Recently, Variety reported that Discovery Communications was interested in acquiring Scripps Networks Interactive . While nothing has been officially confirmed or denied by either company, the move makes sense, but it also seems unlikely. 

However, if the deal did happen the resulting company would be a top-tier media creator with virtually no direct competition.

The rumor
On Dec. 10, Variety reported that "a source with knowledge of the situation said the prospect of Discovery making a run at Scripps Networks was discussed Tuesday at a Discovery board meeting."

The report went on to say that representatives from both companies declined to comment.

Why it makes sense
Companies in the media industry, particularly the valuable creators of original content, are in high demand now more than ever as newer technologies like streaming devices allow viewers unprecedented access to vast libraries of content that they can view from almost anywhere. This necessitates a continuous supply of new and compelling content and only a handful of companies can deliver in this regard on a consistent basis.

It just so happens that both Discovery and Scripps are such companies, and they are still relatively small compared to industry titans like The Walt Disney Company and Time Warner. Other media companies like AMC Networks and Starz also remain viable buyout candidates as well, especially considering their diminutive sizes.

Scripps seems to be a perfect acquisition candidate for Discovery, considering that the two companies' content lineups would mesh remarkably well. Discovery primarily focuses its content on the natural world with popular networks like Discovery Channel and Animal Planet while Scripps primarily focuses on the how-to lifestyle segment with signature networks like Food Network and Home & Garden TV. However, both companies take similar approaches to content. Both companies' channel lineups primarily focus on the nonfiction docudrama television segment. Almost all of their respective channels place a strong emphasis on learning.

However, there is also overlap between some of the companies' channels. For example, content that appears on Discovery's Destination America is similar to content that appears on Scripps' Travel Channel. Scripps' Travel Channel also bears a striking resemblance to several of Discovery's channels like Science Channel and Discovery Channel.

An acquisition of Scripps by Discovery would make sense for two reasons. First, it would significantly bolster the latter's content lineup by adding popular networks that are unique but similar in style and approach. Second, the deal would significantly cut down on industry competition as Scripps remains one of the few direct competitors to Discovery, in terms of offering similar content, at the current time.

The media industry is a challenging place to be, and one in which consolidation makes a great deal of sense. A stronger content lineup provides a media company with more leverage in negotiations with cable/satellite providers. A company with a wide array of popular channels can bundle weaker channels with stronger ones, which enhances pricing power for content creators.

Why it would be difficult
The major impediment to a potential deal is the sheer size of Scripps Networks. The company, whose shares have risen almost 40% in 2013, is now valued at a market capitalization of $11.8 billion. Discovery Communication's own market capitalization is $29.3 billion, which means that Scripps is more than a third of the size of the company which is looking to acquire it. At the current time, Discovery also only has $560 million in cash along with over $6.5 billion in debt, which means that the deal would probably have to be debt-financed by a company with an already-hefty debt burden. 

These numbers that would seem to argue against the deal happening do not mean that it could not actually happen. However, a buyout of Scripps would be substantial enough that it would be difficult for Discovery to digest at the current time. A much larger company like Disney with significantly more cash would have a much easier time acquiring Scripps.

The result
The resulting company that would emerge from Discovery acquiring Scripps would be a powerhouse media company with a significant stranglehold on the popular nonfiction television segment. It would no doubt be a company that I would consider owning.

However, Discovery Communications and Scripps Networks are fabulous companies with bright futures in their own right. They are both projected to grow their revenue by over 7% and their earnings by over 10% in 2014. A deal between the two would just be an added bonus for investors seeking growth in content creation.

Vera Bradley released third-quarter results after the market closed on Dec. 11, beating on both the top and bottom lines; however, fourth-quarter guidance came in below expectations. The weak guidance caused an initial decline in the stock after-hours, but shares rose the next day -- only to fall once again. Let's take a look at the report to see what exactly is going on, and what you should do from here.

The designer
Vera Bradley is a leading designer and retailer of handbags and accessories for women. Its offerings are aimed at all age ranges, from young girls and teens to mothers and grandmothers. Its products are sold through its company-owned locations and website, as well as at more than 3,400 specialty retailers, select department stores, and third-party e-commerce sites. The company is also very active in supporting breast cancer research, through the Vera Bradley Foundation for Breast Cancer. 

Source: VeraBradley.com. 

The results
Vera Bradley's recent earnings that exceeded analyst expectations. Here's an overview:

Source: Vera Bradley earnings report. 

EPS decreased 15.9% and revenue fell 5.9%, due to comparable-store sales declining 6.5%. Gross profit fell 10.3% to $71.9 million as the company's gross margin declined 270 basis points to 55.3%. Management has stated that the negative results are due to decreased customer traffic, underperformance of the company's product offerings, and "a persistently challenging retail environment." Retail is a very difficult industry right now, and it does not seem like Vera Bradley can navigate it successfully. 

Dismal guidance
While earnings beat the consensus estimates, management's guidance for the fourth quarter came in much weaker than expected:

Source: Vera Bradley earnings report. 

The new outlook calls for earnings per share to decrease 24.2%-29% and revenue to fall 7.8%-10.8%, and its gross margin to decline 340 to 380 basis points. As investors, we want to put our money to work in companies that are growing, not struggling. With this in mind, I wouldn't touch Vera Bradley until its next report, and even longer if it continues to guide toward year-over-year declines.

Consumer favorite
Michael Kors Holdings'  high-quality products and immense popularity have propelled it to the top of the luxury market over the last two years and its stock has reacted accordingly by rising over  240%. It reported second-quarter earnings in early November and the results exceeded expectations; here's an overview of that report:

Earnings per share grew 44.9% and revenue rose 38.9% year-over-year, driven by comparable-store sales rising 22.9%. Gross profit increased 42.4% to $449.9 million, helped by the company's gross margin expanding 150 basis points to 60.8%. The better-than-expected results from the first and second quarters and strong guidance going forward caused management to increase its full-year outlook in the report. This is bad news for Vera Bradley, because it proves that the consumer demand is there, but not for its products. Overall, Michael Kors has continued its rise as the new global luxury powerhouse and I believe it is the brand to own in the space, not Vera Bradley.

King of Spade(s)
Kate Spade, one of the many brands owned by Fifth & Pacific , has shown increasing popularity with women in the handbag and accessories market alongside Michael Kors; this has added to the competition Vera Bradley has been facing. Fifth & Pacific's recent quarter missed analyst estimates, but did show strength among this key brand; here's an overview of the results:

Earnings per share increased 40% and revenue rose 18.1%; this was driven by Kate Spade's incredibly strong revenue growth of 76.4% year-over-year to $180 million, which included a 31% increase in direct-to-consumer comparable sales. The brand has been so strong that management announced they are considering changing the company's very popular store on Fifth Avenue, in New York, into a Kate Spade store. On top of this idea, the company will be expanding the store count to take full advantage of its growing market share. With Michael Kors domination and Kate Spade's increasing presence, Vera Bradley is in a very difficult situation, and not one investors should want to get involved in. 

