Organization of Information

Management's Discussion and Analysis provides a narrative on our financial performance and condition that should be read in conjunction with the accompanying consolidated financial statements. It includes the following sections:

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º Forward-Looking Statements

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º Executive Summary

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º Critical Accounting Policies and Estimates

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º Results of Operations

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º Liquidity and Capital Resources

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º Contractual Obligations

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º Impact of Inflation

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º Off-Balance Sheet Arrangements

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º New Accounting Pronouncements

Forward-Looking Statements

This report includes or incorporates forward-looking statements. We base these forward-looking statements on our current expectations and projections about future events. These forward-looking statements generally can be identified by the use of statements that include phrases such as "anticipate", "will", "may", "likely", "plan", "believe", "expect", "intend", "project", "forecast" or other such similar words and/or phrases. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this report, concerning, among other things, trends and projections involving revenue, income, earnings, cash flow, liquidity, operating expenses, assets, liabilities, capital expenditures, dividends and capital structure, involve risks and uncertainties, and are subject to change based on various important factors. Those factors include the impact on our operations from

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º Changes in national and regional economies;

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º Changes in advertising trends and our advertisers' financial condition;

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º Our ability to service and refinance our outstanding debt and meet our liquidity needs;

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º Competition for audience, programming and advertisers in the broadcast television markets we serve;

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º Pricing fluctuations in local and national advertising;

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º Changes in Federal regulations that affect us, including changes in Federal communications laws or regulations;

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º Local regulatory actions and conditions in the areas in which our stations operate;

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º Our ability to obtain quality programming for our television stations;

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º Successful integration of television stations we acquire;

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º Volatility in programming costs, industry consolidation, technological developments, and major world events; and

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º Potential adverse effects if we are required to recognize impairment charges or other accounting-related developments.

For a discussion of additional risk factors that are particular to our business, please refer to Part I, Item 1A. "Risk Factors" beginning on page 18. These and other matters we discuss in this report, or in the documents we incorporate by reference into this report, may cause actual results to differ from those we describe. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Executive Summary

Hearst-Argyle Television, Inc. and its subsidiaries (hereafter "we" or the "Company") own and operate 26 network-affiliated television stations. Additionally, we provide management services to two network-affiliated stations, one independent television station and two radio stations owned by The Hearst Corporation ("Hearst") in exchange for management fees. We seek to attract our television audience by providing compelling content on multiple media platforms. We provide leading local news programming and popular network and syndicated programs at each of our television stations, 20 of which are in the top 50 U.S. television markets. We also own 37 websites and currently multicast digital multicast channels in addition to their main digital channel in 20 of our markets, which feature 24-hour weather and entertainment programming. We stream a portion of our television programming, including our news and weather forecasts, and we publish community information, user-generated content and entertainment content on our stations' websites. We also have a companion mobile ("WAP") site for each of our markets in which our web offering is tuned for viewing over mobile devices. We believe that aligning our content offerings with audience media consumption patterns in this manner ultimately benefits our advertisers. Our advertisers benefit from a variety of marketing opportunities, including traditional spot campaigns, community events and sponsorships at our television stations, as well as on our stations' Internet and/or mobile websites, enabling them to reach our audience in multiple ways.

Events and other factors that have influenced our 2008 results

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º The United States and global economies are currently undergoing a period of economic uncertainty, and the related capital markets are experiencing significant disruption. In certain of the local markets in which our stations operate there has been a weakening in the economic climate due to the housing market slump, subprime mortgage issues and tightening of credit markets resulting in pressure on employment, retail sales and consumer confidence. The resulting economic recession has impacted the automotive industry, which historically has been our largest advertising category, particularly hard. In addition to the weakness in auto, the retail, telecommunications, restaurant, movies, health, financial services and furniture advertising categories were also impacted in 2008.

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º During the fourth quarter the Company performed its annual impairment test on its indefinite-lived intangible assets. As a result of adverse economic conditions, we recorded a non-cash pre-tax impairment charge of $926.1 million to reduce the carrying value of our intangible assets from $3.3 billion to $2.4 billion. On an after-tax basis the impairment charge was $569.7 million. This non-cash charge had no impact on cash flows.

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º The Company wrote down certain cost and equity method investments totaling $7.8 million and recorded severance-related charges associated with workforce reductions of $5.7 million during the fourth quarter of 2008.

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º Political advertising increases in even-numbered years, such as 2008, consistent with the increase in the number of candidates running for political office and the presidential election, as well as selected state and local elections. We operate leading stations in several key election states, including New Hampshire, New Mexico, Pennsylvania and California, and as such we generated significant revenues from political advertising during 2008.

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º Revenue from Olympic advertising occurs exclusively in even-numbered years, such as 2008, with the alternating Winter and Summer Games occurring every two years. Our 10 NBC stations aired the 2008 Summer Olympics in August 2008. Net Olympic related ad revenue was not significantly incremental in 2008.

