• by David Goetzl  @dgoetzl, January 7, 2009

Time Warner said Wednesday that the downturn in the ad market will contribute to an annual net loss for 2008, another striking impact of the sour media economy. While other factors will play a role, the company said the financial environment has affected ad dollars more than expected, particularly at Time Inc. and AOL.

Over the second half of the year, magazine revenues will be down more than 12% compared to 2007, CFO John Martin indicated at an investor event Wednesday. In the July-September period, Time Inc. saw revenues down 12% and the decrease for the fourth quarter was below that.

The negative trend in publishing is expected to continue in the coming months, Martin said, with advertisers showing "not a lot of willingness to commit dollars early."

Nonetheless, Martin said, magazines are in better shape than the struggling newspaper sector, since they are less reliant on classified advertising and readership appears to be holding steady.

At AOL, hurdles have come from a "softening in just overall demand in premium display inventory"--notably in the auto, financial and travel sectors.

In November, Time Warner had said it expected adjusted operating income before depreciation and amortization for 2008 to be up 5%. But fourth-quarter issues--including the potential inability of bankrupt companies like Circuit City to pay their bills--will be a contributor to a far worse performance. A $125 million negative impact on advertising will play a role.

In regard to the TNT and TBS cable networks, Martin said they continue to perform well, and Time Warner believes it is "disproportionally benefiting as money is coming off broadcast and into cable."

Time Warner's expected operating loss in 2008 comes after it had operating income of $8.9 billion in 2007.