishment of senior
notes, net                                  2,965             -            2,965                       -             -              -
Other income, net                           1,221        155,808        (154,587 )                    392        50,046        (49,654 )
Interest expense                           (8,917 )      (10,343 )         1,426                   (2,714 )      (3,441 )          727

Income (loss) from continuing
operations before income taxes            (15,718 )      142,648        (158,366 )                 (5,873 )      45,992        (51,865 )
Provision (benefit) for income taxes       (5,309 )       49,545         (54,854 )                 (1,863 )      15,999        (17,862 )

Income (loss) from continuing
operations                                (10,409 )       93,103        (103,512 )                 (4,010 )      29,993        (34,003 )
Loss from discontinued operations,
net of income taxes                            -            (720 )           720                       -           (218 )          218

Net income (loss)                       $ (10,409 )    $  92,383        (102,792 )              $  (4,010 )    $ 29,775        (33,785 )

Comparison of Three and Nine months ended September 30, 2009 and 2008

Revenue

The current U.S. financial crisis and broader economic recession and the resulting sharp declines in advertising spending have negatively impacted our television and radio revenue for the three and nine months ended September 30, 2009.

Automotive-related advertising, one of our largest advertising categories, decreased 31% and 51% for the three and nine months ended September 30, 2009 as compared to the same periods in 2008, respectively. Other similar major categories including, retailing (down 26% for the quarter and 28% year-to-date) and professional services (down 4% for the quarter and 16% year-to-date) have followed a consistent downward trend over the past year. This trend is primarily due to the current adverse condition of the automotive industry and the ongoing economic recession and resulting decline in the demand for advertising from these and other business categories. A continued pattern of deterioration in advertising revenue from these sources could materially and adversely affect our future results of operations.

Television revenue decreased in the three and nine months ended September 30, 2009 compared to the same periods in 2008, primarily due to sharp declines in local, national and political advertising spending in this broad economic recession and the absence of our stations from DISH Network ("DISH") in the first half of 2009 due to the expiration of our retransmission agreement with DISH in December 2008. Political advertising revenue decreased 89% for both the three and nine months ended September 2009 as compared to the same periods in 2008, respectively. The decrease in advertising spending was partially offset by an increase in retransmission revenue due to our new retransmission agreements as discussed below. The decrease in local advertising revenue was due to general economic pressure that has continued to impact a number of local economies throughout 2009, including those on the West Coast, primarily in the home products, automobile, professional services and retail segments. The decrease in national advertising sales was due to the same general negative economic conditions, which have impacted most national advertising categories, particularly automotive spending.

Revenue from our ABC-affiliated stations decreased 2% and 22% in the three and nine months ended September 30, 2009 as compared to the same periods in 2008, respectively, primarily due to reduced local and national advertising revenue given the ongoing economic recession, reduced political advertising revenue and the absence of our stations from DISH during the first half of 2009. Revenue from our CBS-affiliated stations decreased 23% for both the three and nine months ended September 30, 2009, as compared to the same periods in 2008, also primarily due to reduced local and national advertising revenue given the ongoing recession, reduced political advertising revenue and the absence of our stations from DISH. Revenue from our Spanish-language television stations decreased 5% in both the three and nine months ended September 30, 2009 as compared to the same periods in 2008, respectively, primarily due to reduced local and national advertising revenue given the ongoing economic recession.

We completed negotiations for new retransmission consent agreements with over 50 distribution partners in the fourth quarter of 2008 and the first nine months of 2009. We executed final retransmission consent agreements with several of our cable distribution partners in the third quarter of 2009. The periods covered by these agreements began on January 1, 2009. Accordingly, our third quarter financial results include approximately $2.0 million of cable retransmission fees attributable to those contracts for the period from January 1, 2009 to . . .