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º During the first quarter of 2008, we reached a final settlement with our insurance carriers related to lost property, increased expenses and interrupted business at WDSU-TV in New Orleans, Louisiana, resulting from Hurricane Katrina in 2005. We received $11.5 million in the first quarter of 2008 bringing total recoveries to $16.5 million, net of deductibles, given the receipt of an advance payment of $5.0 million in the fourth quarter of 2006. The $11.5 million received in the first quarter of 2008 was recorded as an offset to Station Operating Expenses. The after-tax first quarter 2008 effect of the insurance settlement was a $9.3 million increase in net income.

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º On June 23, 2008, we redeemed all of our outstanding 7.5% Series B Debentures using borrowings under our existing credit facility. As a result of the redemption, Notes payable to Capital Trust was reduced by $134.0 million and Investments was reduced by $4.0 million. In addition, we recognized a $3.9 million redemption premium, which was included in the Interest expense, net-Capital Trust in the Consolidated Statements of Operations. There are no debentures currently outstanding, and we have dissolved the Capital Trust.

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º At December 31, 2008, total debt was $791.1 million, a decrease of $136.0 million from December 31, 2007, including the Notes payable to the Capital Trust.

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º The duration of the economic recession is unknown at this time, as is the ongoing effect on certain local market economies. Our operating results may continue to be negatively impacted throughout the duration of the recession. Given the current economic environment, we will continue to monitor the need to test our intangibles for impairment as required by SFAS No. 142.

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º Pursuant to the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") and the FCC's "must carry" regulations, cable operators are generally required to devote up to one-third of their activated channel capacity to the carriage of the analog signal of local commercial television stations. On a cable system-by-cable system basis, a local television broadcast station must choose once every three years whether to waive the right to mandatory, but uncompensated, carriage and, instead, to negotiate a grant of retransmission consent. For the period from January 1, 2009 to December 31, 2011, we have opted to negotiate retransmission consent with most of the cable systems that carry our stations. During 2008, we concluded retransmission consent agreements with a majority of our cable systems as measured by subscriber base. Executed agreements have led to an increase in retransmission revenues.

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º The Satellite Home Viewer Improvement Act of 1999 ("SHVIA") established a compulsory copyright licensing system for the distribution of local television station signals by direct broadcast satellite systems to viewers in each DMA. Under SHVIA's "carry-one, carry-all" provision, a direct broadcast satellite system generally is required to retransmit the analog signal of all local television stations in a DMA if the system chooses to retransmit the analog signal of

any local television station in that DMA. Television stations located in markets in which satellite carriage of local stations is offered may elect mandatory carriage or retransmission consent once every three years. We have opted to negotiate retransmission consent for all of the satellite systems that carry our stations for the period from January 1, 2009 to December 31, 2011, and we already have existing agreements in place with the satellite systems.

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º In 2006 Sprint Nextel Corporation ("Nextel") was granted the right from the FCC to claim from broadcasters in each market across the country the 1.9 GHz spectrum to use for an emergency communications system. In order to reclaim this signal, Nextel must replace all analog equipment currently using this spectrum with digital equipment. All broadcasters have agreed to use the digital substitute that Nextel will provide. The transition will be completed on a market-by-market basis. During the year ended December 31, 2008, we recorded $4.7 million of gains which primarily represents the difference between the fair market value of the equipment we received and the book value of the analog equipment we exchanged in seven of our markets. During the year ended December 31, 2007, we recorded $2.3 million of gains which primarily represents the difference between the fair market value of the equipment we received and the book value of the analog equipment we exchanged in one of our markets. The gain is reflected as an offset to Salaries, benefits and other operating costs. As the equipment is exchanged in our remaining markets, we expect to record additional gains.

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º The Federal Communications Commission ("FCC") has permitted broadcast television station licensees to use their digital spectrum for a wide variety of services such as high-definition television programming, audio, data and other types of communication, subject to the requirement that each broadcaster provide at least one free video channel equal in quality to the current analog channel. We currently have multicast channels broadcasting weather programs and an additional network affiliation and numerous other multicast opportunities are being reviewed. We have also affiliated with the Open Mobile Video Coalition, which contemplates launching a mobile video service using a portion of available digital spectrum. We continue to explore alternative uses of our digital spectrum.

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º Legislation that guides the transition from analog to digital television broadcasting included a deadline of February 17, 2009 for completion of the transition to digital broadcasting and the return of the analog spectrum to the government. As a result, we accelerated the depreciation of certain equipment that may have a shorter useful life as a result of the digital conversion. The DTV deadline has been delayed to June 12, 2009.

