Editor's Pick: Originally Published Wednesday, Dec. 23

Maybe 2016 will finally be the year of the media merger.

Traditional media companies that own TV and film properties, or a combination of the two, watched helplessly for much of the past 12 months as their stock valuations sank. Though media distribution companies executed industry changing deals in 2015, content companies were quiet.

But with valuations of some content companies at near historic lows, mergers and acquisitions could become commonplace. There are certainly a number of targets to consider.

Viacom (VIA) - Get Report (VIAB) - Get Report , AMC Networks (AMCX) - Get Report and Discovery Communications (DISCA) - Get Report have been the subject of takeover rumors for several years, but so far bids have been few and far between. But as their stock prices have dropped, the demand for quality content in the age of Internet-streaming services has risen.

Even with the broader stock market suffering declines this year, established and hard-hit media companies are among the cheapest sectors in the market. As the S&P 500 has retreated amid plunging oil prices and a strengthening U.S. dollar, the shares of pay-TV media companies have declined in the face of weak subscriber numbers.Disney's (DIS) - Get Report ESPN sports channel has become the poster child for media investor jitters.

So where does this leave the potential for mergers and acquisitions?

Media analyst Tuna Amobi at S&P Capital, said in a recent note he sees "further opportunities for industry consolidation among entertainment content providers" against a backdrop of a recent wave of consolidation among distributors.

Premium content companies are tempting buys for companies facing heated competition from the likes of Netflix (NFLX) - Get Report and Amazon (AMZN) - Get Report , both of which have increased spending on acquisitions to attract more viewers to the non-traditional, pay-TV model.

As part of a larger organization, standalone content companies, including the likes of CBS (CBS) - Get Report and Starz (STRZA) , can better compete as more consumers are turning to alternative platforms for viewing. Their plunging prices in recent months make them attractive

Click through TheStreet's slideshow for more on how these five content companies are ideally suited for an acquisition in 2016:

Viacom

Image placeholder title


Viacom, with a price-to-earnings ratio that's plunged to 5.6, has one of the lowest valuations in the industry. But while the stock price may be low, the buyers that can afford Viacom, with a market cap of $15.6 billion, are few.

Viacom shares are down 48.1% year to date, with the stock tapping four-year lows in recent sessions. Viacom is in talks with Dish (DISH) - Get Report about renewing a crucial carriage contract. Without Dish's 14 million subscribers, Viacom shares are likely to plunge further, analysts say.

Discovery Communications is one company that may be able to afford Viacom. Both companies cater to niche audiences.

Another potential merger candidate for Viacom is CBS, which was once part of Viacom before the companies split in 2005. Now, some investors and analysts say recombining the companies makes sense, in part because it would give the merged company more power to negotiate with pay-TV providers.

"Amid further convergence of content, technology and services, recent years has witnessed a growing popularity of streaming video platforms," said analyst Amobi in his Dec. 19 note. He has a hold rating and $54 price target on Viacom. "Online video could provide a compelling opportunity for content providers."

Viacom operates through its Media Networks, which reaches about 700 million households in 160 countries, and through its Filmed Entertainment unit, which produces and distributes motion pictures through Paramount Pictures with franchises including Indiana Jones, Star Trek and Mission Impossible. It owns television channels MTV, VH1, Nickelodeon and Comedy Central along with BET Networks.

AMC Networks

Image placeholder title

With a price-to-earnings ratio of 26.4, AMC Networks shares are down 5% year to date and still trading toward the bottom of their 52-week range.

New York-based AMC Networks acquired half of BBC America late last year for more negotiating leverage with providers. It has since seen a 23% increase in third-quarter sales, which it attributes in part to the additional BBC programming.

AMC, which owns popular shows The Walking Dead, Mad Men and Breaking Bad, is among several suitors circling around a takeover of Starz, according to several media reports. As part of a larger company, AMC could gain more clout as it competes with Netflix, Time Warner's TWX HBO NOW and an upcoming Apple streaming platform.

AMC's possible partners include Starz, which it is reportedly considering buying. As distributors combine to lower costs for customers to better compete with online offerings, a combined content company like Starz-AMC could better compete for higher fees.

Discovery Communications

Image placeholder title

Discovery Communications shares are down about 24% year to date, which puts the stock in bargain territory for investors and potential suitors.

Discovery Channel, with shows Naked and Afraid and Alaskan Bush People, is among the few networks that is on track to report gains in prime-time viewers. It draws an average of 1.23 million prime-time viewers as of Dec. 15, according to Nielsen ratings. That's an increase of 9% compared to the same period last year.

Discovery stock has been plunging this month with its valuation of 16.3, offers a lower-than-usual price tag. But Discovery itself may have its focus on its own acquisition, including UK's Channel 4, which may go private.

And Discovery, which CEO David Zaslav has said has "fully stabilized our U.S. business for growth," is expected to show growth over the next few years, even based on worst-case-scenarios.

In recent sessions, DISCA has been trading strong on high volume, which could indicate an underlying catalyst that could send shares soaring.

Starz

Image placeholder title

Starz is an ideal candidate to join another smaller company like AMC or Lions Gate (LGF) for more negotiating power with cable and satellite operators, analysts say.

Unlike most other content companies, Starz shares have actually performed strongly this year, with the stock up 9.8% since January.

Acquirers may see its valuation in recent months -- shares are down about 28% since July -- as a bargain for this Meridian, Colo.-based network that reaches more than 29 million U.S. households, or about 25% of cable, satellite and telco customers.

Starz produces original content including Spartacus and Outlander while also enjoying a movie library with first-run film licensing agreements with Disney and Sony Pictures Entertainment. But its agreement with Walt Disney Pictures expires at the end of 2015, when Netflix will nab those first-run rights, leaving it with Sony's films through 2022.

Losing Disney's leaves a content void in Starz's portfolio that could pressure it to fill with a merger with one or more smaller content companies.

But Starz has indeed been making headway with pay TV providers. Amazon announced Starz video content, along with Showtime and other pay TV services, will be available to Prime members through a new Streaming Partners Program. Perhaps a 2016 acquisition could drive more momentum.

CBS 

Image placeholder title

Broadcasting network CBS has been a rumored takeover target for most of this year in part for its strong foothold in popular content.

Now, shares are down 17.5% year to date, giving potential buyers an opportune time to snap up this popular network.

The most-watched U.S. television network, CBS has re-signed with the National Football League to produce and air Thursday night games. A new series of Star Trek will be available exclusively through CBS All Access, which Credit Suisse analyst Omar Sheikh, in a recent note, said "signals an attempt to accelerate the evolution of the service into a distribution platform with real scale."

CBS has diversified interest in broadcast and cable, television and radio, book publishing and interactive businesses. It reported encouraging results for the third quarter and analysts expect continued strong growth in syndication revenue and growing streaming revenue and cable subscriptions.

CBS is perhaps the best positioned in the media sector to make more money from the trend toward online video consumption as other companies are expecting losses, Sheikh said in the note.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.