The Foolish bottom line
Vera Bradley is a struggling company within a very cut-throat industry. It has not been able to navigate the market efficiently and has been continually losing share to brands like Michael Kors and Kate Spade. I would stay away from Vera Bradley for now and wait to see if it can turn things around in its next quarterly report. If you are looking for an investment in this industry today, you should look to Michael Kors or Fifth & Pacific.

Often one of the toughest decisions a Foolish investor has to make is what to do when a strong company like lululemon athletica reports fantastic results but issues an outlook that is somewhat weak. Buy, hold, or sell? Judging by recent results from competitors Under Armour and Nike  the right thing to do for long-term investors may be just to stay the course.

Lululemon's results
Lululemon reported fiscal third-quarter results on Dec. 12. Net revenue rocketed 20% to $379.9 million. Same-store sales jumped 5%. Net income leaped 15.4% to $66.1 million or $0.45 per share. It's hard to argue that these were bad results.

CEO Christine Day pointed out that the results included sales in line with the company's expectations, earnings that beat its guidance, and earnings growth that returned to a double-digit run rate. While the company guided for a disappointing fourth quarter, which Day attributed to "both macro and execution issues," she still expects growth to come for years ahead. This suggests the weak quarter ahead will be part of these rapid growing pains.

For the fourth quarter, Lululemon expects sales between $535 million and $540 million, flat same-store sales, and earnings per share between $0.78 and $0.80.

In the conference call, CFO John Currie warned, "We've experienced a soft start to the fourth quarter." He explained that the supply chain had a large number of hires who are going through training or gaining more experience, which will help out in future quarters.

Lululemon may have been growing faster than it can handle in such a short amount of time. Over the long term, it's a great problem to have. Currie believes that this problem temporarily cost the company sales and orders, but Lululemon has gotten up to speed and it should be back on track in future quarters.

On top of all of this, Lululemon said it is seeing "a slowdown in traffic to our stores" and "a difficult macro retail backdrop, with all retailers experiencing lower traffic." You have to admit -- with all of these problems, Lululemon is still holding its head above water for the fourth quarter, plus it has a good outlook for beyond then. Lululemon identified its problems, put the fixes in, and solved the problems. Now, to quote Currie, "As we go through next year you'll see continued improvement in product flow."

What about others such Under Armor and Nike?
Last quarter, Under Armour saw similar outstanding growth. Net revenue jumped 26% to $723 million. Earnings per share also leaped 26% to $0.68. It was the 14^th quarter in a row of net revenue gains over 20%. http://finance.yahoo.com/news/under-armour-reports-third-quarter-110000919.html

CEO Kevin Plank said that Under Armour saw "success across our business." He credited the success with the company's "newness and innovation" that the customer is responding to. This suggests that despite the challenges in the economy, guest will still open their purses and wallets for the type of products Lululemon and Under Armour sell.

Meanwhile, Nike reports after hours on Dec. 19.  Last quarter Nike showed strong growth percentages despite its already enormous size.  Revenue was hopped 8% to $7.0 billion.  Future orders also rose 8%.  Diluted earnings from continuing operations exploded 37% to $0.86. http://finance.yahoo.com/news/nike-inc-reports-fiscal-2014-201500826.html

Foolish final thoughts
One quarter doesn't make any company, and Lululemon is no different. With very strong historical results and an optimistic outlook for 2014 and beyond, Fools may want to consider forgiving Lululemon and keeping it on watch. The long-term profitable growth trend is still in place while others in the industry such as Under Armour and NIKE prove that it's still possible to grow significantly in this environment. If the stock pulls back further with no new public or macro news, it may be an opportunity to snatch a long-term winner at a discount.

Many investors know Novartis for its robust dividend, a diversified business that ranges from vaccines to generic drugs, and the discovery of the revolutionary chronic myeloid leukemia, or CML, drug Gleevec. This multibillion-dollar product was a breakthrough for patients when it hit the market more than a decade ago, but many investors may not know that its development was almost stopped in its early stages due to low sales expectations. So, why did the company charge ahead with the drug's development anyway? Why did Novartis decide to forget the forecasts and focus on the science instead?

In the video below, analyst Max Macaluso and Bernard Munos, founder of the InnoThink Center for Research in Biomedical Innovation, discuss why forecasts in the pharmaceutical industry can be dangerous to follow and how Novartis has focused on the development of breakthrough drugs. A transcript follows the video.

Bernard Munos: The first company that realized that something was amiss and needed to change was Novartis, with the Gleevec experience. When the Novartis planners were trying to kill Gleevec because it was a product that was supposed to peak at $50 million of sales -- and now Gleevec sells about $5 billion, which is about the accuracy of those new product forecasts.

Daniel Vasella, who was a physician, knew in his guts that Gleevec was a cure for cancer -- the first cure to ever hit mankind, literally, for cancer. To his credit, he was determined that he was not going to be the CEO to kill the first cure for cancer.

Then he did the obvious, which was look at the reliability of those new product forecasts, that all the pharmaceutical companies use to determine which product they're going to move forward and which products are they going to kill, and realized -- which was not hard to do -- that those forecasts had basically zero reliability. The notion of using bogus forecasts to determine what you're going to invest in was sheer nonsense.

Max Macaluso: So, instead of forecasts, what did they do?

Munos: We know now -- we didn't quite understand back then -- but we know now that, mathematically, you cannot forecast anything in this industry. It's not that we're bad, but eventually we will be good. It's that we're bad and we'll never be good, because you cannot forecast anything in this industry, so you have to do something that they don't teach you in business school; how to run a business without the benefit of a forecast.

Unfortunately, a lot of the senior leadership in the industry went to business school -- I went to business school -- and that's what they teach you, so if you don't have benefit of a forecast, you're clueless; and I think that's what you saw across the industry.

Novartis did it the clever way. They basically said, "OK, forecasts aren't reliable, so we're not going to use them. Now, on the other hand, scientists are usually pretty good at identifying a breakthrough when they see one and me -- Vasella speaking -- as a scientist, I can recognize a breakthrough in Gleevec, and therefore this is a standard that we will be using. We'll look at this thing, and we will only move to the clinic things that can change the status quo, that will cause physicians to abandon what they've been doing, and embrace that new therapy."

