Summary of TIME WARNER INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
INTRODUCTION
Management's discussion and analysis of results of operations and financial condition ("MD&A") is provided as a supplement to the accompanying consolidated financial statements and notes to help provide an understanding of Time Warner Inc.'s ("Time Warner" or the "Company") financial condition, cash flows and results of operations. MD&A is organized as follows:
• Overview. This section provides a general description of Time Warner's business segments, as well as recent developments the Company believes are important in understanding the results of operations and financial condition or in understanding anticipated future trends.

• Results of operations. This section provides an analysis of the Company's results of operations for the three and six months ended June 30, 2008. This analysis is presented on both a consolidated and a business segment basis. In addition, a brief description is provided of significant transactions and events that impact the comparability of the results being analyzed.

• Financial condition and liquidity. This section provides an analysis of the Company's financial condition as of June 30, 2008 and cash flows for the six months ended June 30, 2008.

• Caution concerning forward-looking statements. This section provides a description of the use of forward-looking information appearing in this report, including in MD&A and the consolidated financial statements. Such information is based on management's current expectations about future events, which are inherently susceptible to uncertainty and changes in circumstances. Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2007 (the "2007 Form 10-K"), as well as Item 1A, "Risk Factors," in Part II of this report, for a discussion of the risk factors applicable to the Company.

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TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued) OVERVIEW
Time Warner is a leading media and entertainment company, whose major businesses encompass an array of the most respected and successful media brands. Among the Company's brands are HBO, TNT, CNN, AOL, People, Sports Illustrated, Time and Time Warner Cable. The Company produces and distributes films through Warner Bros. and New Line Cinema, including The Dark Knight, Get Smart, Sex and the City, I Am Legend, 10,000 B.C. and Harry Potter and the Order of the Phoenix, as well as television series, including Two and a Half Men, Without a Trace, Cold Case, The Closer and ER. During the six months ended June 30, 2008, the Company generated revenues of $22.972 billion (up 4% from $22.164 billion in 2007), Operating Income of $3.893 billion (down 13% from $4.476 billion in 2007), Net Income of $1.563 billion (down 31% from $2.270 billion in 2007) and Cash Provided by Operations of $4.932 billion (up 58% from $3.119 billion in 2007). As discussed more fully in "Business Segment Results," the six months ended June 30, 2007 included the impact of an approximate $670 million gain on the sale of AOL's German access business. Time Warner Businesses
Time Warner classifies its operations into five reportable segments: AOL, Cable, Filmed Entertainment, Networks and Publishing.
Time Warner evaluates the performance and operational strength of its business segments based on several factors, of which the primary financial measure is operating income before depreciation of tangible assets and amortization of intangible assets ("Operating Income before Depreciation and Amortization"). Operating Income before Depreciation and Amortization eliminates the uneven effects across all business segments of considerable amounts of noncash depreciation of tangible assets and amortization of certain intangible assets, primarily recognized in business combinations. Operating Income before Depreciation and Amortization should be considered in addition to Operating Income, as well as other measures of financial performance. Accordingly, the discussion of the results of operations for each of Time Warner's business segments includes both Operating Income before Depreciation and Amortization and Operating Income. For additional information regarding Time Warner's business segments, refer to Note 10, "Segment Information." AOL. AOL LLC (together with its subsidiaries, "AOL") operates a Global Web Services business that provides online advertising services on both the AOL Network and third-party Internet sites, referred to as the "Third Party Network." AOL's Global Web Services business also develops and operates the AOL Network, a leading network of web brands and free client software and services for Internet consumers. In addition, through its Access Services business, AOL operates one of the largest Internet access subscription services in the United States. As of June 30, 2008, AOL had 8.1 million AOL brand Internet access subscribers in the U.S., which does not include registrations for the free AOL service. For the six months ended June 30, 2008, AOL generated revenues of $2.185 billion (9% of the Company's overall revenues), $755 million in Operating Income before Depreciation and Amortization and $514 million in Operating Income.
