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Why I Am Long Madison Square Garden

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- Early last week, I introduced two media stocks I consider sells -- Netflix (NFLX) and Sirius XM (SIRI) -- and six I consider buys -- Rogers Communications (RCI), Bell Canada (BCE), Time Warner (TWX), Disney (DIS), Pandora (P) and Madison Square Garden (MSG). Later in the week, I outlined my bull case for both Rogers and Bell. When I go long media stocks, I do so with a time horizon measured in years, not months and week. I also consider five key criteria when making my selections:
  • Massive and/or rapidly growing revenue
  • Multiple, diverse streams of revenue
  • Multi-platform delivery of premium content
  • Direct control over premium content
  • Ubiquity
  • In this article, I make my bull case for MSG, relating it back to each of the five points. When investors discuss the media space in North America, too few bring up the situation in Canada involving Rogers and Bell. My article from last week details how the two firms dominate the telecommunications, media and much of the sports landscapes north of the border. While I am fairly certain nothing even close to that level could happen in the United States, thanks to tighter (and often nonsensical) regulatory controls, I expect some companies to try to push the envelope.

    In 2012, we will see the continuation of something that picked up toward the end of 2011: various types of media partnerships and consolidation. Although we did not witness much meaningful M&A last year, partnerships hit the wires one after the other, ranging from Clear Channel's (CCMO.PK) iHeart Radio collaborating with competitors such as Cumulus Media (CMLS) and Disney hooking up on TV Everywhere ventures with the likes of Time Warner Cable (TWC) and Comcast (CMCSA - Get Report).

    As the year unfolds, I expect more partnerships and M&A activity to pick up. Telcos and media companies in the U.S. need to be even more careful than their Canadian counterparts. Just have a look at what happened to AT&T (T) when it tried to add T-Mobile to its stable. In Canada, Rogers and Bell sometimes need to appease regulators. For example, Bell will have to divest several radio stations once it takes control of Astral Media. But, at day's end, Rogers and Bell run roughshod. In the States, companies will have to dance the dance with a bit more tact if they wish to pull off anything even close to the Rogers-Bell level. I anticipate more than a couple instances of American companies testing the regulatory waters in 2012.
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