Second, today's announcement includes certain forward-looking statements which are based on management's current expectations. Actual results may vary materially from those expressed or implied by these statements, due to various factors. These factors are discussed in detail in Time Warner's SEC filings, including its most recent annual report on Form 10-K and quarterly reports on Form 10-Q. Time Warner is under no obligation and in fact expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

I would also like to point out that the fall issue of inFOCUS, our new investor newsletter, is also now available on our website. With that covered, let me turn it over to Jeff.

Jeffrey L. Bewkes – President and Chief Executive Officer

Thanks, Doug. Good morning, everybody. I know there is some other news out this morning, you may have learned something about it on CNN, so thanks for ripping yourselves away from your sets and joining us today.

I'll give my view on our progress and then turn it over to John to talk about our financial results, and after that we'll take your questions.

There are basically three headlines this quarter. First, our businesses have proved to be resilient in a very challenging environment. That's due to our business mix and to our brands and scale, which enable us to make compelling content on a consistent basis.

Second, our balance sheet is very strong; it is a real advantage at times like these.

Third, we continue to make strides toward the structural objectives we outlined for you last February, moving us closer to our goal of being the global leader in creating and distributing branded content.

I would like to go through these in reverse order; the first two are pretty quick. As you know, the most significant of our structural initiatives is separating out the cable business and that will make us an even more content-focused company. We continue to make progress on that transaction and we remain confident that it will be consummated. Understandably, we've gotten questions lately about Time Warner Cable's ability to finance the dividend, but as Time Warner Cable outlined in its call this morning, it has more than sufficient committed capital, committed financing in place. So from a timing perspective, the gating factor continues to be the regulatory process, but we still think we're on pace to close by early next year.

The second headline is the strength of our balance sheet. Due in large part to the capital strategy that we've executed over the last few years, our balance sheet is very strong in terms of liquidity and capacity. John will walk you through the details, but the bottom line is that we're very pleased about where we stand today. This strength gives us both the ability to weather difficult economic conditions and it gives us the flexibility to continue to invest in the long-term competitive position of our businesses in a period when others may have to retrench.

Now I would like to spend the rest of the time this morning discussing the first headline, which is the resilience of our businesses. We have been as surprised as anybody else by the speed and the magnitude of the financial crisis, and it's hard to predict the ultimate impact on the economy; but our results in the quarter and our outlook for the year show that overall, our businesses are well-positioned.

As you saw in the earnings release this morning, our third quarter was the strongest of the year. We had adjusted OIBDA up 9% and adjusted EPS rising almost 30%. We've also updated our full-year outlook for adjusted OIBDA growth this morning to around 5%, reflecting in part a restructuring charge that we expect to take at Time Inc. in the fourth quarter.

Excluding the roughly $300 million of restructuring charges that we're taking this year at New Line, corporate and now at Time Inc., we still expect our adjusted OIBDA to grow near the low end of the 7% to 9% range that we first gave you back in February. We're very pleased to be able to say that in the middle of this economic climate and it's clearly a tougher climate than what we anticipated when we started out the year.

This resilient operating performance stems from two things: first there is our asset mix, which gives us diverse revenue streams. Most of our revenue comes from our content and subscription businesses which have historically been largely insulated from macroeconomic swings. Less than 20% of our revenue comes from advertising today, and even if you were to exclude Time Warner Cable, our advertising piece is really about a quarter of our revenue.

Let's go into the ad revenue. Even where we have ad exposure, we're relatively well-positioned. More than one-third of our advertising comes from our cable networks business. While Turner would not be immune to a prolonged ad downturn, it is advantageously situated within both the television business and in relation to most other ad-based businesses, as is shown by its recent outstanding results. We have almost no local advertising, excluding the local cable ads in the cable company. So that's the first part of the resilience.

The second part of our resilience reflects our ability to make compelling content on a consistent basis. You know, companies claim that and reach for it and it's always been the core of Time Warner, but it's more important today than ever because as media consumption shifts hits are growing in value. Consumers have more choice in how, when and where they use media and they're using that choice to gravitate both to the niche content and to the biggest hits. We're seeing evidence of this shift towards hits on traditional platforms and on new digital platforms and we're seeing it in the United States and overseas.

We fundamentally believe that we can position our company structurally to make better, more popular content on a more consistent basis. The reason is that our brands and our scale enable us to invest more in development and innovation which provides better economics which in turn attracts talent; that increases the quality and success rates of what we do; that builds brand equity and drives audiences which fuels further investment and attracts further talent, essentially a virtuous circle.

A few examples of that, starting with our networks. We had another great quarter, obviously, in our networks business, including 9% ad growth. We had another quarter of double-digit affiliate revenue growth and as you know, record adjusted OIBDA earnings growth. But let's focus on a few key brands to see the brand scale dynamic working.

At CNN, which I think is the right one to start with on a day like this, we have invested to build the largest news gathering infrastructure of any network broadcast or cable in the news business. That effort has clearly paid off. This quarter CNN's reach in its key demographic was 20% better than its nearest competitor; cnn.com was the leading news source on the web, as ranked by unique visitors; and CNN's keynote coverage of the democratic convention was #1 across all of television. That's the first time in history that a cable network has done that.