AOL's strategy is to continue to transition from a business that has relied heavily on Subscription revenues from dial-up subscribers to one that attracts and engages more Internet users and takes advantage of the recent as well as anticipated growth in online advertising by providing advertising services on both the AOL Network and the Third Party Network. AOL's focus is on growing its Global Web Services business, while managing costs in this business as well as managing its declining subscriber base and costs in its Access Services business. On February 6, 2008, the Company announced that it had begun separating the AOL Access Services and Global Web Services businesses, which should enhance the operational focus and strategic options available for each of these businesses. The Company anticipates that it will be in a position to operate AOL's Access Services and Global Web Services businesses separately in 2009.
Within its Global Web Services business, in 2007 AOL formed a business group called Platform-A, which includes AOL's business of selling advertising on the AOL Network and the Third Party Network and licensing advertising serving technology to third-party websites. Platform-A sells advertising that uses optimization and targeting technologies to deliver more effective advertising and to reach specific audiences across the AOL Network and the Third Party Network. Advertising services on the Third Party Network are primarily provided by Platform-A Inc. (formerly Advertising.com, Inc.) and its subsidiaries, including TACODA LLC, Quigo Technologies LLC, ADTECH AG, Third Screen Media LLC, Advertising.com LLC and Perfiliate Limited ("buy.at"), each of which is a wholly-owned subsidiary of AOL.

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TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued)
During the first six months of 2008, Advertising revenues on the AOL Network were negatively impacted by certain factors and trends, including shifts in the mix of sold inventory to lower-priced inventory, lower revenues from certain advertiser categories, the increasing usage by online advertisers of third-party advertising networks and declines in the price of advertising inventory. Additionally, AOL's Advertising revenues were negatively impacted by the challenges of integrating recently acquired businesses under Platform-A, including the realignment to create one integrated Platform-A sales force, which resulted in certain sales execution issues during the first half of the year. The increasing usage of third-party advertising networks has had a positive impact on AOL's Third Party Network Advertising revenues. However, Third Party Network advertising has historically had higher traffic acquisition costs ("TAC") and, therefore, lower incremental margins than display advertising. Due to the differing cost structures associated with the AOL Network and Third Party Network components of the Global Web Services business, a period-over-period increase or decrease in aggregate Advertising revenues will not necessarily translate into a similar increase or decrease in Operating Income before Depreciation and Amortization attributable to AOL's advertising activities.
During the first six months of 2008, the Company has experienced a significant decline in revenues from a major customer of Platform-A Inc. as a result of the customer's acquisition of a business believed to perform online advertising services that are similar to those provided by Platform-A Inc., and the Company anticipates that such revenues will continue to decline for the remainder of 2008 compared to the similar period in 2007. Revenues from this relationship decreased to $22 million for the six months ended June 30, 2008 from $104 million for the six months ended June 30, 2007. For the full year 2007, AOL earned Advertising revenues from this relationship of $215 million.
AOL's Publishing business group, a component of the Global Web Services business, develops and operates the products and programming functions associated with the AOL Network. The AOL Network consists of a variety of websites, related applications and services, including those accessed via the AOL and low-cost Internet access services. Specifically, the AOL Network includes owned and operated websites, applications and services such as AOL.com, international versions of the AOL portal, e-mail, AIM, MapQuest, Moviefone, ICQ and Truveo (a video search engine). The AOL Network also includes TMZ.com, a joint venture with Telepictures Productions, Inc. (a subsidiary of Warner Bros. Entertainment Inc.), as well as other co-branded websites owned by third parties for which certain criteria have been met, including that the Internet traffic has been assigned to AOL. In addition, during the second quarter of 2008, AOL completed the acquisition of Bebo, Inc. ("Bebo"), a leading global social media network. During the second half of 2008, AOL intends to continue to focus on cross-promoting its content on the AOL Network, which now includes Bebo's original programming, and provide Bebo users with certain products, such as mail and instant messaging.
Paid-search advertising activities on the AOL Network are conducted primarily through AOL's strategic relationship with Google Inc. ("Google"). In connection with the expansion of this strategic relationship in April 2006, Google acquired a 5% interest in AOL, and, as a result, 95% of the equity interests in AOL are indirectly held by the Company and 5% are indirectly held by Google. As part of the April 2006 transaction, Google received certain registration rights relating to its equity interest in AOL. Since July 1, 2008, Google has had the right to require AOL to register Google's 5% equity interest for sale in an initial public offering. If Google exercises this right, Time Warner will have the right to purchase Google's equity interest for cash or shares of Time Warner common stock based on the appraised fair market value of the equity interest in lieu of conducting an initial public offering. The Company cannot predict whether Google will request the Company to register its 5% equity interest in AOL or, if requested, whether the Company would exercise its option to purchase Google's interest at its then appraised value.
