A Good Opener for News Corp.

As News Corp.'s (NYSE:NWS) first-quarter earnings showed yesterday, Rupert Murdoch's empire continues to do well at generating cash from its assets, despite some sluggishness in the studio business.

Revenues increased a modest 4% to $5.9 billion, and operating income declined 6% to $851 million. Adjusting the earnings for an accounting change that occurred in the previous year's quarter (News Corp. took a hit last year of more than $1 billion, pulling the company down to a net loss), net profit increased 45% to $843 million. On a combined basis, net income increased 47% to $0.28 per diluted share -- and again, the accounting change is excluded in this comparison.

One of the negative aspects of the quarter can be found in the studio segment, which suffered some tough comparisons. In the previous year's quarter, movies such as Robots and Alien vs. Predator helped to drive results as they made their way through ancillary distribution channels; Twentieth Century Fox Television also was strong, with robust performance from syndication products. News Corp. labeled this segment an unequivocal drag on operations -- it just didn't have the firepower to compete with its other businesses. The film studio's operating income declined 35%.

Don't fret, though, because better days are ahead. Remember that the company just released Marvel Entertainment's (NYSE:MVL) third X-Men movie to the DVD market at the beginning of October -- just in time for the holiday season. Speaking of Marvel, next summer will see News Corp. distribute the Fantastic Four sequel. Ice Age: The Meltdown is due on home video near the latter part of this month. And how about that Borat? News Corp. stumbled upon a surprisingly strong comedy this past weekend, much to Disney's (NYSE:DIS) eternal embarrassment -- the mockumentary turned The Santa Clause 3 into nothing but a lump of coal for the stockings of executives at the Mouse. Of particular interest is the use of the Internet to market Borat -- Rick Munarriz noted that News Corp.'s MySpace can be a valuable marketing tool for movies such as this. MySpace will also be useful in monetizing opportunities in the arena of social networking -- a deal with Google (NASDAQ:GOOG) should bear some significant fruit down the line.

So, the studio didn't do so hot. What about the rest of the conglomerate? Not bad at all in some areas. The television segment increased its operating income by 20%. Cable networks grew their profit by 26%. The jewel of the segment, Fox News Channel, saw flat performance in terms of income because of programming costs, but its viewer levels continue to rival those of its competitors. The satellite-television business narrowed its loss, the newspapers segment was about the same in terms of income, and book publishing saw a 21% decline in profit. Nevertheless, taken in total, News Corp. delivered a much better cash-flow scenario this quarter. Last year at this time, $497 million in operational cash flow was generated; this year, $716 million was booked, enough to cover capital expenditures and acquisitions.

News Corp. is a strong media player, able to compete with heavyweights such as Time Warner (NYSE:TWX), Viacom (NYSE:VIA), and CBS (NYSE:CBS). Its movie business may be down right now, but it's nothing to worry about; future quarters should be kind to this operating segment. Shareholders in it for the long term should do well.

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Fool contributor Steven Mallas owns shares of Disney and Marvel Entertainment. As of this writing, he was ranked 1,163 out of more than 12,000 investors in the Motley Fool CAPS system. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.