Moving over to the entertainment networks, TNT and TBS, the scale of those networks has also allowed us to invest in the highest quality original and syndicated acquired content. For example, Raising the Bar, a new original on TNT set a record this quarter as ad-supported cable's top new series launch ever. The Closer, another original drama on TNT, is the #1 ad-supported cable series ever. TBS now claims four of the top five sitcoms on cable, including the #1 original comedy on cable, Tyler Perry's House of Payne.

HBO is another great example of our strategy. It pioneered the idea of reinvesting part of its big base of affiliate fees into original programming. Since then, the HBO brand has become synonymous with the highest quality television and not coincidently, it has grown to be one of the most profitable networks in the world and is three times larger than its next largest competitor in pay TV.

It's no accident that HBO took home one-quarter of all Emmy awards this year, just one network. As we speak today, HBO is building on this lead. It has more pilots in development now than at any time in its history. Several of HBO's new shows are building strong momentum. True Blood, which launched in September, is on track and currently is the third most popular series that HBO has ever had, right behind The Sopranos and Sex and the City.

Turning to our film business, it posted another strong quarter growing adjusted OIBDA on top of strong earnings from last year. Warner Bros. ability to operate at industry-leading scale of production and industry-leading scale in marketing and distribution improves our economics and those of our participants. That enables us to attract the talent that makes the best films and the best television series. Last quarter I mentioned that our studios have produced eight of the top 15 highest-grossing films of all time. No other studio has produced more than two.

This year we have the #1 share at the box office, the #1 share in standard DVD sell-through, the #1 share in Blu-ray sell-through, and the #1 share in VOD. Keep in mind that The Dark Knight is only included in those box office numbers, not in the others, because it hasn't yet been distributed into the other windows yet.

These advantages are also evident in our TV series production business. Warner Bros. TV is the largest independent supplier of scripted shows to the major broadcast networks. Similar to the film studio, that scale in development, in production and distribution enables us to offer our participants the best economics, yielding exclusive development deals with such A-list writer/directors as Jerry Bruckheimer, JJ Abrams and Josh Schwartz, just to name a few, there are many more.

As a result, Warner's has the best track record in TV production. Our success rate converting pilots into series is by far the best in the industry. Just to point to a recent success, two Warner Bros. shows, The Mentalist and Fringe are the highest rated debuts so far this year in this broadcast season.

Rounding out our content businesses, let's talk about publishing. Time Inc. is clearly feeling the effects of the advertising market, with ad revenue down 8% this quarter. Nevertheless it also illustrates the importance of having brands at scale. People magazine is the best example. It is by far the biggest magazine in the celebrity category and is the most profitable title at Time Inc. More people read People each week than watched the season finale of American Idol. As competition has expanded in the celeb category, People has only increased its share. In the first half of this year, it increased circulation at a higher rate than any other celebrity-oriented magazine. Despite its size, in a difficult third quarter People's combined print and online advertising was modestly up.

This again shows that as media consumption fragments, both consumers and advertisers turn to the highest quality brands. With this strategic imperative in mind, we took a hard look at Time's organizational structure as we have done a few quarters ago in our film group. In general, we work continuously to reorganize the structure of our businesses to improve their efficiency and their competitive position. It will be and it has been an ongoing way of doing business for us.

Last week we announced the most comprehensive overhaul in Time Inc.'s history. We are organizing our U.S. magazines and our companion websites into three business units that have like readership and like advertisers. This will enable similar titles for the first time to share some editorial and sales infrastructure. It will also streamline management substantially and speed up our decision-making, integrating as well digital with traditional print operations.

Consistent with our overarching strategy, it will enable us to ensure that we are concentrating our resources on developing the biggest and most promising brands. Through these steps, we expect to reduce Time Inc.'s workforce by about 6% and to generate at least $150 million in annual run rate savings which we will be realizing starting next year.

Shifting then from content to AOL. The economy has also had an impact on AOL's advertising business. In particular, we have seen increasing weakness from certain advertising categories, specifically in mortgage finance and domestic autos. But there were bright spots. Our usage continues to grow rapidly, which is an important indicator of the underlying health of the business. Page views were up 14% in the quarter, fueled by more than 100% growth at our content channels, providing more evidence that our redesigns over the last two years and the new niche sites AOL has launched are succeeding.

AOL has also re-launched aol.com during the quarter, featuring access to outside email services and social networks. It's already having an impact. In September aol.com traffic, according to comScore, was up more than 30% and uniques were up 11%.

To sum up, while this is a period of considerable uncertainty, we believe our business will remain resilient thanks both to our diversified revenue streams and to our proven ability to make compelling content consistently, in good times or bad. We are reassured by the strength of our balance sheet, which is obviously crucial in the current environment. We continue to make progress toward the structural objectives that will move us to our goal of making Time Warner the leading pure content company in the years to come.

Thanks for listening, and now I'll turn the call over to John.

John K. Martin – Executive Vice President, Chief Financial Officer

Thanks, Jeff and good morning. Let me just mention that there are slides that are available on our website which we hope will help you follow along with my remarks. Getting right into it, the first slide highlights our consolidated third quarter results. We posted strong adjusted OIBDA growth up 9%, despite flat revenue. Our revenues this quarter reflect 5% growth in subscriptions and a small decline in advertising. The subscription revenues were impacted by a decline in AOL's Access business. If you look through that, subscription revenues were actually up 9%.