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º Compensation from networks to their affiliates in exchange for broadcasting of network programming has been sharply reduced in recent years and is expected be eliminated in the future. Our affiliation agreements with ABC and NBC expire on December 31, 2009. We will be negotiating renewal agreements during 2009, and renewal terms are not presently known.

Critical Accounting Policies and Estimates

Our management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated 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 ongoing basis, we evaluate our estimates, including those related to allowances for doubtful accounts; program rights, barter and trade transactions; useful lives of property, plant and equipment; intangible assets; carrying value of investments; accrued liabilities; contingent liabilities; income taxes; pension benefits; and fair value of financial instruments and stock options. We base our estimates on historical experience and on various other assumptions, which we believe to be reasonable under the

circumstances. Had we used different assumptions in determining our estimates, our reported results may have varied. The different types of estimates that are required to be made by us in the preparation of our consolidated financial statements vary significantly in the level of subjectivity involved in their determination. We have identified the estimates below as those which contain a relatively high level of subjectivity in their determination and, therefore, could have a more material effect upon our reported results if different assumptions were used.

Impairment Testing of Intangible Assets-In performing our annual impairment testing of FCC licenses and goodwill, which are both considered to be intangible assets with indefinite useful lives, we must make a significant number of assumptions and estimates in determining the fair value. For purposes of impairment testing, FCC licenses are tested on a market by market basis, and goodwill is tested at the reporting unit level. We have determined that for goodwill testing, under Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") and Emerging Issues Task Force ("EITF") Topic No. D-101: "Clarification of Reporting Unit Guidance in Paragraph 30 of FASB Statement No. 142" ("EITF Topic D-101"), we have a single reporting unit. To determine the fair value of the FCC licenses, we utilize a discounted cash flow model. To determine the fair value of our reporting unit, we also utilize a discounted cash flow model. Other valuation methods, such as a market approach utilizing market multiples are used to corroborate the discounted cash flow analysis performed at the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered potentially impaired. In determining fair value, management relies on and considers a number of factors, including but not limited to, future market revenue growth, operating profit margins, perpetual growth rates, market revenue share, weighted-average cost of capital, and market data and analysis, including market capitalization. Fair value determinations are sensitive to changes in the factors described above. There are inherent uncertainties related to these factors and judgments in applying them to the analysis of FCC and goodwill recoverability. For the year ended December 31, 2008, the book value of certain of our FCC licenses exceeded their fair value resulting in an impairment of $926.1 million on these assets. The fair value of the reporting unit exceeded the book value and as such, no goodwill impairment was indicated in 2008. See Note 4 for further detail.

Pension Assumptions-In computing projected benefit obligations and the resulting pension expense, we are required to make a number of assumptions. To compute our projected benefit obligations as of the measurement date of December 31, 2008, we used a weighted average discount rate of 6.44% and an average rate of compensation increase of 3.43%. We used two methods to determine the weighted average discount rate as of the December 31, 2008 measurement date. For our largest three pension plans we constructed a portfolio of bonds to match the benefit payment stream that is projected to be paid from the Company's largest pension plan. The benefit payment stream is assumed to be funded from bond coupons and maturities as well as interest on the excess cash flows from the bond portfolio. This approach yielded a 6.5% discount rate for our largest three pension plans. For our smaller plans, we used a cash flow matching approach where the expected benefits payments under the plans are matched to published bond yield curves. The cash flow matching approach yielded a 6.25% discount rate on the smaller plans. To compute our pension expense in the year ended December 31, 2008, we assumed a discount rate of 6.5%, an expected long-term rate of return on plan assets of 7.75%, and an average rate of compensation increase of 4.0%. See Note 14 to the consolidated financial statements for further discussion on management's methodology for developing the expected long-term rate of return assumption. We consider the assumptions used in our determination of our projected benefit obligations and pension expense to be reasonable.

The weighted-average assumptions used in computing our 2008 net pension expense of $11.4 million and projected benefit obligation as of December 31, 2008 of $211.1 million have a

significant effect on the amounts reported. A one-percentage point change in each of the assumptions below would have the following effects upon net pension expense and projected benefit obligation, respectively, in the year ended and as of December 31, 2008:

                            One Percentage Point Increase                        One Percentage Point Decrease
                                      Expected                                             Expected
                                        long-          Rate of                               long-            Rate of
                                      term rate      compensation                        term rate of      compensation
                   Discount Rate      of return        increase        Discount Rate        return           increase
                                                               (In thousands)
Net pension                (3,529 )       (1,673 )            1,135             4,510            1,673              (1,223 )
cost
Projected                 (28,808 )          N/A              4,949            33,156              N/A              (4,457 )
benefit
obligation