This is actually something worth thinking about. I'm often asked -- because I've been advocating the development of breakthrough therapies -- I'm often asked, "How do you define a breakthrough?"

With Fiat's help, Chrysler overhauled key products like the Jeep Grand Cherokee. Sales and profits have soared. Now, Fiat would like to own the rest of Chrysler -- and that puts Chrysler's IPO in doubt. Photo credit: Chrysler

Will Chrysler ever go public?

The company continues to say that an initial public offering is in the works. But it has been postponed: Originally scheduled for last week, the IPO of Detroit's No. 3 automaker will now happen sometime next year, officials say. 

Bloomberg has reported that the delay is due to the need to get some documents from the IRS. But is something else going on?

There's good reason to think so. In this video, Fool contributor John Rosevear explains what might really be happening behind the scenes with Chrysler and its majority shareholder, Italian automaker Fiat  -- and why there's good reason to think that this IPO might not happen after all.

The new Ford Mondeo is China's version of the Fusion sedan. It arrived at Chinese dealers in August, and sales have been strong. Photo credit: Ford Motor Co.

Ford  had a great year in China last year. Its Focus was China's best-selling vehicle family, and sales were up big. But that was nothing compared to what we've seen in 2013: Through November, the Blue Oval's sales in China are up a whopping 51%.

That growth rate is far beyond what big rivals like General Motors  and Volkswagen  have managed to put up this year. And Ford recently passed giant Toyota  in Chinese-market sales. What's Ford's secret? 

Ford's secret is that the company's current lineup has hit a "sweet spot" with Chinese customers. Quite a few middle-class Chinese folks say they want a new car that's nice, well-equipped with lots of high-tech features -- but that isn't flashy or ostentatious. Many of those customers find that Ford's latest products are just what they wanted.

In this video, Fool contributor John Rosevear looks at the latest numbers from China and at how Ford is already moving to keep this great growth story going over the next few years.

Microsoft and Sony are off to the races in the war for console supremacy. And if a recent report is any indication, it appears Microsoft and Sony are matching one another in the early innings of this high-profile storyline.

Microsoft keeps pace
Until last week, Sony was more proactive in releasing data regarding the health of its PlayStation 4 console sales, which appear to be chugging along at a healthy clip. On Dec. 4, Sony fired a shot across Microsoft's bow, saying its total PlayStation 4 sales had reached 2.1 million through Dec. 1.

Microsoft certainly wasn't in a hurry to answer. However, Microsoft finally answered back, saying Xbox One sales had surpassed 2 million units as well. Also, of equal importance, it had achieved this figure in nearly the same number of days as Sony. 

Looking at the bigger picture
This most recent news from Sony and Microsoft paints their respective console sales as matching one another blow for blow.

However, this might not be the ultimate sign that Microsoft's Xbox One and Sony's PlayStation 4 launches have been proven successes, That, as tech and telecom analyst Andrew Tonner discusses in the video below, may take much longer to ultimately prove.

Darden Restaurants will release its quarterly report on Thursday, and the company behind the popular Olive Garden and Red Lobster restaurant chains has investors expecting further deterioration in its corporate earnings. Even as competitors DineEquity and Brinker International fight for dominance in the casual-dining arena, Darden has its own investors looking for ways to encourage the restaurateur to get its share price moving in the right direction again.

The restaurant industry attracts millions of diners each year, but from an investor's point of view it's fraught with peril. Low margins and finicky customers make it tough to eke out profits even in the best of times, and in tough economic times eating out is an easy discretionary purchase for Americans to pull back on. Yet for Darden, things have just gotten interesting for investors, as an activist group has proposed a plan it thinks could send the stock soaring as much as 50%. Will it help Darden beat Brinker and DineEquity or merely serve to distract management as it tries to bolster earnings? Let's take an early look at what's been happening with Darden Restaurants over the past quarter and what we're likely to see in its report.

Source: Darden Restaurants.

Stats on Darden Restaurants

Source: Yahoo! Finance.

What's happening with Darden Restaurants?
In recent months, analysts have cut their views on Darden earnings, reducing estimates by $0.03 per share for the quarter ended in November and full-year fiscal 2014 projections by about 3%. The stock has risen, though, climbing 8% since mid-September.

Summer wasn't kind to Darden, with its report for the quarter ended in August showing weakness in same-store sales and earnings. Red Lobster saw comparable-store sales fall 5.2% during the quarter, with Olive Garden posting a 4% decline in comps. Those results weren't entirely inconsistent with what Brinker and other competitors reported a couple of months earlier, but they nevertheless were discouraging.

One ongoing problem for Darden has been the move toward faster-service chains. Chipotle Mexican Grill and Panera Bread have been big beneficiaries of the shifting trends in the restaurant industry, with both chains boosting same-store sales even in light of Darden's poor performance. With Darden having made pricing and menu choices that have caused customers to question the value of its offerings, traffic trends show that diners are voting with their feet, to Darden's detriment.

Darden's competitors have taken varying responses to shifting trends. Brinker is pushing forward with ambitious growth plans for its Chili's and Maggiano's restaurants that it hopes could take its earnings per share up 15% or more in fiscal 2014. Meanwhile, DineEquity has moved toward a franchise model for its Applebee's and IHOP restaurants, raising expenses temporarily but leaving the company in a better position to see more stable results going forward.

But the biggest news for Darden this quarter came from activist investor Barington Capital, which took a nearly 3% stake in the stock back in October. Barington thinks that Darden should break up into separate entities, with faster-growing small chains going into one entity and Olive Garden and Red Lobster continuing in the other. Just yesterday, Barington recommended a plan that could also include spinning off the chain's real-estate holdings into a separately traded real estate investment trust, taking advantage of investors' appetite for income-producing properties with reliable long-term tenants.

In the Darden earnings report, watch for management to address Barington's recommendations and come up with a viable recovery strategy of its own. Unless Red Lobster and Olive Garden start performing better, shareholders might well start siding with the activist investor and its efforts to get Darden's stock moving in the right direction.

Click here to add Darden Restaurants to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Joy Global shares are down over 15% so far this year, as weak mining markets have hampered its top and bottom lines. Fiscal 2013 was a tough one, and next year doesn't appear like it will be much better. However, if you watch mining stocks, it's worth reading a bit deeper into Joy's results to see both the positive and negative trends taking shape.

