A “surprise” loss for 2008 reflects a company that can’t stanch its gaping wounds.

Still, by spinning off the cable unit, the thinking went, Bewkes would fashion Time Warner into a pure-play content provider comprised of its Time Inc. publishing arm, AOL, and its movie and television studios. The streamlined revenue model would be a mix of subscription and advertising that Wall Street could understand. But going the content route still didn't address the fact that the media business remains deeply troubled as digital forces continue to erode consumers' willingness to pay for magazines, movies, and generally all forms of entertainment. It's becoming increasingly harder and harder to make a business out of producing and selling content. And yet that's the business Time Warner has now doubled down on.

Take Time Inc., the publisher of Time, Sports Illustrated, Fortune, and People, among other titles. The division continues to be battered by the decline of print advertising and the unimpeded migration of readers to the Web. The cratering of the U.S. auto industry has been particularly painful to Time Inc., as automakers have slashed ad spending in unison. But despite the recent economic meltdown, these forces were set in motion years ago. Time Inc. CEO Ann Moore was a late convert to the Web. In 2005, the company finally adopted a strategy to focus on its core magazine brands and build robust Web sites around them. But with revenue of $5 billion, it's unclear if Time Inc. could ever scale a Web business to the point where it could sustain a well-staffed enterprise of writers and editors producing professional content.

And how can anyone be surprised that AOL is worth less than the company was saying? Google's investment in it implies a $20 billion valuation, which is obviously absurd. But, more importantly, AOL has been an obvious, stinking albatross for years. They even took AOL out of the company's name a couple of years back. Why were Parsons and company so reluctant to pull the trigger on this?

There have been some bright spots in the past year. Warner Bros.' The Dark Knight earned more than $500 million at the domestic box office, and the epic presidential election pushed CNN ratings to new records. But amid the deepest economic recession in 70 years, Time Warner can't delay confronting the reckoning that faces the media business. It is a company where it's very easy to see where the blood is flowing. But for whatever reason, it can't find the bandages or the scalpel. For an unpleasant reminder of one possible future outcome, Time Warner executives need only to look at the empty space in the Time & Life building.

(Time Warner building 2003 by STAN HONDA/AFP/Getty Images)