AOL remained an albatross around the neck of Time Warner during the first quarter as profits from the Internet-access business plummeted a ghastly 73 percent versus the same quarter a year ago. The company's decision to drop its subscription model and provide AOL free in the hope of expanding the user base and thereby attract more advertiser dollars appeared doomed. AOL's advertising dollars did rise in the quarter -- but by only one percent, while much of its subscription revenue disappeared. As a result, Time Warner reported its overall first-quarter profit fell 36 percent to $771 million from $1.2 billion a year ago, significantly lower than analysts' forecasts. In a statement, Time Warner chief Jeff Bewkes said that the company would finally do what several prominent shareholders had been urging it to do for years -- spin off its successful cable business. Such a strategy had been resisted by Bewkes's predecessor, Richard Parsons. "We've decided that a complete structural separation of Time Warner Cable, under the right circumstances, is in the best interests of both companies' shareholders," Bewkes said in the statement. Sales at the cable unit rose 8 percent to $4.16 billion during the period, although income declined 12 percent to $242 million from last year, when it recorded a gain from the sale of some cable systems. Profits at its film business also fell 25 percent to $183 million as a result of costs related to the shutting down of New Line Cinema and merging it with Warner Bros. Revenue, however, increased 3.5 percent to $2.84 billion. Profits at its cable networks, including HBO and the Turner Broadcasting channels rose 1.6 percent to $874 million as sales rose $2.66 billion. Surprisingly -- given the overall slump in the print news business -- earnings at Time Inc., which publishes Time Magazine, Entertainment Weekly, People, and Sports Illustrated, more than doubled to $93 million.
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