Networks, AOL and film all posted significant margin expansion and in fact, on a consolidated basis, we posted our highest margin since the year 2001. Adjusted OIBDA growth in our content businesses, which we're defining as Time Warner's results without AOL and cable was even faster, up 14% in the third quarter. Our adjusted earnings per diluted share jumped 29% compared to the year-ago quarter.

Lastly on this slide I highlight that we have generated through September $5 billion of free cash flow. This exceeds our most recent full year guidance and represents a very high adjusted OIBDA conversion rate of 51%.

The next slide provides a little bit more detail on our EPS figures. Diluted EPS was $0.30 which compares to $0.24 in the third quarter of last year. There were some items this quarter that affected comparability. They are highlighted here and in even greater detail in our earnings release. Adjusting for these, the quarter's EPS was $0.31, up 29%. That's due to the growth in adjusted OIBDA, lower interest expense and a smaller outstanding share count due to our buyback program.

Turning to free cash flow with the details highlighted on the next slide, in the quarter Time Warner delivered over $2 billion in free cash. It was our best quarter ever. It represented a very high 59% conversion rate. We've now generated at or above $1 billion in free cash flow in each of the past 10 of 11 quarters, so very predictable and very high levels.

Year-to-date, free cash of nearly $5 billion is $1 billion higher versus the first nine months of last year. So to put some context around this, it took us 12 months -- not nine -- to generate $5 billion last year so we're on track again to have a record year at the company. You may recall that our outlook at the being of this year was that we expected to generate free cash flow of only $3.6 billion.

A couple of things have contributed to the higher-than-expected levels:

First, we have had lower cash taxes than we expected due to the Economic Stimulus Act as well as some rigorous proactive tax planning.

Second, our interest expense was less due to lower rates and again, careful management of the balance sheet.

Third, we've had favorable working capital movements due to careful management of the balance sheet and partially tied to lower production costs due to the writer's strike.

I'll point out that year-to-date 82% of Time Warner's capital spending was at the cable segment, so if you look at capital outside of the cable segment, CapEx represents only about 2% to 3% of revenue which is an extremely low figure.

Turning to the next slide, we are updating our full year business outlook, and as outlined in our release this morning, our outlook now takes into account the roughly $100 million to $125 million of restructuring charges that we expect to take in the fourth quarter, primarily in our publishing segment as well as the possible risk of additional pressure on our advertising businesses, particularly at AOL and publishing, and it also includes the revised outlook at Time Warner Cable.

We focus on three measures in the outlook release. Adjusted OIBDA growth is now expect to be around 5%, as Jeff said, and that's off a base of $12.9 billion. Excluding the roughly $300 million in aggregate restructuring charges that we now expect to incur this year, we would have been at the low end of the original 7% to 9% range that we provided in February of this year.

With the caveat that our visibility is somewhat limited by the economy, I will also point out that our outlook implies that excluding restructuring charges, the fourth quarter should be another strong quarter of growth.

We've also increased our free cash flow guidance for the second time this year to around $5.5 billion, and I'll add that this outlook is net of an expected $700 million in pension contributions this year and that includes roughly $400 million to $500 million that we anticipate that we're going to make in the fourth quarter.

Diluted EPS now is expected to be in the range of $1.04 to $1.07. That compares to our prior outlook of $1.07 to $1.11. In addition to the restructuring charges, other items are impacting comparability such as gains and losses on asset sales, asset impairments and costs incurred in conjunction with the Time Warner Cable separation. That had the impact of reducing our EPS outlook by $0.04.

Let me move on and cover the key highlights of the divisions, and let me start with the networks division where we clearly had a very terrific third quarter. Adjusted OIBDA rose 21% to a little more than $1 billion. It was a record quarter and it was boosted by strong advertising and subscription revenue growth, as well as lower programming costs. Essentially every dollar of revenue growth fell to the adjusted OIBDA line in the quarter.

Turner's ad revenues climbed 9%, and that was driven by growth in both news and entertainment and this is mainly due to higher CPMs and audience growth domestically, as well as an increase in the number of units sold internationally.

Looking to the fourth quarter, we remain cautiously optimistic that Turner will once again continue to post solid advertising growth. We can't yet fully gauge the impact of recent events in the financial markets on the broader economy, and Turner would not likely be immune to any widespread protracted ad slowdown. In addition, we expect that certain advertiser categories such as automotive and financial services will be challenged.

But having said all of that, the benefits of this year's strong upfront are kicking in this quarter, cancellation rates are running at normal levels and while the current scatter market is moving cautiously, it still is running modestly ahead of upfront pricing.

Moving over to subscription revenues, they were up 10% in the quarter and that reflected solid growth in affiliate fees at both Turner and HBO, as well as subscriber growth at Turner and international expansion. This was Turner's sixth consecutive quarter of double-digit subscription revenue growth.

Turning to film, Warner Bros. posted another strong quarter. OIBDA was up 6%, as the phenomenal performance of The Dark Knight as well as lower film write-offs offset very comparisons in the theatrical, home video and off-network syndication.

