Key questions and answers from the third quarter earnings call conducted by Time Warner Inc. (TWX: chart) on November 5, 2008.

Spencer Wang (Credit Suisse Banc): Can you just talk a little bit about how you’ll be deploying your excess financial capacity?

John K. Martin, Jr.: First we have got to focus on actually achieving the separation and getting that done, and then once we get the cash, we take very seriously how we deploy that capital to make sure that we are earning attractive returns.

We are closely monitoring the financial crisis impact on both access to, as well as the cost of capital. And over time, our leverage decision is going to be influenced by both of these factors, and 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.

Michael Nathanson (Sanford C Bernstein & Company, Inc.): Is this current cost base a good run rate going forward at AOL?

Doug Shapiro: Some of the cost reduction AOL tracks access as it declines, and AOL has been continuously putting through not restructuring in the formal accounting sense, but reorganizing and reducing costs.

John K. Martin, Jr.: There is clearly the benefits due to active management. We saw a pretty meaningful decline in costs of service which is lower personnel related and overhead costs.

There were lower costs in the member services group, there were lower costs in product development, there was 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 and personnel costs, and 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.

Doug Mitchelson (Deutsche Bank): Is there as of today, any specific quality interest from peers in merging with AOL?

John K. Martin, Jr.:We don’t speculate on any potential deal. 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.

Benjamin Swinburne (Morgan Stanley): Any change in your view of potential cost savings?

Jeffrey L. Bewkes: If you take our film slate and focus it and we have moved from what was combines in the 40 to 50 film release number between New Line and Warner before if you include Picturehouse and WIP, all those have been consolidated and we are now more in the 25 film slate release category.

With film slates being more focused and with solid access to capital, we are not at all concerned about our ability to finance films going forward. Essentially, Warners has done a great job in the lining up and producing results for finance partners.

We always retain world wide distribution rights but our existing finance arrangements cover multiple films to be produced over a multi-year time frame even now and given Warners’ advantage position in film and TV.

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.

Anthony DiClemente (Barclays Capital): What were the number of world wide DVD units sold in the quarter?

Jeffrey L. Bewkes: Essentially the industry is down a little bit but we are up. The U.S. consumer spending on home video is $13.5 billion and it was down about 2.5% year to date versus the prior year and consumer spending at Warner Home Video Software was $2.7 billion an increased 7%.

Generally, and this goes beyond DVD sales to movie tickets, those kinds of home entertainment options, movie tickets particularly, seems to be fairly resistant to economic downturns. Doesn’t necessarily mean there totally resistant but relatively so and so that would be the general view.

Imran Khan (JP Morgan): On AOL, what other areas of cost saving do you see from the business if the advertising market remains soft?

Jeffrey L. Bewkes: If you look at the access business where the rate of the client and 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 down but the rate of changing cost there is probably going to become less significant.