JOY data by YCharts

Copper, a bright spot
In the company's fiscal 2014 conference call, Edward Doheny, Executive Vice President at Joy, stated that "global copper markets continue to see the strongest commodity fundamentals." That's good news for companies like Freeport-McMoRan Copper & Gold , Southern Copper , Rio Tinto , and BHP Billiton . Southern Copper and Freeport-McMoRan both have large copper reserves and notable exposure to the metal. More diversified BHP Billiton and Rio Tinto provide less exposure, but copper still makes up a notable part of each company's business.

Joy expects copper consumption to be up 3.6% in 2013 and highlights a 30% drop in copper inventory levels since the start of the year. And it's still seeing solid demand for its mining equipment out of South America. So, this quartet should be well situated for growth on the copper front as we start the new year.

Iron ore and metallurgical coal
Doheny sees iron ore prices holding, but is quick to point out that "a lot of capacity has been added." So, even though iron ore demand is reasonably strong, with steel production up about 4%, new supply could keep prices weak in 2014. That's bad news for iron ore miners like BHP Billiton and Rio Tinto. Both companies have notable exposure to the steel industry.

In fact, not only does the pair mine for iron ore, but they are also producers of metallurgical coal. Met coal is used in the steel making process. And on that front, Joy's Doheny provides a notable insight: "We know where we put in a lot of our longwall systems around the world. And so we know we have some high productivity, low-cost [met coal] production coming online in 2014."

So while weak met prices are leading to mine closures, new mines could easily make up for that. This, in turn, could keep met coal prices weak in 2014. So while copper is good news for BHP and Rio, iron ore and met could be bad news for the giant diversified miners.

A thermal rebound?
Joy's Doheny believes that thermal coal is "bouncing around the bottom" and sees "some opportunities probably more in thermal coal in the second half of the year." That will be good news for thermal coal focused companies like Cloud Peak Energy , but also for more diversified Peabody Energy . In fact, even Rio and BHP will benefit from an uptick in thermal coal, since they both have modest exposure to the fuel.

That said, Cloud Peak is the most focused on thermal coal. It operates out of the ultra-cheap Powder River Basin (PRB) in the United States and is working to increase its export business. Peabody, meanwhile, gets about half of its sales from U.S. thermal coal (from the PRB and similarly cheap Illinois Basin) and also mines for thermal coal in its Aussie business. Unfortunately for Peabody, though, it also mines met coal out of Australia. So Joy Global's outlook isn't totally positive for the coal giant.

Changing Markets
Doheny notes that "In the last 24 months, we've seen over 25 new CEOs at mining companies take over with a focus on cost reduction and returns to shareholders after years of focus on growth and investment." That's clearly been bad news for Joy's business, but it highlights changes taking place in the mining industry that will, eventually, lead to higher commodity prices again. Right now, copper and thermal coal seem furthest along in the correction process.  

On Dec. 13, pop superstar Beyoncé surprised fans and retailers alike with the unexpected release of her fifth studio album, the self-titled, 14-track album, Beyoncé, for $15.99 as an Apple iTunes exclusive. Unlike most other iTunes albums, there is no option to purchase the tracks separately, and each track comes with an accompanying music video with three additional video clips.

It was a stunning coup by Apple -- it had secured the exclusive digital release of a high-demand album, which was not offered to brick-and-mortar retailers or other digital streaming sites such as Spotify, Rdio, and Pandora .

Album art from her previous album, 4. Source: Wikimedia.

Beyoncé's release pleased fans, and the "visual album" has already sold nearly 830,000 albums as of Dec. 16, but brick-and-mortar retailers were not amused.

In response to her decision to offer it through iTunes first, Target announced that it would not sell a hard copy of Beyoncé's new album when it is released. In an interview with Billboard, a Target spokeswoman said that "when a new album is available digitally before it is available physically, it impacts demand and sales projections".

It's doubtful that Beyoncé is losing sleep over Target's decision -- her album has already broken the first-week digital sales record for an album in the United States, and will debut at No. 1 on Billboard's Top 200 albums chart next week.

However, Beyoncé's new album highlights the ongoing battle between digital and brick-and-mortar retailers in media sales. Let's take a look at how much digital distribution channels like iTunes have affected sales of physical CDs over the past few years.

Physical vs. Digital Music Sales: 2007-2013

As 2013 comes to an end, total physically packaged music sales in the U.S. will decrease to $13 billion -- nearly half of its sales in 2007, the same year that Apple introduced the iPhone.

Digital music sales, on the other hand, have risen from $2 billion to $10 billion during the same period, thanks to robust growth in online stores like iTunes and streaming services. Packaged music revenue will only account for 55% of total music sales by the end of 2013 -- down from 61% last year.

Based on those figures, it's easy to see what will happen in 2014 and beyond -- stores like Target, Wal-Mart , and Best Buy will have an increasingly tough time selling physical CDs. To make matters worse, brick-and-mortar stores must deal with two digital threats -- online markets and streaming music.

Beyoncé's album is a clear vote of confidence for online markets, and not the streaming music that companies like Spotify, Rdio, and Pandora offer.

Selling the entire album, rather than individual tracks, reflects the opinions of several other musicians, such as Jon Bon Jovi, who disapproves of selling an album by individual tracks. Back in 2011, Bon Jovi famously accused Steve Jobs of destroying the "magical experience" of purchasing an entire album, which he considers a complete work of art.

What this means for brick-and-mortar retailers

The impact of digital music on brick-and-mortar retailers started with the introduction of Apple's iPod in 2001. Prior to the iPod, MP3 players could only hold the equivalent of a single album on a memory stick. The iPod, which was fitted with a mini-hard drive, could store 1,000 songs.

The iPod arrived at a crucial time for music retailers. Sales of CDs had been plunging since 1999, following the launch of Napster, the controversial file-sharing service that became a hotbed of pirated music. Best Buy, which purchased Musicland (formerly known as Sam Goody) in 2001, was forced to unload the chain two years later after its annual revenue plunged by 20%.

Two game-changers: The iPod (2001) and Napster (1999). Source: Apple, Pcmag.com.

On its own, Musicland tried to embrace downloadable music and ringtones at download terminals in its stores. It didn't help, since it made little sense to visit a store to accomplish what could be done from a computer at home. As a result, the chain filed for bankruptcy protection in 2006 and closed most of its stores.

Today, there aren't many dedicated CD/Vinyl chains like Musicland left in the United States. This is what the current retail music market looks like, according to Billboard:

Source: Billboard.

Although Target has made a stand against Beyoncé for being snubbed, Wal-Mart appears to have taken advantage of its rival's aggressive stance, stating that Wal-Mart was "happy to be able to carry her album and support all physical music."

What this means for other musicians

Beyoncé's new album highlights four interesting facts --

• Releasing an album first via digital distribution is a viable way to test the market without launching an expensive full-scale physical release.

