July 9, 2001

DMX/AEI MUSIC SECURES AGREEMENT FOR DIGITAL MUSIC SERVICES TO FEDERATED DEPARTMENT STORES

Los Angeles, California. (July 9, 2001) -- DMX/AEI MUSIC, a subsidiary of Liberty Digital, Inc. (NASDAQ:LDIG), and the industry leader in programming and delivering digital music services, adds to an already impressive roster of high-end retail accounts with the signing of an agreement with Federated Department Stores, Inc.

DMX/AEI MUSIC will provide commercial-free, continuous, cutting-edge digital music to all 440 of Federated’s stores, via Axis™ - a groundbreaking, digital audio and video delivery system that combines the power of the Internet, the latest IBM e-business platforms, Microsoft software and critical customer input.

The agreement with DMX/AEI MUSIC marks Federated’s first corporate-wide partnership for music. All locations of Federated’s stores, including Bloomingdale’s, Macy’s, Burdines, The Bon Marché, Lazarus, Goldsmith’s and Rich’s will utilize DMX/AEI MUSIC throughout their stores. All stores will have several zones of music, so that the music can be tailored and targeted for the diverse atmosphere and changing demographics of each area within the stores, including Junior’s and Young Men’s.

"Federated is committed to providing a superior shopping experience for its customers, while maintaining a distinctive image for its individual department store ‘brands’," stated Rudolph V. Javosky, SVP Design and Construction for Federated. "Each Federated division will work with DMX/AEI MUSIC to provide unique, high-quality music content and programming throughout the store environment."

Axis taps into the Internet to provide businesses of all sizes a cost-effective musical environment that is developed and fine-tuned by DMX/AEI MUSIC programming experts to the location’s specific marketing and brand needs. With the world’s largest music library as its foundation, the Axis receiver arrives pre-loaded with hundreds of hours of music. The plug-and-play Axis receiver resides on premise. New music titles and playlists are pushed to it automatically through a dial-up modem connection via the Internet from the Denver-based DMX/AEI MUSIC digital technology center.

Built on IBM’s Digital Media Distributor (DMD) platform, Axis offers customers around the world a new way to receive music programming that is hands-free, cost efficient and centrally managed. Through DMD’s ability to centrally configure delivery schedules, Axis allows DMX/AEI MUSIC to specify the different types of music to be sent to each location and play a variety of personalized music mixes at pre-designated times based on time-of-day, day-of-week, even to support seasonal and promotional events.

"Axis not only delivers an incredible selection of music, but also critical solutions to businesses that want to enhance their brand and customers’ in-store experience to remain innovative in an increasingly competitive industry," said Lon Troxel, President and COO of DMX/AEI MUSIC. "Axis delivers CD-quality audio along with messaging, imaging and other multimedia solutions that will enable Federated to directly target its customers."

About Federated Department Stores

Federated, with corporate offices in Cincinnati and New York, is one of the nation’s leading department store retailers, with annual sales of more than $18.4 billion. Federated currently operates 440 department stores in 33 states and Puerto Rico under the names of Bloomingdale’s, The Bon Marché, Burdines, Goldsmith’s, Lazarus, Macy’s and Rich’s, as well as macys.com, bloomingdales.com and Bloomingdale’s By Mail. Federated also operates the Fingerhut catalog and e-commerce subsidiary. Information on Federated and its operating divisions is available on the Internet at www.federated-fds.com.

About DMX MUSIC

DMX MUSIC is a premium digital music service distributed worldwide by DMX/AEI MUSIC, a subsidiary of Liberty Digital, Inc. DMX/AEI MUSIC was formed in May 2001 by the merger of DMX MUSIC and AEI Music Network. Headquartered in Los Angeles, DMX/AEI MUSIC has 26 offices throughout the United States and internationally in Australia, Belgium, France, Germany, Holland, Japan and the United Kingdom. DMX/AEI MUSIC is a global leader in digital music programming, with one of the world’s largest digital music libraries, delivering 250 styles of non-stop music via digital cable, satellite and the Internet. DMX/AEI MUSIC is available on six continents and is provided to more than 8.5 million homes, 180,000 businesses and 500,000 airline passengers daily, with a worldwide listening audience of over 75 million people.

About Liberty Digital, Inc.

Liberty Digital, Inc. is a diversified new media company with interests in interactive television technology and Internet e-commerce and content businesses. Liberty Digital's Series A Common Stock is traded on the Nasdaq National Market under the symbol LDIG. For more information about Liberty Digital, access the company’s Web site at www.libertydigital.com.