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TheStreet Open House

5 Media Companies With the Most to Win and Lose

BOSTON (TheStreet) -- Media and entertainment companies are in the throes of the biggest upheaval since the television was invented. The VCR gave way to the DVD player, whose existence is being threatened by streaming video. Netflix (NFLX), in its quarterly results from last week, all but declared the death of its own DVD business.

It's clear: The future of home entertainment lies in SVOD, subscription video on demand. If you're not streaming videos via Netflix on your Microsoft (MSFT) Xbox, Apple (AAPL) iPad, Sony PlayStation or DVD player, you might be watching TV shows and movies on-demand via your Comcast (CMCSA) or Time Warner (TWX) subscription. And coming this winter: an increasing number of new televisions featuring integrated Netflix controls, with no need for a connected device.

With so many changes, it's an exciting time for consumers. But for a company such as Netflix, which provides a streaming service, there are massive costs. In its most recent results, Netflix announced that streaming content costs in 2012 would be nearly double the amount spent in 2011, putting it "on par with what HBO spends in the U.S." Currently, Netflix has over $3.5 billion in streaming commitments.

And with other competitors, such as Amazon joining the streaming foray, the those costs can only move higher. Premium cable channels such as Time Warner's HBO and Epix have paid up for exclusive electronic distribution rights to movies and shows, effectively boxing out Netflix. Therefore, for any company with content, like a CBS (CBS), Starz (LSTZA) or AMC (AMCX), this can mean only one thing: more control over content and higher profits.

One example of this phenomenon lies with Starz, a content provider to Netflix since 2008, which recently opted out of an extension, set to expire in February. Starz says the decision was to "protect the premium nature" of the brand and that the "network is in an excellent position to evaluate new opportunities and expand its overall business." Translation? Starz can likely shop its digital rights to a competitor for more money, or go the route of HBO Go and offer its own streaming option.

Therefore, as the experts try to forecast the prospects for steaming options such as Netflix, Amazon, Apple or even a resurrected Blockbuster/Dish combo, investors can be certain of one thing: Content rules, and it might be the best investment of them all.

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