• by Wayne Friedman , November 5, 2008

Time Warner, the world's largest media company, slipped a bit in the third quarter-- down almost 2% in profits, and hurt by lower revenue from its AOL and film entertainment division. TW dropped to $1.07 billion in net earnings from $1.09 billion the year before. Overall revenue, however, improved to $11.71 billion from $11.68 billion.

The company's TV networks, Turner Broadcasting and HBO, had a better story to tell: operating earnings up 21% to $909 million on a 7% gain in revenue to $2.7 billion. Advertising revenue at the Turner networks was 9% higher in the third quarter versus the same period in 2007 to $772 million for all its networks.

Concerning the near-term advertising market, company officials said they were "cautiously optimistic" that its TV advertising could remain strong in a weakening economy.

John Martin, CFO of Time Warner, told stock market analysts that the current fourth-quarter scatter TV advertising market had program pricing at the Turner networks a bit ahead versus the upfront deals made last June. He also noted that cancellations of the upfront deals were at normal levels.

At Time Warner Cable, revenue was up 8% to $4.3 billion, with adjusted operating profit 9% higher to $1.6 billion. The company said basic-cable subscribers fell by 31,000 to 13.27 million, but digital-video subscribers climbed by 124,000. In addition, Time Warner Cable added 200,000 residential digital-phone customers, now totaling 3.62 million.

But the ad market was not kind to its troubled AOL unit during the period. The AOL division was again a glaring under-performer--down 17% to $1 billion, with ad revenue dropping 6% in the period.

AOL had a growing ad revenue story in the previous periods. Last year, it improved 13% over 2006. But fourth-quarter revenue growth slipped--only a 10% hike. This year, AOL growth was at an anemic 1% in the first quarter and 2% in the second quarter.

Time Warner's publishing unit continued to have its problems, down in total revenues 7% to $1.1 billion on 35% lower operating income to $162 million. Publishing ad revenue was 8% down to $585 million.

Time Warner's Warner Bros. filmed entertainment division rose 3% in operating earnings to $275 million, but fell 9% in revenue to $2.8 billion. The company blames difficult comparisons to the period a year ago. Still, it notes that this was a major blockbuster summer, with "The Dark Knight" and "Sex and the City: The Movie" stopping some of the revenue decline.