DG Systems Reports Record First Quarter Results.

SAN FRANCISCO--(BUSINESS WIRE)--May 18, 1999--

- Revenues Increase 16%; EBITDA Increases $336,000 -

DG Systems, Inc. (Nasdaq: DGIT), a leading provider of digital distribution services to the broadcast industry, today reported record results for the first quarter ended April 3, 1999.

Consolidated revenues for the quarter ended April 3, 1999 rose 16% to $11.5 million from $9.9 million in the same period last year, while revenues from the Company's core audio, video and related production services rose to $10.7 million from $7.8 million in the first quarter of 1998. The rise in first quarter 1999 revenues is primarily attributable to 557,000 audio and video deliveries in the quarter, an increase of 297,000 from the same quarter in 1998. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter ended April 3, 1999 was $8,000, compared to negative EBITDA of $328,000 in the same period last year.

The Company incurred a net loss for the quarter ended April 3, 1999 of $3.0 million, or $0.11 per share, compared with a net loss of $3.8 million, or $0.31 per share, during the same period last year.

Commenting on the results, Scott K. Ginsburg, Chairman and Chief Executive Officer of DG Systems, stated, "The 1999 first quarter represents the second consecutive period of positive EBITDA for DG Systems. Increased deliveries through our network during the quarter reflect growing acceptance by advertisers, agencies and broadcasters nationwide of DG's audio and video digital distribution capabilities."

Paul W. Emery, Chief Financial Officer and Vice President of Finance and Administration added, "We remain committed to containing costs through our consolidation/platform building period. Complete integration of all of the Company's facilities and the continued centralization of certain administrative functions are expected to further reduce DG's cost of service and other operating expenses later this year."

Mr. Ginsburg concluded, "I am excited about DG's future prospects. While we are solidly positioned as the industry's leading source of audio spot delivery, now serving 72% of U.S. radio stations, we are aggressively moving to achieve similar status with our video delivery products. Our sales and marketing programs, targeted principally on the 'top 100' brands for digital video advertising, are beginning to fuel video delivery growth, and we anticipate further gains from this program as we add new brands. DG Systems now serves over 75% of the television stations located in the nation's largest markets - a position we intend to grow by increasing traffic through our digital distribution network, expanding our client base and building our competitive position in the television sector."

DG Systems operates a nationwide, value-added digital distribution network which links hundreds of advertisers and advertising agencies with more than 7,500 radio and 600 television stations across the United States and Canada. The Company's fault-tolerant Network Operations Centers (NOC) deliver audio, video, image and data content which facilitate transactions among advertising industry participants. DG Systems can be reached at 415-276-6600 or at www.dgsystems.com. This release contains forward-looking statements relating to the company, including the expansion of its digital distribution networks, and the demand among certain clients for digital audio and video delivery services. These forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those projected. These and other risks relating to DG Systems' business are set forth in the company's Form 10-K filed with the Securities and Exchange Commission on March 31, 1999. -0-

                   Digital Generation Systems, Inc.
                 Consolidated Statements of Operations
                 (In thousands, except per share data)

                                             Quarter Ended
                                          April 3,    March 31,
                                            1999        1998
                                          --------    --------
Revenues
     Core Services(a)                     $ 10,660    $  7,759
     Non-Core Services                         800       2,115
                                          --------    --------
     Total Revenues                         11,460       9,874

Operating Expenses
     Delivery and Material Costs             4,539       3,746
     Customer Operations                     3,557       3,575
     Sales and Marketing                     1,237       1,264
     Research and Development                  612         588
     General and Administrative              1,507       1,029
                                          --------    --------
      Total Expenses                        11,452      10,202

EBITDA (loss)                                    8        (328)

Net Loss                                  $ (2,991)   $ (3,803)
                                          ========    ========

Basic and diluted loss per common share   $  (0.11)   $  (0.31)
                                          ========    ========

Weighted average common shares
     shares outstanding                     26,462      12,176
                                          ========    ========


(a)  Note: Core Services include audio, video and related production
     services