MSGI Reports Record Revenues in Second Quarter.

NEW YORK--(BUSINESS WIRE)--Feb. 17, 1999--Marketing Services Group, Inc. (Nasdaq: MSGI), an integrated marketing and Internet services industry leader, today reported second fiscal quarter results for the period ended December 31, 1998.

Revenue for the second quarter was up 56% to $16,640,513 as compared to $10,673,770 for the second quarter one year ago representing the 9th consecutive quarter of double-digit revenue growth.

Net loss for the second quarter was $(1,525,842) or $(.14) per share as compared to $(884,484) or $(.33) per share for the second quarter one year ago. Earnings per share improved by $.19 as compared to the first quarter one year ago, including the $290,424 dividend to GE Capital Services.

Net loss was principally attributable to the start-up fulfillment business, which completed its second quarter of operations as well as telemarketing activities; which suffered a greater than usual seasonal loss during what is typically its worst quarter. The direct and Internet marketing business continued to provide positive income from operations.

"As the numbers clearly show, our strategy of focusing solely on the areas of direct and Internet marketing is the correct choice," said Jeremy Barbera, Chairman and CEO, MSGI. "This is the source of both our revenue and margin growth, and is at the least risk for seasonality impact.

"Although fulfillment certainly has a place in our corporate plan, we cannot allow MFI to continue to erode MSGI's net income," continued Mr. Barbera. "We are in receipt of offers to acquire the business and intend to sell a majority position during this current quarter. Our plan to maintain a minority interest in MFI better reflects our client's needs and shareholder's value."

Second Quarter Events

"The first quarter of Fiscal 1999 was extremely active and exciting," said Mr. Barbera. "We brought new, cutting edge products to market while continuing physical expansion through both internal growth and acquisitions. As we continue to focus on our mission to be the leading integrated marketing and Internet services company for commercial and not-for-profit clients, I think it is appropriate to thank our long-time employees for their commitment to this vision, as well as to welcome our newest team members who have joined us via the recent acquisition of Stephens-Knox & Associates. "

Highlights from the quarter include four key initiatives:

-- Late September, MSGI announced a stock repurchase program and has so far acquired 417,094 shares. As of this release date MSGI's outstanding shares have been reduced to 12,702,359.

-- In October, MSGI announced the launch of a revolutionary online ticketing system and formed a strategic partnership with UK Ticketing giant, bocs, a subsidiary of Airmiles International Group of London. Earlier this month MSGI signed Broadway giant Cameron Mackintosh (Les Miserables, The Phantom of the Opera, Miss Saigon) to a contract for extended Web development, hosting and e-mail list management with possible future plans for online ticketing. These relationships firmly reinforced MSGI's role as the leading online provider for the arts and entertainment industries.

-- During November, MSGI and MBNA America Bank, N.A., the recognized leader in affinity credit card marketing, launched an exclusive affinity card developed for passionate arts patrons - Entertainment Edge. The initial mailing received a higher than anticipated response rate. In addition, Entertainment Edge cardholders tended to activate their accounts in greater numbers as a percentage of total accounts issued in comparison to MBNA's 14,000+ affinity card programs. MBNA and MSGI are currently researching the expansion of this program into other major metropolitan areas such as Chicago, London and Toronto.

-- Late December, MSGI completed negotiations with Steven-Knox & Associates, which was acquired effective January 1, 1999. SK&A propelled MSGI to a run rate of $100 million and also provided MSGI with their first international operations in the Covent Gardens section of London, as well as expansion into several new markets.

Matters discussed in this release include forward-looking statements that involve risks and uncertainties, and actual results may be materially different. Factors which could cause actual results to differ are stated in the Company's reports to the Securities and Exchange Commission including it's 10Q for the period ended December 31, 1998 and the annual report on Form 10-KSB for the year ended June 30, 1998.

Marketing Services Group, Inc. (www.msginet.com) provides direct marketing and database marketing, telemarketing and telefundraising, media planning and buying, interactive fulfillment, Web development, online consulting and e-commerce to more than 1,000 clients worldwide. -0-

               MSGI Consolidated Statement of Operations
             Three months ended December 31, 1998 and 1997
                             (unaudited)

                             1998                1997
                             ----                ----

Revenues                  $ 16,640,513    $ 10,673,770
Net loss                  $ (1,525,842)   $   (884,484)
Net loss attributable
to common stockholders    $ (1,816,266)   $ (4,269,665)
Loss per common share     $       (.14)   $       (.33)
Weighted average shares     12,886,265      12,934,993

-0-

As a result of the GE Capital transaction; the three months ended December 31, 1998 includes the impact of dividends on stock for (a) $235,548 in cumulative undeclared dividends; and (b) $54,876 of periodic non-cash accretions on preferred stock.

The three months ended December 31, 1997 includes the impact of dividends on stock for (a) non-cash, non-recurring beneficial conversion feature of $3,214,400; (b) $149,446 from adjustment of the conversion ratio for certain issuance's of common stock and exercises of stock options; (c) $17,260 in cumulative undeclared dividends; and (d) $4,075 of period non-cash accretions on preferred stock.