AOL's Access Services business offers an online subscription service to consumers that includes dial-up Internet access. AOL continued to experience declines in the first six months of 2008 in the number of its U.S. subscribers and related revenues, due primarily to AOL's decisions to focus on its advertising business and offer most of its services (other than Internet access) for free to support the advertising business, AOL's significant reduction of subscriber acquisition and retention efforts, and the industry-wide decline of the dial-up ISP business and growth in the broadband Internet access business. The decline in U.S. subscribers has moderated, with a decline of 1.3 million for the six months ended June 30, 2008 compared to a decline of 2.3 million for the six months ended June 30, 2007. The decline in subscribers has had an adverse impact on AOL's Subscription revenues. However, dial-up network costs have also decreased and are anticipated to continue to decrease as subscribers decline. AOL's Advertising revenues associated with the AOL Network, in large part, are generated from the activity of current and former AOL subscribers. Therefore, the decline in subscribers also could have an adverse impact on AOL's Advertising revenues generated on the AOL Network to the extent that subscribers canceling their subscriptions do not maintain their relationship with and usage of the AOL Network.

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TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued)
Cable. Time Warner's cable business, Time Warner Cable Inc. and its subsidiaries ("TWC"), is the second-largest cable operator in the U.S., with technologically advanced, well-clustered systems located mainly in five geographic areas - New York State (including New York City), the Carolinas, Ohio, southern California (including Los Angeles) and Texas. As of June 30, 2008, TWC served approximately 14.7 million customers who subscribed to one or more of its video, high-speed data and voice services. For the six months ended June 30, 2008, TWC generated revenues of $8.458 billion (37% of the Company's overall revenues), $2.927 billion in Operating Income before Depreciation and Amortization and $1.374 billion in Operating Income.
TWC principally offers three services - video, high-speed data and voice - over its broadband cable systems. TWC markets its services separately and in "bundled" packages of multiple services and features. As of June 30, 2008, 51% of TWC's customers subscribed to two or more of its primary services, including 19% of its customers who subscribed to all three primary services. Historically, TWC has focused primarily on residential customers, while also selling video, high-speed data and networking and transport services to commercial customers. Recently, TWC has begun selling voice services to small- and medium-sized businesses as part of an increased emphasis on its commercial business. In addition, TWC earns revenues by selling advertising time to national, regional and local businesses.
Video is TWC's largest service in terms of revenues generated and, as of June 30, 2008, TWC had approximately 13.3 million basic video subscribers. Although providing video services is a competitive and highly penetrated business, TWC expects to continue to increase video revenues through the offering of advanced digital video services, as well as through price increases and digital video subscriber growth. As of June 30, 2008, TWC had approximately 8.5 million digital video subscribers, which represented approximately 64% of its basic video subscribers. TWC's digital video subscribers provide a broad base of potential customers for additional services. Video programming costs represent a major component of TWC's expenses and are expected to continue to increase, reflecting contractual rate increases, subscriber growth and the expansion of service offerings. TWC expects that its video service margins as a percentage of video revenues will continue to decline over the next few years as increases in programming costs outpace growth in video revenues.
As of June 30, 2008, TWC had approximately 8.1 million residential high-speed data subscribers. TWC expects continued strong growth in residential high-speed data subscribers and revenues during 2008; however, the rate of growth of both subscribers and revenues is expected to continue to slow over time as high-speed data services become increasingly well-penetrated. TWC also offers commercial high-speed data services and had 287,000 commercial high-speed data subscribers as of June 30, 2008.
Approximately 3.4 million residential subscribers received Digital Phone service, TWC's IP-based telephony voice service, as of June 30, 2008. TWC expects strong increases in Digital Phone subscribers and revenues for the foreseeable future. TWC also rolled out Business Class Phone, a commercial Digital Phone service, to small- and medium-sized businesses during 2007 in the majority of its systems and has nearly completed the roll-out in the remainder of its systems during the first half of 2008. As of June 30, 2008, TWC had 16,000 commercial Digital Phone subscribers.
