Time Warner: A Message from President and CEO Jeffrey L. Bewkes

A Message from President and CEO Jeffrey L. Bewkes

To Our Shareholders,

I welcome the opportunity in this letter -- my first to you as Time Warner’s CEO -- to set out where the company is going and how we’ll take it there.

Time Warner is built on strong businesses, but we compete in industries that are undergoing fundamental transformations as new technologies and consumer expectations continue to evolve.

Against this backdrop of accelerating change, we’re intensifying the company’s focus on growth by aggressively capitalizing on our most promising opportunities. Everything we’re doing reinforces our commitment to increasing shareholder returns in a sustainable, long-term way.

To achieve this goal, we’re working to:

Operate our businesses for better performances and higher returns than our competitors;

Ensure that we have the right businesses and the right structure; and

Actively manage our balance sheet and deploy capital to the right places -- including, when appropriate, directly to our shareholders.

Growing our businesses is critical to Time Warner’s long-term success. Not only do we need to sharpen our current operations, but we must also take full advantage of emerging digital technologies. We’ve recently made great progress across our divisions -- including AOL’s Platform-A advertising business; CNN’s global leadership in online and wireless news; Time Warner Cable’s groundbreaking Enhanced TV features such as Start Over; Time Inc.’s successful SI.com, CNNMoney.com and People.com Web sites; and HBO On Broadband.

Going forward, we’ll be even more revolutionary than evolutionary in pursuing new opportunities. At our studios, networks and publishing companies, digital content and distribution are extending our brands globally. These businesses are now stepping up their efforts to create new ways for consumers to enjoy compelling content how, when and where they want it. For instance, we believe that advertising-supported networks would benefit from making their programming lineup available on demand to TV viewers. And, as an example to the industry, we’re putting an increasing amount of our own network programming on demand.

All leaders in their categories, Warner Bros. Entertainment, Time Inc., HBO and Turner Broadcasting continue to build on their foundation of award-winning entertainment and news. At the 2007 Primetime Emmy® Awards, I’m proud to say, HBO received 21, the most of any network for the fifth consecutive year, and Time Warner companies won six 2008 Academy Awards®.

As we generate revenue growth, we’ll also manage our expenses to expand our businesses’ margins and profitability. Recently, I announced a plan to cut over 15% of our corporate costs, resulting in an annual savings of more than $50 million. Making cost management a continuing commitment, we’re extending this discipline across all of our operations. Our decision to combine Time Warner’s film studios, for example, will enable New Line Cinema to achieve significant savings in overhead by taking full advantage of Warner Bros.’ infrastructure.

Aiming at putting the right businesses in the right structure, we launched two initiatives earlier this year.

First, we began working to separate AOL’s declining access operations from its higher-growth audience, communications, community and advertising platform businesses. We’re confident that AOL is pursuing the right strategy, and success is now about execution. Key to AOL’s business model is strengthening Platform-A, in which we invested almost $900 million in 2007 for such acquisitions as TACODA and Quigo. Just as vital is growing usage on AOL properties, something that our planned acquisition of Bebo, a leading global social media network, should help us do. We expect that separating AOL’s access from its other businesses will significantly enhance operational focus and multiply strategic options.

Second, we started a formal process to review our ownership of Time Warner Cable. We have long believed that cable is a great business, offering such advanced services as digital video, broadband Internet access and Digital Phone to both residential and commercial customers. But, as the industry evolves, Time Warner Cable has increasingly different capital and financial needs than our other businesses. Currently, Time Warner owns about 84% of the cable company’s common stock while public stockholders hold the remaining 16%. The formal review process, which involves the boards of both Time Warner and Time Warner Cable, will determine what changes, if any, we should make to our ownership of the cable company.

In these and any future initiatives, you can rest assured we’ll approach changes methodically and in a way that makes sense for our shareholders.

Finally, we’ll continue to manage our balance sheet effectively -- with an eye to maintaining a healthy leverage ratio while retaining our investment-grade credit rating. In addition, we’ll keep evaluating the investment opportunities across our businesses and balance them against the benefits of returning capital directly to our shareholders.

In closing, let me underscore the confidence that I have in our future. Time Warner is a great company of superb brands and talented people. Fast-changing industries are challenging, but they also provide our greatest opportunities to innovate and stay ahead of the competitive curve. We’re moving quickly to make the most of them. There’s a lot of work ahead of us. And, with my dedicated colleagues, I have no doubt we’ll succeed. Thank you for your support of Time Warner.