BOSTON ( TheStreet) -- Media industry stocks put in the second-best performance of any industry sector in 2010 with a 29% average return, and that pace of growth -- along with the industry's unpredictable evolution -- is expected to continue in 2011.

An improving economy and the prospect of more advertising revenue for broadcasters bodes well for a continuation of 2010's rebound.

"The sector seems poised to weather lingering challenges and turn in another strong year in 2011," said S&P Equity analyst Tuna Amobi, in a research note Tuesday.

But there is a huge divide between the sector's winners, which tend to be cable operators or content providers, and the losers, which have mainly been print-focused media companies.

For example, the diversified and content-rich Liberty Media Corp. ( LCAPB) and satellite radio provider Sirius XM Radio ( SIRI), each had share price returns of more than 150% in 2010, while shares of The Washington Post ( WPO) were flat and The New York Times' stock ( NYT) lost 20.7%.

Small investors who want to hold a stake in the industry without buying individual stocks can buy exchange traded funds. One example is PowerShares Dynamic Media ( PBS), an $85 million ETF with a 71% allocation to media stocks as well as to companies in contiguous industries, such as telecommunications and business services. Its shares rose 17.6% in 2010, and are up 2.6% this year.

The ETF's top-five holdings, which are each at about 5% of the assets of the fund, are: Omnicom ( OMC), up 17% in 2010; Time Warner Cable ( TWC), up 60%, Viacom ( VIA.B), up 33%; Walt Disney ( DIS), up 16% and Directv ( DTV), up 20% on the year.

The S&P 500 index was up 13% in 2010, excluding reinvested dividends.

The following is a synopsis of the investment fundamentals of five major media companies:

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Arbitron ( ARB), perhaps the best known name in its market niche of giving radio and TV "ratings" or viewership counts, is essentially the scorekeeper for the increasingly complex media industry.

The company sells its market research and audience measurement expertise which is used to set advertising rates or design advertising and marketing campaigns. Shares gained 77% in 2010, including a 48% run in the fourth quarter on prospects of increased advertising revenue for media companies.

Arbitron has a $1.1 billion market capitalization and a dividend yield of 1%. It's a sure thing in the eyes of analysts, as all four that follow the company rate it a "buy," according to FactSet. Wall Street expects revenue to rise 7% to $421 million in 2011.

The consensus analysts' view is for 2010 earnings of $1.63 per share to be followed by a 22% increase to $2 per share in 2011. Wellington Management and Pamet Capital Management each owned about 13% of its shares at the end of the third quarter.

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News Corp. ( NWSA) is a media industry bellwether. It's the majority owner of some of the world's leading media and entertainment brands, including the Fox Broadcasting TV network and Fox Films (20th Century Fox), financial newspaper The Wall Street Journal, the cable networks SKY Italia, BSkyB, and STAR-TV, as well as other newspaper and magazine businesses.

The company's cable network business generates 50% of its operating profit. News Corp. has about $9 billion in cash on its balance sheet and is regularly making acquisitions to feed its continued growth. Its latest deal, announced in November, was the purchase of a 90% interest in Wireless Generation, a New York-based education technology firm that sells web-based software for student tracking and tutoring.

The move represents News Corp.'s first foray into the $500 million private education business. For fiscal 2010, analysts estimate earnings will be $1.12 per share and grow by 14% to $1.28 per share in 2011.

Four analysts have "buy" ratings on the stock, and there are 10 "buy/hold," ratings, and five "holds," according to Standard & Poor's, which has it rated "buy."

The analysts' median 12-month price target on the shares is $18, a 21% premium to the current price. The company currently has a market capitalization of $39 billion. Shares were up 6.4% in 2010, including a strong gain late in the year. The Dodge & Cox family of funds is the largest individual shareholder with a 5.0% stake as of Sept. 30.

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Viacom ( VIA.B) is a diverse new media company known primarily as a content provider. It owns a portfolio of cable networks that are basic pay television subscriptions; a global media company with cable network properties, including Nickelodeon, MTV, BET, Comedy Central, VH1, Country Music Television, and Spike TV.

The company also has several online properties related to those brands as well as Paramount Pictures, which produces its own movies and owns a library of 2,500 films, including The Godfather and Titanic.

The company's vast movie library and popular cable networks put it in a solid position as a content provider as consumers increasingly are willing to pay for online and on-demand entertainment.

Analysts covering the stock break down to six "strong buy" ratings, 15 "buy" ratings, nine "hold," and one "reduce," according to Thomson Reuters.

Wall Street is projecting a 5% increase in revenue to $14.2 billion in 2011 and earnings growth of 13% to $3.31 per share. The analysts' median 12-month price target is $44.90, a 14% premium to the current price. It has a $24.4 billion market capitalization.

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Cablevision Systems ( CVC) is one of the nation's largest multimedia companies with business in three segments -- cable TV and high-speed Internet voice and data service; several cable networks, including AMC and the Sundance Channel; and the Long Island, N.Y.-based newspaper Newsday.

The company's primary service area is metropolitan New York City, where the population is willing and able to pay for premium cable-TV content. S&P Equity Research says the company should also gain a new revenue stream as it launches interactive advertising over its cable networks.

Cablevision is growing through acquisitions as well. In December, the company added almost 300,000 new cable subscribers by buying Bresnan Communications for $1.4 billion. Wall Street is expecting earnings of $1.31 per share in 2010 and that profits will grow 50% to $1.97 per share in 2011.

Analysts give it six "buy" ratings, 11 "buy/holds," five "holds," and two, "weak hold" ratings, according to Standard & Poor's. Its shares were up 59% in 2010 and are up 4% this year. The analysts' median 12-month price target is $37, a 6% premium to the current price. T. Rowe Price owned 10.7% of its shares at the end of the third quarter, making it by far the largest shareholder.

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Time Warner Cable ( TWC) is the largest pure-play U.S. cable system operator, providing television, Internet access, and phone service to nearly 12.6 million customers.

Its size gives it leverage in negotiating contracts with content providers, but it faces competitive challenges from other types of communications service providers, such as phone companies and wireless and over-the-Internet firms.

As a result, consumers are increasingly opting out of land-line service, a practice known as "cord-cutting," or they are choosing to reduce their service since they have cheaper alternatives. That will make it difficult for the company to grow margins as its subscriber growth slows.

But Time Warner Cable has huge cash flow which can be used to fund growth via acquisitions or to spend on new technologies and content sources in order to maintain current customers and add more.

Analysts are relatively bullish on the shares, giving nine "buy" ratings, 12 "buy/hold" ratings, and six "holds," according to Standard & Poor's. The current Wall Street estimates are for revenue of $18.9 billion in 2010 and 5% growth to $19.8 billion in 2011. The consensus estimates are for earnings of $3.57 per share in 2010 followed by growth of 24% to $4.43 per share in 2011.

The stock was up 60% in 2010, and its off to a positive start already this year, gaining 2%. Capital Research Global Investors and AllianceBernstein each held 7% stakes as of Sept. 30.

-- Written by Frank Byrt in Boston.

>To see these stocks in action, visit the 5 Media Stocks Worth a Look portfolio on Stockpickr.

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