Please recall that last year's third quarter included the theatrical release of the fifth Harry Potter movie and the video release of 300; those were both very successful. It also included the initial availabilities of Two-and-a-half Men, Cold Case and The George Lopez Show, and we really had nothing comparable this year.

In addition, despite $17 million of restructuring charges associated with New Line incurred in the quarter, margins climbed about 200 basis points over last year to their highest level in ten quarters, and Warner Bros. margins were higher even than the entire film line indicates.

As you may know, we've made the decision to move Harry Potter and the Half Blood Prince from the fourth quarter of this year to the summer of '09 to take advantage of the light release schedule created by the writers' strike and that decision will move revenue and earnings out of the fourth quarter because Harry Potter has traditionally actually been profitable for us in the initial theatrical window. Nevertheless, we still expect strong results in the fourth quarter from the film division as the home video releases of The Dark Knight and Get Smart, accompanied with lower P&A expense, should offset some tough home video comparisons. Just as a reminder, last year in the fourth quarter we had the home video releases of Harry Potter and the Order of the Phoenix, Rush Hour 3 and Hairspray.

As we focus on this year, we have some pretty big and promising theatrical releases coming up in the fourth quarter such as Yes Men starring Jim Carrey, Four Christmases staring Vince Vaughn and Reese Witherspoon and the international distribution of The Curious Case of Benjamin Button, which is starring Brad Pitt.

Turning next to cable, as you know Time Warner Cable held a call earlier this morning to discuss its third quarter results. OIBDA in the cable division was up 9%, and that was despite softness in its high margin advertising business. The company also continues to generate very strong free cash flow levels that are up 64% year-to-date. As we outline on the next slide, subscriber metrics were also solid across the board. Time Warner Cable added 522,000 RGUs which was essentially flat with the number that it added a year ago and it did mark the fourteenth consecutive quarter of RGU growth exceeding 500,000.

High-speed data net additions remained strong, providing further evidence that Time Warner Cable is taking broadband share from its telco competitors. As Time Warner Cable's management outlined this morning, the company has modestly reduced its outlook estimates for revenue and adjusted OIBDA growth and it reaffirmed its outlook for free cash flow and EPS growth. Just to be clear, that revision is fully factored into Time Warner's updated outlook release that we published this morning.

So let me move on to AOL. AOL's results in the quarter were mixed. Starting with the audience business, as Jeff mentioned, we saw once again very strong usage growth at AOL, particularly in our content verticals. Total advertising revenues were down however, 6%, to a little more than $500 million. Advertising, just as a reminder, consists of display, paid search and third-party network revenues, each of which accounts for about one-third of the total.

Just to briefly walk through the components, display advertising on the AOL Network declined down 15% to $181 million. Both page views and network impressions were up; they were up substantially and pricing for guaranteed inventory was somewhat higher. However on an overall basis -- and this is similar to what we have seen in the past quarters -- the revenue decline reflected a mix shift from higher priced guaranteed inventory to lower priced , non-guaranteed network inventory. Advertiser demand in several categories was particularly soft, including personal finance and autos.

Moving over to paid search, revenue growth there was 12% and the number was about $182 million. The growth was due largely to increases in revenue per search query. In our third party network business, revenues declined 12% versus the year-ago quarter to $144 million.

Please keep in mind that the decline related to a large customer that we had last year, Apollo, was substantially larger than the contribution from any acquisitions that we made during the quarter, so that's a drag on the results. The acquisitions contributed $29 million to the year-over-year growth, and Apollo was down $55 million. So if you look through that, third party network advertising revenues were actually up 7%.

Now the 7% growth is lower than what we've seen in recent quarters and that's due to both the decline in branded advertising as well as lower consumer response to our performance advertising.

Just mentioning for a moment the access business, AOL subscribers declined by 634,000 and AOL ended the quarter with about 7.5 million domestic subscribers.

Looking at profits for a moment, AOL's adjusted OIBDA in the quarter was almost $400 million, that's down 7% year over year. That was weighed down by lower revenue, principally in the access business, as well as higher traffic acquisition costs (TAC), and that was partly offset by lower personnel and overhead costs. Total expenses at AOL were actually down 23% year over year and that means that margins of 39% were actually the highest level that they have seen in years.

Looking at the fourth quarter, we expect that both display and third-party network advertising is probably going to remain soft. Keep in mind, similar to the third quarter, that Apollo should remain a drag. Nevertheless, we expect adjusted OIBDA to be higher here year over year in the fourth quarter and that's due to continued tight cost control and management as well as, just a reminder, there were some material restructuring charges in last year's fourth quarter at AOL.

Turning to publishing, revenues declined 7% in the quarter due to an 8% decline in advertising revenues and relatively flat subscription revenue. We continue to see softness in print advertising demand, with nine of our top ten categories down year over year in the third quarter, most notably media and movies, food, retail and toiletries and cosmetics. Readership remains strong, however, and Time Inc. continues to outpace the industry according to the most recent MRI data.

Adjusted OIBDA declined 19% in the quarter and that was due primarily to the decline of the high margin advertising revenue, and that was partly offset by lower expenses. As Jeff mentioned, Time Inc. announced a comprehensive reorganization plan and we expect that should contribute at least a $150 million lift to profit beginning next year once it's complete.

