Time Warner, the world's biggest media company, suffered a 40% drop in profit in the last three months of 2007 and has announced plans to cut costs.
Will Smith's film I am Legend broke box office records
Net income was $1bn(£500m), down from $1.75bn, as internet firm AOL continues to struggle.
Falling profits also reflect the fact that the 2006 figures were buoyed by the sale of AOL businesses in the UK and France for $769m.
Will Smith, star of the recordbreaking I am Legend, helped buoy film profits.
The film took $77m in its opening weekend.
In the whole of 2007, Time Warner made pre-tax profits of $6.5bn, a fall of 30%.
Chief executive Jeff Bewkes announced an "immediate" 15% cut in corporate costs and spoke of plans to increase margins and profitability.
He took over in January and has predicted a better 2008 for the company, forecasting a growth in operating income of between 7 and 9%.
"Looking ahead, we'll intensify our creative and entrepreneurial focus to move our businesses ahead more quickly," Mr Bewkes said.
Attention will be focused on struggling internet provider AOL, which merged with Time Warner in 2000, and is undergoing a restructuring.
Speaking to analysts, the company revealed it is working on splitting off two AOL divisions - AOL Access which looks after internet provision and AOL Audience which creates web-based programming and products - and running them as independent entities.
Investors hope AOL will be spun off in its entirety or sold to another technology or media company. Subscription revenue fell by a third in 2007 at AOL, due to a fall in US customer numbers as well as the sale of its European operations.
Investors also hope the new chief executive's plan will boost shares, which are trading at about $15, a fall of over a fifth from their 2007 high of $19.25.