Some of TWC's principal competitors, direct broadcast satellite operators and incumbent local telephone companies in particular, either offer or are making significant capital investments that will allow them to offer services that provide features and functions comparable to the video, high-speed data and/or voice services offered by TWC. These services are also offered in bundles similar to TWC's and, in certain cases, such offerings include wireless service. The availability of these bundled service offerings has intensified competition, and TWC expects that competition will continue to intensify in the future as these offerings become more prevalent. TWC plans to continue to enhance its services with innovative offerings, which TWC believes will distinguish its services from those of its competitors.
Time Warner owns approximately 84% of the common stock of TWC (representing a 90.6% voting interest), and also owns an indirect 12.43% non-voting equity interest in TW NY Cable Holding Inc. ("TW NY"), a subsidiary of TWC. On May 20, 2008, TWC and its subsidiaries Time Warner Entertainment Company, L.P. ("TWE") and TW NY entered into a Separation Agreement (the "Separation Agreement") with Time Warner and its subsidiaries Warner Communications Inc. ("WCI"), Historic TW Inc. ("Historic TW") and American Television and Communications Corporation ("ATC"), the terms of which will govern TWC's legal and structural separation from Time Warner. Refer to "Recent Developments" for further details.

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TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued)
Filmed Entertainment. Time Warner's Filmed Entertainment segment comprises Warner Bros. Entertainment Group ("Warner Bros."), one of the world's leading studios, and New Line Cinema Corporation ("New Line"). For the six months ended June 30, 2008, the Filmed Entertainment segment generated revenues of $5.404 billion (22% of the Company's overall revenues), $476 million in Operating Income before Depreciation and Amortization and $277 million in Operating Income.
The Filmed Entertainment segment has diversified sources of revenues within its film and television businesses, including an extensive film library and a global distribution infrastructure, which has helped it to deliver consistent long-term performance. As announced in the first quarter of 2008, in an effort to increase operational efficiencies and maximize performance within the Filmed Entertainment segment, the Company has reorganized the New Line business to be operated as a unit of Warner Bros. while maintaining separate development, production and other operations. During the first six months of 2008, the Company incurred restructuring charges related to planned involuntary employee terminations in connection with the reorganization. The Company expects to incur additional restructuring charges related to the reorganization during the remainder of 2008.
Warner Bros. continues to be an industry leader in the television business. For the 2007-2008 broadcast season, Warner Bros. produced more than 20 primetime series, with at least one series airing on each of the five broadcast networks (including Two and a Half Men, Without a Trace, Cold Case, ER and Smallville), as well as original series for several cable networks (including The Closer and Nip/Tuck).
In February 2008, the Writers Guild of America (East and West) (the "WGA") reached an agreement with the film and television studios, ending an industry-wide work stoppage that began on November 5, 2007. The strike caused cancellations and delays in the production of Warner Bros.' television programs and feature films and hampered the development of new television series. Although the Company has experienced a short-term reduction in operating results attributable to these cancellations and delays, it does not anticipate that the strike will have a significant long-term impact.
The sale of DVDs has been one of the largest drivers of the segment's profit over the last several years, and its extensive library of theatrical and television titles positions it to continue to benefit from sales of home video product to consumers. However, the industry and the Company have experienced a leveling of DVD sales due to several factors, including increasing competition for consumer discretionary spending, piracy, the maturation of the standard definition DVD format and the fragmentation of consumer leisure time. In the first quarter of 2008, the home video industry settled on the Blu-ray format as the single high-definition technology. The shift to a single format may lead to increased consumer purchases of high-definition players and DVDs.
Piracy, including physical piracy as well as illegal online file-sharing, continues to be a significant issue for the filmed entertainment industry. Due to technological advances, piracy has expanded from music to movies and television programming. The Company has taken a variety of actions to combat piracy over the last several years, including the launch of new services for consumers at competitive price points, aggressive online and customs enforcement, compressed release windows and educational campaigns, and will continue to do so, both individually and together with cross-industry groups, trade associations and strategic partners.