Looking forward, right now in the fourth quarter print advertising is actually pacing below where we saw the third quarter end up and in addition, I have mentioned the fourth quarter you should expect that we are going to take a restructuring charge at this segment.

Let me just such on corporate spending for a second; that's highlighted on the next slide. As you know, we have been committed to reducing our corporate costs. During the third quarter corporate expenses declined 22% year over year. That marks the lowest expense quarter since the year 2001 at this company. We continue to track nicely ahead of our target of reducing annual corporate expenses by $50 million this year; and even beyond this goal, we expect to keep a very tight reign on corporate costs.

Let me move on and just provide a little bit more perspective on the health of our balance sheet. The bottom line is that in large part due to the capital strategies the company has employed now for some time, we have ample liquidity and we have substantial financial flexibility. Let's start with the slide that highlights our net debt.

As you can see, we ended the quarter with just over $33.5 billion in net debt. That's down about $2 billion year-to-date, as free cash flow has been partially offset by investments, acquisitions and dividends. I would also point out that the net debt figure is higher by the $820 million that we held and invested in the reserve primary fund at September 30th, which many of you probably know, is the fund that broke the buck. Our monies there consisted of about $300 million of Time Warner and about $500 million of Time Warner Cable. Roughly half of these amounts have since been recovered, we received them last week, and we believe and fully expect the remaining funds to be fully recovered within the next 12 months.

So we as a company have significant liquidity, that's on the next slide. At September 30 on a consolidated basis we had $18 billion of cash and availability with over $5 billion at Time Warner if you exclude Time Warner Cable, and almost $13 billion at Time Warner Cable. Please note that this also doesn't include the cash held at the reserve fund that I just mentioned.

Understandably, lately we have been asked whether Time Warner Cable has the ability to continue to pay its nearly $11 billion special dividend. As Jeff said, the answer is yes. That was covered on their call this morning as well. It's essentially fully financed today. They've got nearly $13 billion in cash and committed capacity and that is including its revolver and bridge facility. Like all our facilities, that commitment is spread across a diverse array of banks globally, all of which are very important to the economies of their primary countries of operation. As Jeff mentioned, the separation is on track to close early next year.

I just wanted to add to that that we do intend to seek shareholder approval for a reverse stock split which we are conducting in connection with this transaction. As you know, if we choose a full or a partial spin-off as the distribution method, that should reduce the absolute dollar of our stock price upon completion of the transaction. We think a reverse stock split would be prudent and it would improve the liquidity and attractiveness of the Time Warner stock.

Wrapping up with this last slide, we also have substantial financial flexibility. As shown here – and I think we have shown this slide in the past -- on a consolidated basis at the end of the quarter Time Warner had debt leverage of around 2.6:1, pro forma for the cable separation we estimate that Time Warner would have leverage of about 1.6:1. You can see here Time Warner Cable pro forma at September 30 would have leverage of about 3.9:1.

In addition, other than to some very small capital leases, our only scheduled debt maturity over the next two years is $2 billion of floating rate notes that are due in November of next year, and there are no debt maturities in 2010. The average maturity of our debt is nearly 11 years so with ample liquidity, substantial flexibility we think that we're in an attractive position in this current environment.

With that, let me turn the call back over to Doug and we'd be happy to start the Q&A portion of the call.

Douglas Shapiro – Vice President, Investor Relations

Thank you. Shirley, can you please start the Q&A? Please try to limit yourself to one question so we can accommodate as many people as possible. Thanks.

Q&A

Operator

Our first question comes from Spencer Wang, Credit Suisse.

Spencer Wang, Credit Suisse

One question for both Jeff and John. You have generated significant free cash flow and the balance sheet is in good shape. You'll be receiving the one-time dividend in early '09. Can you just talk a little bit about how you'll be deploying your excess financial capacity? If you could speak to how you're thinking about reinvesting in the core businesses versus buyback versus acquisitions versus perhaps raising the dividend? Thank you.

John K. Martin – Executive Vice President, Chief Financial Officer

I'll take it. The approach that we're setting out is similar to what we've said before. First we've got to focus on actually achieving the separation, getting that done. Once we get the cash, we take very seriously how we deploy that capital to make sure that we are earning attractive returns.

I would first say that we're closely monitoring the financial crisis impact on both access to, as well as the cost of, capital. Over time our leverage decision is going to be influenced by both of these factors. Frankly, as we sit here today, we feel extremely fortunate that we have such a strong balance sheet and we have such flexibility at this point. We do view that as being a real strategic asset in this environment.

Beyond what I just said, I think it's sticking to the priorities that we've laid out before which are that we're going to look to fully invest in our businesses. We have been doing that so I don't anticipate that is going to take up any of our additional capacity.

Beyond that, we'd be looking to do a few things: one, potentially doing acquisitions that we believe would add and create value once they're put through a disciplined filter or process to make sure that they actually are additive. There's nothing that we see as a "must have" and we don't see any strategic holes in our portfolio right now.

Having said that, then beyond that we would be looking at returning capital in the form of dividends and share buybacks. Over time it will probably be a balance of all of the above.

Operator

Your next question comes from Michael Nathanson, Sanford Bernstein.

