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It's all about the content. That's the buzzword in the media world these days -- content. As worlds collide, just about everyone that produces information and entertainment makes up the media -- new media, old media, liar media, print, online, smartphone, tablet, anachronistic televsision media, streaming media, you name it. Increasingly, every possible media entity competes against one another or is getting ready to, despite a partnership here or a contract there. And almost everybody claims that they have "premium content."

Consider companies on opposite ends of the spectrum. In it's latest annual report, Demand Media (NYSE:DMD), often erroneously called a "content farm," notes that it offers "subscriptions to premium content... on [its] owned and operated websites." Satellite radio provider Sirius/XM (NASDAQ:SIRI) practically brands its entire business on the notion of "premium content."

But exactly what is "premium content" and does the use of what has become little more than a marketing slogan make a difference as you evaluate the prospects of investing in new and old media/enterainment companies?

Back in the day -- when I was a young whipper snapper -- after walking to school uphill in the snow, we made a clear distinction, thanks, largely, to the limited choices at our disposal. There was network television, cable television (which only the loser kids did not have), and "premium" channels like HBO and Cinemax that you would sneak a glimpse of (read: Skinamax) when Mom and Dad were otherwise occupied. We never even considered the vinyl copy of Working Class Dog we were cranking or the late-night disc jockey who thought he was cool part of this limited media landscape.

Today, you consume content on your iPod, iPhone, and iPad, thus Apple (NASDAQ:AAPL) is a media company. America's Company may not produce original content, but it plays the role of a modern day, hi-tech, mobile content distributor. Netflix (NASDAQ:NFLX) streams other people's content and, soon, some of its own, putting it in a league similar to Apple. Cable companies, such as Time Warner (NYSE:TWC) and Cablevision (NYSE:CVC), offer programming from a slew of programmers, particularly networks ranging from Disney/ABC (NYSE:DIS) to Scipps Interactive (NYSE:SNI).

As the cable operators make a foray onto your iPad, they skirt the line between passive distributor of programming and new media incarnation. In radio, you have Sirius/XM, the prime purveyor of premium programming, but don't leave out terrestrial and Internet radio. Each provides something for nothing, but, increasingly companies like Clear Channel (CCMO.PK) and Pandora are moving into subscription-based premium areas. And don't forget about print entites with online presences. Papers like the Wall Street Journal, The New York Times (NYSE:NYT), and Financial Times (see below) offer online registrants access to premium content and services. And, last but not least, you have new media conglomerates such as Demand and agitators like Huffington Post. I won't even bring up Facebook and other social media innovators.


*From the Financial Times' registration page

Who or what offers "premium" content, programs, or services? If they call it premium does that make it so? An article FT or the WSJ considers "premium" and charges an access fee for might not qualify as such in my world. Is it only premium because you have to pay for it? (No clever jokes, please) That doesn't pass muster either. Howard Stern's show did not become "premium content" overnight simply because he decided to jump from a distribution method that uses free as a business model to one that charges for a subscription. Are Cheers reruns only considered "premium" content when I watch them on Netflix or the Hallmark Channel, but not when I view them over-the-air after the late news? And who's to say that a satellite radio station dedicated to the music of Bruce Springsteen, Elvis Presley, or Pearl Jam is any more "premium" than the Genius mix Steve Jobs spins for me on iTunes? It's all subjective. "Premium" content's days are numbered.

If you have yet to figure it out, this is all quite torturous to follow. We live in a topsy-turvy media world these days. Who delivers content? Who creates it? I would go as far as to say we live in transformational and unprecendented times. Old contracts between cable companies and network programmers must be rewritten. They no longer apply. What Netflix accomplishes today it might not be able to accomplish tomorrow. With Steve Jobs' or Larry Page's signature on a check, Apple or Google (NASDAQ:GOOG) could turn the world on its ears by taking out Scripps, Discovery Communications (NASDAQ:DISCK), DirecTV (NASDAQ:DTV), Dish Network (NASDAQ:DISH), Netflix, or Sirius/XM.

As an investor you have several ways to play these interesting times.

Go with the leaders. You could buy the big names. The companies that lead, or at least appear to lead the media wars. If I had the means, I would commission a study to test a hypothesis of mine. I venture that the average American would, when asked, label companies like Apple and Netflix content creators. And I don't place this class of people into the same group as those who cannot name the two houses of Congress or claim to see Russia from their shores. It's logical. Who really knows where programming originates from? For the average consumer's purposes, the Apple's and Netflix's of the world are the end all and be all. It's about brand power. And it never hurts to invest in the companies that saturate the market with their platform.

Anticipate a buyout target. I am on this kick that a big player, such as Apple or Google or a major telecom player such as Verizon (NYSE:VZ) or AT&T (NYSE:T) is about to transform the media world as we know it. I think, however, that it's more than a kick or hunch. Heck, even Cramer's with me. The other shoe is about to drop, in one way, shape, or form. As investors, much of what we do involves speculation. Some times we win, sometimes we lose. It's anybody's guess who's going to buy who, but I think several more than plausible scenarios exist.

As I have stated in recent Seeking Alpha articles, I don't think Netflix can survive if it continues on its present course. Yet it needs to gobble up and offer content that people care about. If Apple is as serious as leading analysts think they are about entering the consumer's living room, a Netflix take-out makes perfect sense. Apple could also easily afford to effectively put Netflix out of commission -- or at least marginalize them severely -- by purchasing one of the above-mentioned media companies. Let your imagination run wild. In this day and age of hyper-change, almost everybody is in play, particularly when the predators are companies like Apple and Google.

Generally, you profit most in the short-term by buying the company that gets bought because they usually get bought out for quite a bit more than the value of their share price at the time of the acquisition. With a longer view, if you feel a company like Apple positions itself for even greater world domination with a large, strategic purchase, it's probably time to load up on the pullback. And, it goes without saying, it's tough to argue with using the type of balance sheet that helps put Apple in this position of power as support for your choice. This, of course, ties back into investing in a space's leaders.

Adhere to Peter Lynch. You could take the "easy" way out and buy what you know and like. For instance, place focus on the content as opposed to the company. Of course, you would have to believe that the content serves as the primary catalyst to drive growth in a media organization. For instance, if you think Sirius/XM's stable of impressive talents -- ranging from the Boss to Oprah Winfrey to Christy Canyon -- can continue to drive subscriber growth it might be a solid play. If think Rachael Ray and Tyra Banks represent the future -- and the companies that parter with them have keen foresight -- you'll want to see where they hang their hats. Both Ray and Banks signed deals with Demand Media recently to round out the digital portion of their for-public consumption portfolios. Personally, I am not a fan of the method of investing in Big Macs, but, clearly it has worked and continues to work for some very sharp people.

Just because the media and entertainment space we know today continues to evolve with volatility does not mean that sound short- and long-term trading and investing opportunities do not exist. You just have to decide the direction you think the business is going. Clearly, you'll be able to benefit if you make the right calls regarding several likelihoods -- some big players will continue to grow, others will emerge, M&A activity will increase, some old media players will turn new, and companies that have traditionally distributed content will either become more innovative in how they do so or start creating content of their own.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in NFLX over the next 72 hours.

Source: Navigating Today's Topsy-Turvy Media World