Viacom Rakes in Ad Sales

Viacom's (NYSE:VIA) broadcast of its first-quarter results yesterday brought in some good reviews.

To begin with, net revenues for the company came in at $6.8 billion, a 12% improvement over the year-ago quarter. Net earnings equaled $711 million, or $0.41 per share, helped by a change related to income taxes. Backing that out, earnings were $570 million versus $443 million last year. Free cash flow jumped 38% to $817 million.

The big news here is that advertising revenues were up sharply. As a whole, ad sales experienced a double-digit increase of 21%, and represented 48% of total revenues for the first quarter, as opposed to 44% in the prior period. After the slump experienced by the ad market the last few years, this ongoing trend for higher demand of inventory is indicative of an economy that continues to be healthy.

Viacom's popular cable networks led the overall revenue performance, increasing 21% for a take of $1.4 billion. Better carriage fees and merchandise income -- notably from the Nickelodeon brand -- helped this segment. The television segment (which is different from the cable division) did 18% better this year, booking $2.3 billion in revenues. These results should bode well for the broadcast and cable properties of other conglomerates, such as General Electric (NYSE:GE), Disney (NYSE:DIS), and Fox Entertainment (NYSE:FOX).

The entertainment segment, which includes Paramount Pictures, saw only a single-digit revenue increase, though, to $852 million. The panacea needed here would be a few box-office juggernauts. CEO Sumner Redstone realizes this and has recently mentioned that he'd like to see Paramount increase its tolerance for creative and financial risk, on the theory that profits will follow a more aggressively budgeted slate. While that is an admirable goal, one must remember that it's not necessarily the largesse of the budget that will fill the seats at the multiplex, but the quality and marketability of the idea behind the projects.

Viacom will really look attractive once it spins offBlockbuster (NYSE:BBI). The rental chain's revenues decreased by a percentage point and its operating income decreased 16% for the quarter. With the explosive competition of players like Netflix (NASDAQ:NFLX) and the video rack at retailers like Best Buy (NYSE:BBY), Blockbuster is having a tough time figuring out a way to stay relevant.

For Foolish long-term investors, Viacom appears to be a company worth looking at. Granted, advertising success can be cyclical and the movie business fickle, but the combination of Redstone and COO Mel Karmazin is one that's worth banking on.

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Fool contributor Steven Mallas owns shares of Disney and General Electric.