Michael Nathanson, Sanford Bernstein

I have a question about AOL cost growth this quarter. This quarter it was actually a sharp drop in the run rate of costs at AOL, without a big restructuring charge. Can you tell me what happened in the quarter? Is this current cost base a good run rate going forward at AOL?

Jeffrey L. Bewkes – President and Chief Executive Officer

Some of the cost reduction at AOL tracks access declines. AOL has been continuously putting through restructuring; not restructuring in the formal accounting sense, but reorganizing and reducing costs. I think that because of the mix of those two businesses, the cost levels at AOL can continue, in some key areas, to decline.

But John, if you have any particular specificity that would probably help.

John K. Martin – Executive Vice President, Chief Financial Officer

It's not any one thing, Michael, it is any number of things. It's the variable costs continuing to decline in the access business, as Jeff mentioned, but there are clearly the benefits due to active management. We saw a pretty meaningful decline in cost of service which is lower personnel-related and overhead costs. There were lower costs in their member services group, there were lower costs in product development.

There were some benefits found year over year from prior-year decisions to close some call centers and there was also lower marketing and just general G&A personnel costs. It was all of the above and it's been anticipated, which is one of the reasons why we expected the year-over-year OIBDA comparisons to improve in the back half of this year at AOL as we continue to try to actively manage to make sure that the costs are measuring up appropriately against the revenue opportunities.

Michael Nathanson, Sanford Bernstein

John, just on an accounting basis, are these actions tied to that charge in the fourth quarter?

John K. Martin – Executive Vice President, Chief Financial Officer

No.

Operator

Your next question comes from Jessica Reif Cohen, Merrill Lynch.

Jessica Reif Cohen, Merrill Lynch

Could you talk about your vision for the next three years, what the asset mix will look like? Of course there has been lots of speculation on AOL, but if you make acquisitions and John said there would be a balance, is your desire for cable networks specifically? Do you think you'll add to content? Can you talk about international?

Jeffrey L. Bewkes – President and Chief Executive Officer

Thanks, Jessica. We can't predict or speculate on what exactly would happen in acquisitions. As John said and we have been saying it consistently, in the media business we all know there's been a lot of value destroyed through poor acquisitions and poor capital allocations. Any acquisition we do has to meet some pretty stringent return requirements.

Having said that, in theory and in practice we'll look at anything that would improve our operating position and scale. In the content businesses as we've described, if you tick them off basically it would be cable networks, perhaps film and TV production -- particularly international for anything we can get to good scale on because the secular growth there is good -- small games publishers, some of which we have been doing. So it's in those areas, and provided things improve our position and returns, we'll consider them. We have, as we've said today, the resources which some others don't to pursue whatever opportunities come up.

Operator

Our next question comes from Doug Mitchelson, Deutsche Bank.

Doug Mitchelson, Deutsche Bank

I want to follow up on Jessica's question. There's been a lot of speculation on strategic action with AOL, perhaps something along the lines of a merger to a major competitor. I Is there, as of today, any specific, quality interest from peers in merging with AOL? If that interest exists, what are the hurdles right now, from your perspective, to entering into a transaction?

Jeffrey L. Bewkes – President and Chief Executive Officer

As we've talked about before with regard to any division, but AOL as well, we can't and don't speculate on any potential deals. As we've said when this question has come up about AOL, we are believers in the value of scale at the operating level for all of our businesses; that's what we've talked about today. The same is true with AOL. We do think that we have adequate scale domestically in AOL, but we have said that if there was a strategic opportunity to put AOL in a stronger position we would look at it closely.

You know all the usual suspects and things that go on including even some breaking news today in some of our competitors. So the opportunities or possibilities remain open for this whole business to restructure itself and to build adequate scale to compete with whoever is in the lead position.

I think we've all seen the interest at both -- just to mention a few companies -- Microsoft, Yahoo! and even Google to bulk up and increase scale. We're no different in that regard. So beyond that, we can't really say what is possible or what is underway.

Operator

Your next question comes from Ben Swinburne, Morgan Stanley.

Ben Swinburne, Morgan Stanley

Jeff, could you talk about the film segment looking out from here? A couple of points: your financing relationships and JV partners now that the credit markets have changed a lot? And now that you have got the New Line, Warner Bros. consolidation behind you for a bit of time, any change in your view of potential cost savings? Is there more to take out from here, the right slate size and maybe a little bit more specificity on how fine tuning the slate size and reducing the number of films can drive profitability from here, other than just making better movies? Thanks.

Jeffrey L. Bewkes – President and Chief Executive Officer

The answer is we're only going to make the hit movies from now on. You really have two questions. One is financing, the other is the optimal focus size both in film and TV. We have already said on that second one that we have moved Warner's on its own and then New Line restructuring, take our film slate and focus it. We have moved from what was combined closer to the 40 to 50 film release number between New Line and Warner before, all those have been consolidated and we're now more in the 25 film slate release category.

With film slates being more focused and with solid access to capital, which I will talk about now, we're not at all concerned about our ability to finance films going forward. Essentially, Warner's has done a great job in lining up and producing results for finance partners. We always retain worldwide distribution rights but our existing finance arrangements cover multiple films to be produced over a multi-year timeframe even now, and given Warner's advanced position in film and TV but in film is what we do external financing on and the mix that we have between wholly-owned films, joint ventures and distribution deals, we don't see any issue or change in how we finance films. So it's a fairly advantageous position that we are in on the film finance side.

