Time Warner, the media conglomerate, yesterday cut its full-year forecast for income growth to about 5 per cent, down from its previous prediction of between 7 per cent and 9 per cent.

The owner of Warner Bros film studios reported better than expected third-quarter results on strong advertising sales at its cable networks and good revenues from The Dark Knight, the Batman blockbuster.

However, despite the film grossing more than $527 million (about £328 million) and the success of the DVD release of Sex and the City, revenue from Warner Bros fell 9 per cent compared with the same period in 2007. That particularly strong period was led by Harry Potter and the Order of the Phoenix.

Revenue from AOL, the internet provider, was down 17 per cent after a 26 per cent decline in revenue from subscriptions as American consumers cut back on non-essential expenses, as well as a 6 per cent fall in advertising revenue.

Time Warner plans to split AOL's access and advertising businesses by next year. Such a move would make it easier to sell one or both. The company has been in longrunning talks with both Yahoo! and Microsoft over AOL's websites and advertising operations, while EarthLink, the rival access provider, is seen as a candidate for the remainder of AOL.The company lost 634,000 internet subscribers during the quarter, ending with 7.5 million - 72 per cent fewer than the 26.7 million on its lists at its peak six years ago.

The company's cable networks, including CNN, have benefited from high ratings for their coverage of the presidential election. Cable advertising and subscriber revenues rose by 9 per cent and 10 per cent respectively. Time Warner said that full-year earnings per share will be between $1.04 and $1.07, down from its previous forecast of between $1.07 and $1.11. Group revenue was flat at $11.7 billion.

The forecast cuts have been caused by severance charges at its Time publishing division and about $182 million in restructuring charges for the integration this year of the New Line Cinema studio by Warner Bros. Time Warner's third-quarter net income increased to $1.1 billion, or 30 cents per share, from $900 million, or 24 cents a share, last year. Excluding extraordinary items, profit reached 31 cents a share, beating Wall Street expectations of 27 cents.

The magazine unit saw third-quarter revenue fall by 7 per cent, largely on an 8 per cent reduction in advertising revenue as the weak economy prompted consumers and advertisers to pull back spending. The company plans job cuts as part of a reorganisation into three business units.

Time Warner's share price has fallen by about 40 per cent this year with Wall Street fearing that the prospect of recession would cut advertising revenue at media companies.

Meanwhile, Time Warner Cable posted a higher than expected third-quarter profit, driven by phone and internet sales, but said it had seen a significant slowdown in subscriber growth in the fourth quarter.

The second-largest American cable operator, which will be spun off from Time Warner as a stand-alone business in coming months, nudged down its full-year forecasts, on the back of weaker growth in video and phone services, especially premium services such as pay-per-view video.

Glenn Britt, Time Warner Cable chief executive, said: “If people continue to lose their homes and jobs, it would be naive to assume that there would be no impact on our business. In fact, as we moved into the fourth quarter we saw a significant slowdown in subscriber growth compared with last year, particularly for our video and voice services.”

Time Warner businesses include
Turner Broadcasting System runs cable networks, including CNN
HBO premium cable channel responsible for Sex and the City
Warner Bros Entertainment film studio
Time Inc magazine publisher with more than 125 titles
AOL global web services
Time Warner Cable America’s second-largest cable TV operator

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