Networks. Time Warner's Networks segment comprises Turner Broadcasting System, Inc. ("Turner") and Home Box Office, Inc. ("HBO"). For the six months ended June 30, 2008, the Networks segment generated revenues of $5.485 billion (22% of the Company's overall revenues), $1.800 billion in Operating Income before Depreciation and Amortization and $1.623 billion in Operating Income.
The Turner networks - including such recognized brands as TNT, TBS, CNN, Cartoon Network, truTV and Headline News - are among the leaders in advertising-supported cable TV networks. For six consecutive years, more primetime households have watched advertising-supported cable TV networks than the national broadcast networks. The Turner networks generate revenues principally from the sale of advertising and from receipt of monthly subscriber fees paid by cable system operators, satellite distribution services and other distributors. Key contributors to Turner's success are its continued investments in high-quality programming focused on sports, original and syndicated series, news, network movie premieres and animation leading to strong ratings and Advertising and Subscription revenue growth, as well as strong brands and operating efficiency.

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TIME WARNER INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - (Continued)
HBO operates the HBO and Cinemax multichannel pay television programming services, with the HBO service ranking as the nation's most widely distributed premium pay television service. HBO generates revenues principally from monthly subscriber fees from cable system operators, satellite distribution services and other distributors. An additional source of revenues is the sale of its original programming, including The Sopranos, Sex and the City, Rome and Entourage.
During the first half of 2008, the results of the Networks segment benefited from the segment's recent international expansion efforts, including Turner's fourth-quarter 2007 acquisition of seven pay networks operating principally in Latin America and HBO's acquisitions of additional interests in HBO Asia and HBO South Asia during the fourth quarter of 2007 and the first quarter of 2008. The Company anticipates that international expansion will continue to be an area of focus at the Networks segment for the foreseeable future.
Publishing. Time Warner's Publishing segment consists principally of magazine publishing and related websites as well as a number of direct-marketing and direct-selling businesses. The segment generated revenues of $2.221 billion (10% of the Company's overall revenues), $414 million in Operating Income before Depreciation and Amortization and $311 million in Operating Income for the six months ended June 30, 2008.
As of June 30, 2008, Time Inc. published over 120 magazines worldwide, including People, Sports Illustrated, InStyle, Southern Living, Real Simple, Time, Cooking Light, Entertainment Weekly and What's on TV. Time Inc. generates revenues primarily from advertising (including advertising on digital properties), magazine subscriptions and newsstand sales. The Company owns IPC Media ("IPC"), one of the largest consumer magazine companies in the U.K., and the magazine subscription marketer, Synapse Group, Inc. The Company's Publishing segment has experienced a continued decline in print advertising sales due to the uncertain economy and the ongoing shift of advertising expenditures to digital media, which is expected to continue. Time Inc. continues to invest in developing digital content, including the launches of Health.com and the MyHomeIdeas.comnetwork and the expansion of Sports Illustrated's, People's and InStyle's digital properties as well as the expansion of digital properties owned by IPC and the acquisition of various websites, to advance the Publishing segment's digital initiatives. For both the three and six months ended June 30, 2008, online Advertising revenues were 9% of Time Inc.'s total Advertising revenues, compared to 6% for both the three and six months ended June 30, 2007. Time Inc.'s direct-selling division, Southern Living At Home, sells home decor products through independent consultants at parties hosted in people's homes throughout the U.S.
Recent Developments
TWC Separation from Time Warner
On May 20, 2008, the Company and its subsidiaries WCI, Historic TW and ATC entered into the Separation Agreement with TWC and its subsidiaries TWE and TW NY. Pursuant to the Separation Agreement, (i) Time Warner will complete certain internal restructuring transactions, (ii) Historic TW, a wholly-owned subsidiary of Time Warner, will transfer its 12.43% interest in TW NY to TWC in exchange for 80 million newly issued shares of TWC Class A Common Stock (the "TW NY Exchange"), (iii) all TWC Class A Common Stock and TWC Class B Common Stock then held by Historic TW will be distributed to Time Warner, (iv) TWC will declare and pay a special cash dividend (the "Special Dividend") of $10.855 billion ($10.27 per share of TWC Common Stock) to be distributed pro rata to all holders of TWC Class A Common Stock and TWC Class B Common Stock, resulting in the receipt by Time Warner of approximately $9.25 billion from the dividend immediately prior to the Distribution (as defined below), (v) TWC will file with . . .