Operator

Our next question comes from Tuna Amobi, Standard & Poor's Equity Group.

Tuna Amobi, Standard & Poor's Equity Group

On Platform-A, I am trying to understand better the trends there. I know John talked about Apollo. When do you expect that comparison to lap and you can get back to a normalized growth level there?

Also on that platform, can you talk about Bid Place and just put that in context? Is this some grand vision of how you see advertiser interest, advertisers moving online? What kind of target advertisers and the kind of interest that you're generating from that initiative? Also, you talked about the launch of that. Is it going to be a global launch or just the U.S. and then roll out internationally? Thank you.

John K. Martin – Executive Vice President, Chief Financial Officer

Right. Let me start and Jeff, obviously it's your prerogative, you can jump in whenever you want. But on the mechanics of Apollo, the most significant year-over-year drag that it's going to have in the growth rates is really going to be in the fourth quarter. We did have some Apollo money in the first quarter of this year but the numbers trail off pretty materially.

Going ahead of that, we fully expect over time and obviously the economy provides a little bit of a haze in terms of predicting exactly when, but over time we're going to be able to grow this business in a very attractive way. Given secular usage trends, we're very optimistic about the prospects of both online and mobile display advertising and in fact, over time, we expect that branded advertising dollars currently spent on other mediums are actually going to, in part, shift over into online and to display.

At AOL on the O&O side, we've experienced strong demand for our branded vertical channels but softness in more currently bulk types of inventory, such as email. Given the economic environment, this trend could persist for a while despite the fact that we're seeing some improving sales execution at Platform-A. We have got more focused vertical sales and better inventory management.

But over time, our confidence is really underscored by the fact that Platform-A is providing improved targeting that's going to increase the value of all types of display inventory, improved reporting and analytical capabilities which we think can provide our publishing and advertising partners with greater insight into how Platform-A can deliver demonstrable yield.

Lastly, Platform-A does have a unique ability to tap into multiple pockets of advertiser demand by having the one and only today truly integrated end-to-end advertising platform.

Jeffrey L. Bewkes – President and Chief Executive Officer

Tuna, it sounds like you're asking about Bid Place which is launching early next year. The goal of that is to open up the display business that we have to the long tail advertisers which is what Google has basically done in search. For the same reason that John just mentioned on having an integrated platform end to end, that will augment our capabilities and take advantage of Platform-A's lead 90% reach in search.

I would just point out putting that into a bigger point, that really in terms of our display position, usage keeps going up so inventory keeps going up. As these abilities to monetize improve, that is going to bring long-term growth starting now and [inaudible] to ad monetization practices perform.

Operator

Our next question comes from Michael Morris, UBS.

Michael Morris, UBS

On the networks -- advertising in particular, which was strong again this quarter -- can you talk to us a little bit about some unique items that could cause difficult comps? One, benefit from the writer's strike that you may have seen in the fourth quarter of last year and first quarter this year; and secondly, any rating strength at CNN during the election? How do you look at those going forward in terms of year-over-year comparisons? Also, can you share with us how much of your inventory at Turner was sold in the upfront this year? Thanks.

Jeffrey L. Bewkes – President and Chief Executive Officer

I'll start with that. I'm not worried about any comps from now out. I think I understood your question to be, are we doing so well in either the third quarter now or the fourth quarter of this year that we're going to have high comps to deal with next year? If that's the question, it's a good problem to have. I'm not really worried about it at this point.

It is true CNN is having extraordinary performance with fairly significant increases in ad sales in this last third and fourth quarter around the election. We don't necessarily say that that can't continue, given the vibrancy of stories that are out in the world, a new administration; that's going to be quite interesting and different in terms of the change. The world financial situation, the international, including the two wars that are going to have to be managed going forward. So we would not say if the premise of the question is that there would be such high comps from this year that it necessarily causes difficulty in continuing to grow it next year.

In the bigger picture of Turner ads, and I said it mostly in the remarks, if you really boil it down, what you have go to the entertainment networks -- TBS, TNT -- big reach, the only company with two big, broad reach cable networks so that as audiences come off of networks, big broadcast networks, they come over to Turner. Very strong demos, and particularly good youth trending demos at TBS, TNT. Increasingly unique, high quality programming, not just the proven hit series we get from network television but also the originals and the sports packages that Turner has.

If you put all those advantages together and you look then at the relative inexpensive pricing that TBS, TNT offer against the networks, we think we've got buoyancy built in that outweighs any kind of quarter-to-quarter issues that you have in your question.

In terms of the political advertising at CNN, election spending was definitely up but we don't generate it -- you have got to keep this in mind -- that much extra profit from high ad growth at CNN in news on account of the election period, because the news gathering costs are up. So I don't see it as something that would cause essentially a high hurdle to have to be exceeded next year.

I think that we're very optimistic about being able to continue this progress on the network ad side.

John K. Martin – Executive Vice President, Chief Financial Officer

More from an accounting perspective, I do want to at least mention that people shouldn't expect that programming costs are going to consistently be down year over year with what we saw in the third quarter. There is a seasonality with respect particularly to sports programming, and some of you may remember last quarter actually our programming costs were up because we had higher than normal amortization of the NBA costs to coincide with the playoffs. So sports costs in Q3 were down considerably sequentially, and we also had lower original costs in the third quarter. That's just more to timing than anything else. So fourth quarter you should see cost growth go back to something that's more normalized.

