Dragged down by advertising and subscription losses at AOL and Time Inc., Time Warner (NYSE: TWX) saw Q2 operating income two percent down year-on-year to $1.2 billion, on nine percent worse revenue of $6.8 billion…

—AOL: Q2 revenue fell 24 percent year-on-year to $804 million, after the exodus of 2.3 million subscribers in a year knocked subscription revenue back by 27 percent (or $135 million) and advertising income fell 21 percent (or $111 million).

The ad falls came from lower display and paid search advertising on sites from the former Mediaglow, what AOL is now calling “AOL Media”, but also lower sales of adds on third-party sites (ie. the former “Platform-A”). In subscriptions, AOL lost 510,000 subscribers in the last three months alone; it’s abandoned its ISP business just about everywhere, but still has 5.8 million customers in the US. AOL also took a $15 million charge this quarter against its recent restructuring effort.  AOL operating income is down 28 percent to $165 million.

Cutting AOL adrift from TW’s balance sheet continues to be a priority. TW CEO Jeff Bewkes, in the release, said the spin-off is “on track” for “around the end of the year”: “Separating AOL will benefit both companies – enabling Time Warner to concentrate fully on our core content businesses and improving AOL’s operational and strategic flexibility.” AOL has already spent $20 million on lawyers’ and professional fees relating to the spin-off plans.

—Publishing: Time Inc.: Ad revenue 26 percent down from last year, subscriptions revenue down 18 percent - both blamed partly on a foreign exchange rate hit from its UK wing IPC but also on falling sales. Revenue down 22 percent to $915 million, operating income down more, by 53 percent to $102 million, thanks also to higher pension costs.

—Turner Broadcasting & HBO: Ad income dipped three percent ($30 million), mostly on lower overseas sales for Turner, but subscription income grew eight percent (or $144 million), helping overall revenue up five percent to $3 billion, operating income up 17 percent to $875 million.

—Filmed entertainment: Revenue down nine percent to $231 million because fewer shows were available to ship as DVDs, because of a come-down from last year’s strong Lego: Indiana Jones sales and thanks to a hit from foreign exchanges. But operating income up 52 percent to $143 million after the lower availability of decent DVDs to ship meant lower marketing costs.

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