• Digital albums can provide plenty of attractive bonuses, such as extra music videos.

• The opinion of brick-and-mortar stores like Target doesn't matter very much.

• In the near future, musicians could decide to cut physical retailers out of the loop altogether.

Beyoncé's move could represent the start of a major shift in the music industry -- one which could encourage more artists to digitally release their albums first. Over time, physical CDs could fade away just as records and cassette tapes did over the past few decades.

What do you think, dear readers? Will Beyoncé's new album change how musicians release their albums in the future? Let me know in the comments section below!

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Federal Reserve's monetary policy committee concludes its two-day meeting today, and the market will be fixated on whether policymakers decide to scale back the central bank's $85 billion in monthly bond purchases. In that context, stocks opened slightly higher this morning, with the S&P 500 and the narrower Dow Jones Industrial Average up 0.20% and 0.39%, respectively, at 10:12 a.m. EST.

With all eyes on the Fed, expect fundamentals to take a back seat today -- and that's precisely why I'm taking the opportunity to highlight a fundamental story in FedEx's results for the fiscal second quarter ended Nov. 30 (i.e., part way through the crucial Thanksgiving holiday shopping weekend.) Let's get the headline numbers out of the way: FedEx missed Wall Street expectations with earnings per share of $1.57 versus a consensus estimate of $1.64, according to the quarterly report released this morning. That may end up weighing on FedEx shares today -- they opened down 0.7% at a.m. EST.

Should that be the case, it looks shortsighted for a number of reasons.

First, revenue was exactly in line with the consensus estimate at $11.43 billion. Furthermore, the delivery specialist is committed to boosting its operating margin to 10% in the medium term from 7.2% in the prior fiscal year. The related cost-cutting exercise has already born fruit: the company's operating margin in the last quarter was 7.3%, up from 6.5% in the year-ago quarter.

That margin improvement program is ongoing and there is reason to believe further progress is attainable. On Monday, in reiterating its buy rating for FedEx and raising its price target from $135 to $183, Deutsche Bank wrote:

We believe FDX represents a unique investment story (a large cap that can drive above-average earnings growth due to a self-help story) with operating leverage to a potential global economic recovery. We expect that FDX should begin to realize the benefits of its workforce reductions and various profit improvement initiatives at Express during CY2014...

Second, while FedEx may have shown an earnings miss, it raised its guidance for earnings-per-share growth for the full fiscal year to 8% to 14% (from 7% to 13% previously). There is potential upside to this number, too, as it does not account for any additional share repurchases. Note that the top end of the new guidance range gets us to $7.10 in EPS for fiscal 2014, which is ahead of the current Wall Street estimate of $7.03.

Finally, operating margin in FedEx's second largest segment, FedEx Ground, fell to 14.9% from 15.9% due to the calendar. As the company explained in its earnings release:

Operating margin declined primarily due to this year's later start of the holiday shipping season, as Cyber Week occurred in December this year versus November last year. The seasonal increases in volume, revenue and operating income related to Cyber Week will be realized in this year's third quarter versus the second quarter last year.

As such, FedEx -- and its shareholders -- could still see some holiday cheer in the next quarter.

When life gives you lemons, make lemonade. When the Environmental Protection Agency stunts the growth of renewable fuels and forces you to keep halted construction projects in limbo, make an acquisition. That's exactly what Renewable Energy Group  did by agreeing to purchase the assets of Fischer-Tropsch gas-to-liquids, or FT GTL, company Syntroleum. There are some assets that will make a nearly immediate impact, such as a 50% interest in a Dynamic Fuels joint-venture with Tyson Foods , which also allow REG to directly compete with Darling International and Valero in renewable diesel.

REGI data by YCharts

Then again, there are also assets that are difficult to fit into the company's current business plans, such as FT GTL technologies -- dependent on a licensing agreement with ExxonMobil -- that use natural gas or coal, rather than renewable feedstocks, to produce fuels. Given the seemingly divergent focuses, what can investors expect REG management, which has been extremely efficient with prior acquisitions, to do with Syntroleum's assets?

How Dynamic Fuels adds value
REG acquired virtually all of the assets and liabilities of Syntroleum for about 3.8 million shares, which could be reduced if the market value of the shares exceeds $49 million (an average share price of $12.91) or if less than $3.2 million in cash is transferred to REG. Therefore, we'll assume the maximum net value of the transaction is about $46 million. Considering that Dynamic Fuels owns a 75 million gallon per year renewable diesel biorefinery, of which REG now owns 50%, the acquisition price works out to a little more than $1.20 per gallon of annual capacity for a facility that cost $150 million to build.

That's virtually the same as prior acquisitions on a capacity basis, but it could turn into a steal. How?

REG owns the capital, knowledge, and personnel to run the Dynamic Fuels biorefinery in a way that Syntroleum could only dream of. While the facility sports an annual nameplate capacity of 75 mmgy, it has only produced 66.8 million gallons of renewable products since December 2010. A steady stream of delays contributed to higher than expected operating costs that shelved operations and ultimately placed the facility in standby mode over one year ago. Expect Tyson and REG to smooth out production and process kinks and begin production as soon as logistically possible.

A worker monitors a hydrogen compressor at the Dynamic Fuels facility. Source: Syntroleum.

Additionally, renewable diesel (fuel produced with 50% less lifetime greenhouse gas emissions than petroleum diesel and qualifies as an advanced biofuel) currently earns a $1.00 per gallon tax credit, while biomass-based diesel (traditional biodiesel) only earns $0.50 per gallon. That may or may not be extended in 2014, but advanced biofuels will continue to capture premium credits regardless.

Competition heats up for Darling and Valero
The acquisition of assets capable of turning renewable feedstocks into synthetic renewable diesel will allow REG to more directly compete with Darling International and Valero, which formed the Diamond Green Diesel joint venture that consumes 11% of the nation's used cooking oils and animal fats. Darling plays the part of feedstock supplier, while Valero offers the operational expertise to run the company's 137 mmgy renewable diesel biorefinery. Insert "Tyson" and "REG" to develop a similar storyline, although Dynamic Fuels is 45% smaller.

At any rate, I like that REG didn't sit idly by and watch the market supply of an important next-generation feedstock become controlled by a competitor. Tyson presumably has more waste animal fats and cooking oils at its disposal that can be upgraded into fuels. It will be interesting to see how the two proceed now that the nation's largest biodiesel company, rather than financially challenged Syntroleum, owns the technology to make it happen.