But again, I would just remind you as you look out in the longer term and the way that the networks are being managed, we fully expect that there's going to be an upward bias in margins in our networks as we continue to manage the investment against the revenue opportunity.

Operator

Your next question comes from Anthony DiClemente, Barclays Capital.

Anthony DiClemente, Barclays Capital

What was the number of worldwide DVD units sold in the quarter? If you also have the worldwide DVD sales in the quarter. The reason for the question, of course, is it's really difficult for us to analyze whether the recession itself is impacting home video in a cyclical manner because you have so much lumpiness given the timing of releases; some sometimes you have hits, sometimes you don't.

I was wondering if, given your scale in the business, as you mentioned, could you try to comment? And this is for John and Jeff please, if you could try to comment on how the recession affects home video whether it be pricing or volume, a shift to rental behavior perhaps, a higher take-up on day-and-date VOD or VOD in general, or any other trends you might be seeing? Thanks a lot for taking the question.

Jeffrey L. Bewkes – President and Chief Executive Officer

Thank you, Anthony. Let me start and then John has a point or two... more than a point or two. We've seen reduced footprint traffic at retail where DVDs are. We're watching closely to see what kind of impact that may have on home video sales. John will give you a couple of numbers on it.

Essentially the industry is down a little bit, but we're up; so far, so good. We have been outperforming the industry lately. U.S. consumer spending on home video was $13.5 billion, it was down about 2.5% year-to-date versus the prior year. Consumer spending at Warner Home Video was $2.7 billion, an increase of 7%.

So as I mentioned in the opening remarks, Warner was #1 year-to-date with a 20.5 share of DVD sales in the U.S., up from last year. Generally -- and this goes beyond DVD sales to movie tickets -- those kinds of home entertainment options, movie tickets particularly, seem to be fairly resistant to economic downturns. It doesn't necessarily mean they are totally resistant, but relatively so. So that's the general view.

Do you want to add anything?

John K. Martin – Executive Vice President, Chief Financial Officer

No, I think you hit the biggest numbers. What we don't know in the fourth quarter yet is exactly what, if any, impact there may be on just DVD catalog in particular, because we do believe that the A titles are still going to sell very, very well and we fully anticipate that we're going to ship a lot of units of titles such as The Dark Knight.

The only other thing that's sort of going out that is going to impact next year too is you're beginning to see a real ramp in electronic sell-through revenues where this year, year-to-date, it's approaching almost $300 million and more than double year-over-year so that's helping to buoy any potential downdraft at DVD.

As Jeff said, we've got a real leadership position here and we're cautiously optimistic about the economy but we're very confident in our competitive position.

Jeffrey L. Bewkes – President and Chief Executive Officer

I don't want us to be too positive about it, the real question I think you're asking is will there be a significant -- let's not go all the way to severe -- effect of this economic situation on DVDs? Nobody really knows that yet. Christmas is going to be very important. To the extent people buy fewer players and they don't buy quite as many catalog titles, as Jonathan said, at Christmas that could cause some reduction.

There is one offsetting general point which is that it may be that players are coming out under $200 which could hold up the sales a little bit. I think both things are going on. All of us and your question says it, are looking for what kind of negative impact will there be. We think there will be some, we're not sure how much and we think we'll do better than others, whatever it is.

Operator

Our final question comes from Imran Khan, JP Morgan.

Imran Khan, JP Morgan

A quick question on the AOL front. You have clearly improved the margins significantly by effectively managing costs of that business. As you look at the business, what other areas of cost savings do you see from the business if the advertising marketing remains soft? Thank you.

John K. Martin – Executive Vice President, Chief Financial Officer

At this point, we're going to continue and the management team there has been and is going to continue to manage the cost base, as I said, against the revenue opportunity. If you look at the access business where the rate of decline in revenues is actually moderating, access already has very high margins and is a variable cost component, so the variable costs will come down, marketing will continue to come down, but the rate of change in cost there is probably going to become less significant.

On the audience side of the business, it's going to be based on active management decisions, nothing that I'm prepared to go into a lot of detail here, as we think about how to size the business and grow the business accordingly.

Jeffrey L. Bewkes – President and Chief Executive Officer

We do think that there are some areas where we can continue to cut costs and improve margins in AOL going forward, so you'll be seeing that over time.

Douglas Shapiro – Vice President, Investor Relations

Thanks, everyone for calling in. We're also available here if you have further questions. Thanks a lot.

Corporate Participants

Douglas Shapiro – Vice President, Investor Relations
Jeffrey L. Bewkes – President and Chief Executive Officer
John K. Martin – Executive Vice President, Chief Financial Officer

Analysts

Spencer Wang, Credit Suisse
Michael Nathanson, Sanford Bernstein
Jessica Reif Cohen, Merrill Lynch
Doug Mitchelson, Deutsche Bank
Ben Swinburne, Morgan Stanley
Tuna Amobi, Standard & Poor's Equity Group
Michael Morris, UBS
Anthony DiClemente, Barclays Capital
Imran Khan, JP Morgan