The box office success of Sex and the City failed to offset a 26 per cent fall in profits at Time Warner, which reported lower revenue from print and online.

The company reported that second-quarter profits for the three months to June 30 had fallen from $1 billion last year to $792 million (£406 million). Subscriber fees at AOL declined while advertising revenue at its Time publishing business also fell.

Total revenue for the second quarter rose 5.3 per cent to $11.6 billion.

The American media giant also said that it would separate AOL's internet dial-up and advertising operations by 2009, a move that could lead to a sale or merger of either business. Jeffrey Bewkes, chief executive of Time Warner, said in May that he was open to selling AOL, and the company has taken legal and tax steps that make it possible to split out the online business.

AOL remains a burden on the company's results. Yesterday Time Warner said that revenues at AOL had declined 16 per cent to $1.1 billion, reflecting a 29 per cent, or $200 million, decrease in subscription revenues.

The decline was due in part to AOL's new strategy of offering customers email and other products free.

AOL bought Time Warner in 2001 for $124 billion, sparking shareholder lawsuits and $100 billion in writedowns. The shares have lost about two thirds of their value since the takeover.

Revenues at Time Warner Cable increased 7 per cent, or $284 million, to $4.3 billion, as subscriptions grew 7 per cent to $4.1 billion. Time Warner recently said that it would sell the 84 per cent of its cable operations that it retains to shareholders later this year.

At its filmed entertainment unit, which includes Warner Bros and New Line, revenues rose 14 per cent to $2.6 billion, led by strong home video performances of I Am Legend, The Bucket List, 10,000 BC and Fool’s Gold.

Revenue at its television networks business, which includes Turner Broadcasting and HBO, rose 9 per cent, or $225 million, to $2.8 billion, with growth of 10 per cent, or $158 million, in subscription revenue, and 11 per cent, or $89 million, in advertising sales.

Operating income at the division climbed 18 per cent, or $115 million, to $749 million.

However, revenue at Time, which includes People and Time magazines, declined by 6 per cent, or $77 million, to $1.2 billion, as advertising fell 9 per cent, or $66 million.

“The decrease in advertising revenues was due primarily to reduced domestic print magazine revenues and declines in custom publishing revenues, offset partially by higher online revenues ($19 million), led by People.com, Time.com and CNNMoney.com,” it said.

Time Warner is likely to benefit in the third quarter from film successes such as The Dark Knight, which has taken an estimated $603 million at the box office worldwide. Sex and the City, the movie adaptation of the HBO series, had taken in $373 million in worldwide ticket sales since its release on May 30, according to Box Office Mojo.

The company affirmed its full-year forecast that adjusted operating income would rise 7 per cent to 9 per cent, with earnings per share from continuing operations coming in at between $1.07 and $1.11.

Shares of Time Warner have fallen 20 per cent this year and the media giant's market value is $53.25 billion. Mr Bewkes said that, while the company faced a "challenging economic environment," it is "on track to achieve [its] business outlook."

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