Consider the rest gravy
Will REG ever produce a drop of diesel or jet fuel from natural gas or coal? Perhaps, although without a specific vision outlined by management I don't see how FT GTL from fossil fuel feedstocks quite fits. The technologies still require substantial research and development investments to make it to commercial scale, and even that wouldn't guarantee market acceptance. Therefore, I think it's more likely that REG utilizes Syntroleum's FT GTL assets as they relate to biomass feedstocks. Maybe the company pursues the technology, or maybe it sells the assets in the future, but I just don't see natural gas or coal making an appearance as a feedstock any time soon.

Foolish bottom line
I think there is plenty to like about REG's recent purchase, even if it does increase outstanding share count by 10%. The acquisition won't use any of the $135 million in cash on the balance sheet, which could be a huge advantage assuming the Dynamic Fuel facility restarts operations in the first half of 2014. The longer term implications are even better for shareholders: The company's annual production capacity will increase from 257 mmgy to 294.5 mmgy -- with the gains comprised of higher-margin renewable diesel. It also cements REG's leadership position in the biodiesel industry by responding to increased competition from Darling and Valero on the supply of next-generation feedstocks. These are good times to be a REG shareholder.

AMC Entertainment's IPO this morning is going to be drawing plenty of attention, and it's easy to see why. The leading exhibitor has a wide empire of 4,950 screens across 343 movie theaters. It entertains 200 million guests a year. 

However, investors jumping into their seats for AMC's latest stint as a public company may want to consider buying into the faster-growing potential of IMAX instead. There's nothing inherently wrong with AMC. It's been profitable since posting a loss in fiscal 2011. Its network of screens isn't growing very quickly, but the company has been rolling out Coke freestyle machines to give consumers more beverage choices, adding RealD 3-D to nearly half of its screens to drum up more revenue per patron, and gradually installing motorized recliners to make a night at the movies as cozy as being at home. 

However, AMC's growth hasn't been all that impressive. It rang up $2.4 billion in fiscal 2011, and $2.5 billion in fiscal 2012. During the past 12 months, revenue has clocked in at $2.7 billion. Slow-and-steady growth is impressive, but IMAX offers heartier potential. Yes, revenue fell 5% in 2011, but IMAX bounced back, with revenue climbing 20% last year. Analysts see revenue sliding 2% this year, only to bounce back with a 14% pop next year. It's lumpy, but over time, it translates into healthier growth.

Even AMC's own future seems to indicate healthier growth for IMAX than AMC itself. It expects to add 157 new screens to its empire during the next five years, a 3% increase. Meanwhile, that same five-year deployment plan sees its IMAX screens increasing 10%, to 150 supersized screens. Additional RealD screens, by the way, are only expected to increase by 4% at AMC in that time.

IMAX bears will argue that AMC, and other multiplex operators, are rolling out proprietary big-screen formats, and AMC's prospectus points out that the chain will more than double its fleet to 34 ETX screens by 2018. However, AMC is generating $0.58 more per guest for IMAX relative to ETX. Moviegoers also know that there's a big difference between a movie that's been remastered for IMAX's projection system, sometimes with additional footage shot with IMAX cameras, and one that's simply being blown up for ETX. 

IMAX also offers broader global appeal. Orders for IMAX screens outside of North America continue to grow and, just this morning, Asia's largest exhibitor confirmed that it will be installing an additional 80 IMAX screens across China. 

The market ate up AMC's IPO today. The deal was priced at $18 last night, opening 7% higher in this morning's debut. However, the real feature presentation is IMAX as a global play on worldwide audiences clamoring for premium viewing experiences.

Photo credit: SandRidge Energy.

Royalty trusts like SandRidge Permian Trust can pay investors very well. The problem is that these payouts can fluctuate wildly from quarter to quarter. Worse yet, at some point in the future the payouts will end and leave an investor with nothing but memories. That's why I'm not very fond of royalty trusts and believe investors looking for steady income in 2014 are better off looking elsewhere.

The SandRidge Permian Trust has actually been a steady income producer over the past year, paying an average quarterly distribution of $0.59 for a total payout of $2.35 in 2013. At the present unit price that's a staggering 20% yield, which is why investors are drawn to owning its units.

Still, I'm not a fan of trusts in general, and when it comes to the SandRidge Energy trio of trusts I have three specific issues that keep me from ever considering adding any of these units to my portfolio. To start, these trusts were created to benefit SandRidge Energy first and foremost. As a SandRidge Energy investor I'm completely on board with that idea as the company needed drilling capital and creating the trusts was a creative way of accessing the capital markets. However, these trusts, which also include SandRidge Mississippian Trust I   and SandRidge Mississippian Trust II , were created to fuel the growth of SandRidge Energy above all else.

The second issue I have with trusts like SandRidge Permian is that there is no future growth after SandRidge Energy completes its drilling obligation between now and March 31, 2016. It's really all downhill after that, as the production from the wells SandRidge drilled will simply continue to naturally decline, with no new production coming online to offset that decline. Further, the trusts aren't allowed to grow organically or through acquisition as an upstream master limited partnership like LINN Energy can.

While the payout can grow in the interim as SandRidge Energy drills new wells, in addition to income growth from rising commodity prices, the growth of the trust is capped beyond that. In fact, the Permian Trust is scheduled to dissolve and begin to liquidate in 2031. While that's a long way off, having an expiration date and no growth isn't the ideal combination for a long-term investor. Especially when an MLP option such as LINN Energy is likely to still be steadily growing its distribution to investors at that time.

The third and final reason why I personally wouldn't trust these big payouts in 2014 is the fact that SandRidge Energy is actively selling down its position in all three trusts. SandRidge created the trusts to fund its drilling program and continues to use the trusts as currency to keep on drilling for its own account. For example, earlier this year SandRidge Energy sold 1 million shares of both the SandRidge Permian Trust and SandRidge Mississippian Trust II for a total of $30 million. It was the fourth time since the trusts' initial public offerings that SandRidge harvested some of its units. There will be a constant overhang on the units until SandRidge Energy sells all of the units it owns.

These reasons are on top of the fact that the actual distributions of these trusts have typically underperformed the targeted distribution. As an investor who prefers a steady payout, these fluctuating distributions aren't something I want in my portfolio. There are just so many other rock-solid income stocks that an investor can own, which is why I wouldn't trust any of these trust-funded dividends in 2014.

Homebuilder Lennar Corporation reported earnings today of $0.73 per diluted share for the three months ending Nov. 30, an increase of more than 30% relative to the $0.56 per share posted during the same period last year.