Income Taxes-Income taxes are accounted for in accordance with SFAS No. 109, Accounting for Income Taxes ("SFAS 109"), which requires that deferred tax assets and liabilities be recognized for the differences in the book and tax basis of certain assets and liabilities using enacted tax rates. SFAS 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion, or all of the deferred tax assets, will not be realized. Our estimates of income taxes and the significant items giving rise to deferred assets and liabilities are shown in Note 8 and reflect our assessment of actual future taxes to be paid on items reflected in the consolidated financial statements, giving consideration to both timing and probability. Actual income taxes could vary from these estimates due to future changes in income tax law or reviews by federal and state tax authorities. We have considered these potential changes in accordance with SFAS 109 and Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"), which requires the Company to record reserves for estimates of probable settlements of federal and state audits. Accordingly the Company has included $27.7 million in Other Liabilities (non-current) and $2.0 million in Accrued Liabilities (current) on our Consolidated Balance Sheet. The results of audits and negotiations with taxing authorities may affect the ultimate settlement of these issues and future income tax expense. Income tax benefit was $332.0 million or 39.6% of pre-tax loss in our Consolidated Statement of Operations for the year ended December 31, 2008. Deferred tax assets were approximately $4.7 million and deferred tax liabilities were approximately $470.2 million as of December 31, 2008.

Investment Carrying Values-We have investments in unconsolidated affiliates, which are accounted for under the equity method if our equity interest is from 20% to 50%, and under the cost method if our equity interest is less than 20% and we do not exercise significant influence over operating and financial policies. We review the carrying value of investments on an ongoing basis and adjust them to reflect fair value, where necessary. See Note 3 to the consolidated financial statements. As part of our analysis and determination of the fair value of investments, we must make assumptions and estimates regarding expected future cash flows, which involve assessing the financial results, forecasts, and strategic direction of each company. During the year ended December 31, 2008, the Company wrote down its equity investment in Ripe Digital Entertainment, Inc. ("RDE") to zero, thus increasing its loss in equity earnings by $4.0 million. It also wrote down its $5.9 million cost investment in the Arizona Diamondbacks by $3.7 million to $2.25 million which it expects to realize during the first quarter of 2009 when a sale of its share is finalized. We consider the assumptions used in our determination of remaining investment carrying values to be reasonable.

Results of Operations

Results of operations for the years ended December 31, 2008, 2007 and 2006 include (i) the results of our 25 television stations, which were owned for the entire period presented, and the management fees derived by the three television and two radio stations managed by us for the entire period presented; and
(ii) the results of operations of WKCF-TV, after our acquisition of the station, on August 31, 2006.

                          Year Ended December 31, 2008
                    Compared to Year Ended December 31, 2007

                                For the years ended December 31,
                                    2008                 2007          $ Change    % Change
                                         (In Thousands)
Total revenue                 $         720,491     $       755,738   $  (35,247 )      (4.7 )%
Station operating
expenses:
Salaries, benefits and
other operating costs                   413,302             409,977        3,325         0.8 %
Amortization of program
rights                                   76,296              75,891          405         0.5 %
Depreciation and
amortization                             56,130              55,262          868         1.6 %
Insurance settlement                    (11,549 )                 -      (11,549 )       N/A
Impairment Loss                         926,071                   -      926,071         N/A
Corporate, general and
administrative expenses                  35,363              38,427       (3,064 )      (8.0 )%

Operating income/(loss)       $        (775,122 )   $       176,181   $ (951,303 )    (540.0 )%
Interest expense                         50,984              63,023      (12,039 )     (19.1 )%
Interest income                             (74 )            (2,043 )      1,969       (96.4 )%
Interest expense,
net-Capital Trust                         8,586               9,750       (1,164 )     (11.9 )%
Other expense                             3,731                   -        3,731         N/A

Income/(loss) before
income taxes and equity       $        (838,349 )   $       105,451   $ (943,800 )    (895.0 )%
Income tax
expense/(benefit)             $        (332,011 )   $        38,207     (370,218 )    (969.0 )%
Equity in loss (income) of
affiliates, net                          10,119               2,588        7,531       291.0 %

Net income/(loss)             $        (516,457 )   $        64,656   $ (581,113 )    (898.8 )%

Total revenue.

Total revenue includes:

º (i)
º cash advertising revenue, net of agency and national representatives' commissions;

º (ii)
º barter and trade revenue;

º (iii)
º retransmission consent revenue;

º (iv)
º net digital media revenue, which includes primarily Internet advertising revenue and, to a lesser extent, revenue from advertising on multicast channels;

º (v)
º network compensation; and

º (vi)
º other revenue, including management fees earned from Hearst.

                                 For the years ended December 31,
                                    2008                 2007          $ Change     % Change
                                          (In thousands)
Net local & national ad
revenue (excluding
political)                     $        533,995     $        629,835   $ (95,840 )      (15.2 )%
Net political revenue                    93,002               32,054      60,948        190.1 %
Barter and trade revenue                 24,583               26,039      (1,456 )       (5.6 )%
. . .