Lennar's revenue jumped 42%, or $565 million, to $1.9 billion in its 2013 fourth quarter. This was the result of increases across the board in its pertinent metrics, as its deliveries (up 27%), new orders (up 13%), backlog of homes (up 19%), and average sales price (up 18%) all rose in the most recent quarter. Lennar said home deliveries rose to 5,650 homes, new orders climbed to 4,498 homes, and backlog increased to 4,806 homes. The average sales price of homes delivered increased to $307,000 in the fourth quarter of 2013, up from $261,000 in the same period last year.

Lennar also saw its profitability increase tremendously, as its gross margin on home sales stood at 26.8%, an improvement of 3.3 percentage points, and its operating margin on home sales was up 4.7 percentage points from 12.2% to 16.9%.

All of this led to Lennar's earnings before income taxes (EBIT) rising more than 160%, or $172 million, from $105 million to $277 million. The reason for the less dramatic gain in total earnings per share was due to the fact that in the comparable quarter in 2012 Lennar saw a gain of $19 million from a tax benefit, whereas this quarter it had a $94 million provision for taxes.

"We begin 2014 with a strong balance sheet and a clearly defined strategy, and we are extremely well positioned across all of our platforms to continue to grow profitably our operations and capitalize on the opportunities of a recovering housing market and economy," said Stuart Miller, Lennar Corporation's CEO.

For the year ending Nov. 30, 2013, total revenues at Lennar were up $1.8 billion, or 45% relative to last year. In additions its EBIT was up more than 200% from $222 million to $682 million, an increase of $460 million.

"Fiscal year 2013 was an excellent year for Lennar, with revenues and pre-tax earnings attributable to Lennar increasing 45% and 170%, respectively, from 2012," Miller continued. "Our earnings accelerated in the fourth quarter, fueled by the strategic investments and operating initiatives of our core homebuilding business."

-- Material from The Associated Press was used in this report.

Rumors are now floating around that Microsoft could be planning to launch a Surface Mini -- yet another device in Microsoft's lineup of Surface tablets. The initial rumors indicate that this is probably going to run full Windows 8.1 and pack an Intel quad-core Atom system-on-chip, which -- from a broad-strokes perspective -- makes it similar to the recently released Dell Venue 8 and Lenovo Miix 2. While such a device could be interesting, it seems almost unnecessary, and it could be a long-term mistake.

Competing with partners is tricky business
The biggest issue with Microsoft's tablet strategy is that it directly competes with the companies that license its Windows operating system and Office productivity suite. It's not difficult to see what the problem is: While Microsoft gets the OS and Office at cost, the device vendors need to pay a non-trivial sum for these. This means that Microsoft either ends up with a real gross margin advantage over its partners, or it ends up with the ability to undercut its partners at the same gross margin level.

It's not hard to see why Microsoft would initially be attracted to this; selling a $250-plus device and collecting the hardware margin is much more lucrative on a per-unit basis than simply selling a set of software licenses. Unfortunately, the flip side of this is that hardware vendors may end up reluctant to compete in the Windows space and could end up putting their collective weight behind Google's Android. While Google does compete here with its Nexus-branded products, the search giant doesn't charge OEMs to use the platform.

A Surface Mini could be interesting, but Microsoft needs to be careful
Microsoft's tablet offerings today consist of a bulky, hybrid PC/tablet Surface Pro 2 as well as a much thinner, but more limited, Surface 2 that runs the RT platform. These are generally well-made devices, and thanks to Microsoft's deep pockets, it has been able to market them successfully. It would make sense, then, that Microsoft plans to extend its product lineup to include a 7-inch or an 8-inch device running Windows 8.1.

On one hand, this will probably sell pretty well, as the demand for the smaller Windows 8.1 tablets from Dell and Lenovo seems to be healthy and the reviews positive. On the flip side, if Microsoft's new Surface Mini ends up taking away market share from the tablets that its vendors are putting out, then those major OEMs will probably significantly scale back their Windows efforts. There would be little point in investing the engineering resources and marketing dollars to try to fight Microsoft -- a behemoth much larger than any traditional PC OEM. Microsoft needs to be careful.

Foolish bottom line
Microsoft will eventually need to choose between wanting to be a device vendor or an ecosystem provider. The former has the potential to be more lucrative if the mobile device market doesn't see continued margin erosion and a shift toward lower-priced parts. The latter is safer, very profitable, and allows the company to go after a much broader swath of the market with comparatively little risk.

As long as the OEMs are willing to work with Microsoft -- and as long as Microsoft can provide a meaningful value-add with its Windows OS over Google's Android -- then it makes more sense for Microsoft to take the role of ecosystem steward. However, if the device vendors don't want to pay for Microsoft's software, it makes sense for Microsoft to go at it on its own.

Microsoft's final course of action won't be be apparent for years to come. But for now, Microsoft should take note of the fact that its ecosystem partners want to work with it, and then run with it.

Over the last three months, Delta Air Lines   and Alaska Air have gone to war over market share in Seattle, despite remaining partners in name. In October, when Delta began its recent round of expansion in Seattle, it was at least plausible that the company wanted to maintain a good working relationship with Alaska Air. Today, it's hard to make that case anymore.

On Tuesday, Delta announced an expansion of its Seattle service for the fourth time since October. Once again, it is targeting markets where Alaska Air is the leading carrier. This looks like a pretty clear-cut case of retaliation for Alaska's recent decision to expand at Delta's Salt Lake City hub.

A spiraling rivalry
On paper, at least, Delta is expanding short- and medium-haul service in Seattle in order to support its growing international gateway there. By next summer, Delta will offer nine daily nonstops to eight destinations in Asia and Europe from Seattle.

Delta is rapidly growing its presence in Seattle.

Delta's first two rounds of expansion made sense in the context of providing connecting traffic for international flights. Delta primarily targeted big markets: Los Angeles, San Francisco, Las Vegas, San Diego, and Portland, although it also added a second seasonal daily flight between Seattle and Anchorage.

However, earlier this month, Delta added service from Seattle to Vancouver and Fairbanks, two cities that seem less likely to generate significant connecting traffic for Delta's international flights. Vancouver has ample international service of its own. Flying through Seattle would mean enduring an extra trip through customs and -- for some travelers -- securing a transit visa. Meanwhile, Fairbanks is a small market that isn't likely to generate much international travel.

Trading blows
The latest round of growth in Seattle began with Alaska's decision to boost service on the Seattle-Salt Lake City route it launched back in April, while starting new service from Salt Lake City to Portland, San Jose, San Diego, and Los Angeles. Salt Lake City is a midsized market dominated by Delta that is not core to Alaska Air's business. Alaska's sudden interest in Salt Lake City is almost certainly not genuine; it was merely sending a message to Delta about encroaching on its turf.

Rather than backing down, Delta is escalating the capacity war further. It now plans to start four-times-daily service between Seattle and San Jose (another major route where Alaska Air has more than 50% market share). It is also adding a third seasonal daily flight between Seattle and Anchorage and beginning seasonal service between Seattle and Juneau.

While the San Jose route has some utility for providing connecting traffic to international routes, the additional seasonal flying to Alaska is all about stealing domestic traffic from Alaska Air. After all of its recent announcements, Delta will offer five daily round-trips between Seattle and the state of Alaska next summer -- up from just one this year.

Look out!
Delta's planned growth in Seattle is stunning for a carrier that is expanding just 1%-2% a year overall. According to Tuesday's press release, Delta will have 79 daily departures from Seattle next summer. That's more than double the number of flights it currently offers and almost twice as many as it provided last summer!

The level of capacity growth that will occur in Seattle in 2014 is clearly more than the market will be able to absorb at current fare levels. As a result, Alaska, Delta, and other competitors are likely to become embroiled in fare wars on various routes from Seattle, as the airlines look to stimulate demand with lower prices.

For Delta, this is a manageable threat, simply because Seattle is still a relatively small part of its network; for example, it has more than 900 daily departures from its Atlanta mega hub. Even if it earns low (or negative) margins in Seattle next year, it is building a strategically important international gateway, which should deliver long-term returns that justify the initial costs.

Alaska Air could be in for some rough sledding in 2014 due to Delta's tough competitive stance.

For Alaska, the picture is more muddled. The company has a very strong franchise in the Pacific Northwest and has built up customer loyalty in the Seattle area over the years. That said, most fliers are just looking to score the cheapest fare possible, and this means that Alaska will have to match lower introductory fares from Delta next year on many of its high-traffic routes.

Alaska Air has faced substantial unit revenue pressure in 2013 due to new competition in its core markets. Right now, 2014 looks like it will be even worse from this perspective. Alaska will have trouble maintaining its above-average profit margin if Delta is determined to continue growing in Seattle. As a result, I would not recommend investing in Alaska Air today -- and it could even be a viable short candidate for 2014.

Last week, fashion-forward athleticwear company lululemon athletica  joined the relatively large group of apparel retailers to take a significant dive this quarter. For the industry at large, the issue has been one of poor consumer spending habits, but for Lululemon, the implications may go deeper. The year 2013 has been a terrible one for the company, as Lululemon shed more than 20% of its market value while experiencing the ultimate wardrobe malfunction. Now, with a new CEO set to take the reins in January, the company must prove to investors and analysts (and even customers) that its phenomenal growth story has not ended prematurely. Here's what you need to know.

Earnings recap
In isolation, Lululemon's third-quarter earnings would look pretty impressive, considering the period was one of widespread tepidity in shopper traffic. Net sales grew 20% to $379.9 million, while same-store sales grew a commendable 5%.

On the direct-to-consumer front, sales jumped 37%. This channel now accounts for more than 16% of the company's total sales.

Moving down the income statement, some margin contraction kept the numbers from growing as much as sales. Income from continuing operations grew just 14.6%, to $92.3 million. Net income hit $0.45 per share -- up from $0.39 per share in the third quarter of 2012. Still, both top and bottom lines beat estimates.

Ultimately, investors ran scared from the stock as Lululemon forecast much lower sales ahead for the fourth quarter, and cut its full-year guidance. Same-store sales are forecast to be flat, with the company earning $535 million to $540 million in net sales for the fourth quarter. Full-year 2013 EPS is now expected to be in the range of $1.94 to $1.96 per share.

So, here we are faced with a company that so recently was a market darling -- its five-year return remains well over the 1,300% mark -- and a retail phenomenon, and now can't seem to catch a break. Furthermore, it retains a relatively rich valuation at nearly 25 times forward earnings. What are investors to do?

Combo hit
As many retail-focused investors have heard in recent months, this is considered a highly promotional retail environment -- meaning stores are discounting goods to move them out. Lululemon has long refused to discount its expensive athleticwear so as not to sully its image. In good times, this gives the company great margins compared to its peers. In bad times, things look like they do now.

With a new CEO (formerly of Tom's Shoes and, before that, Burton) in the hot seat starting in January, the company has a chance at starting fresh for 2014, but economic conditions aren't going to improve at the stroke of midnight. For Lululemon to get a breath of fresh air from consumers, investors, and analysts, it needs a spend-happy shopper. Add to that the company's still-hefty valuation, and it's looking like an uphill road for Lululemon. Investors intrigued by the recent fall in stock price should probably wait for the stock to stretch further down before playing a turnaround.

A growing number of television viewers don't want to pay a lofty monthly price for content they have no interest in. Many have decided to forego paying for TV altogether and instead use a digital platform to consume only the content that appeals to them.

Disney's strategy
One strategy being used by content providers like The Walt Disney Company to retain customers over the long haul is to offer a new series on a digital platform. When the series is later introduced on regular television, the customer must verify that they have a subscription to a satellite or cable company before being able to continue watching it.

Disney is attempting to do this with its release of "Sheriff Callie's Wild West," which was introduced on Nov. 24. The release was different than past shows as it was released as an app, and included a website that was connected to the new animated series.

The catch is that Disney will wait until 2014 to release the series on broadcast television. At that time, viewers will have to verify a satellite or cable subscription in order to continue following the series.

What Disney is hoping for is for is that the series will resonate with young viewers. If this happens, the viewers will then pressure parents to buy cable or satellite TV if they don't already have it in order to to continue watching the series. The other part of the strategy is ensuring that parents who already have satellite or cable services will keep them in order to placate their children.

The idea is that the show will slow down the growing number of people who are cutting the cord, or have future plans to.

Viacom and Nickelodeon
Another entertainment company employing a similar strategy is Viacom with its popular Nickelodeon channel. In its case, Viacom has plans to release a Nick Jr. app in the spring of 2014. Those who want to get the most out of the app will have to also verify a cable or satellite subscription.

The company is focusing on the long-term retention of customers as it tries to socialize younger consumers into relying on broadcast television to take advantage of mobile content. It's an attempt to make a connection between mobile and broadcast in order to get the fullest experience available.

Viacom has regained its overall No. 1 position in children's programming this quarter, with Nickelodeon drawing 918,000 viewers a day in the children age group of 2 to 11 years old. Disney has fallen to No. 2 in 2013, with an average of 874,000 viewers a day in the 4th quarter through Dec. 15, according to Viacom, citing data from Nielsen. 

For the year Nickelodeon is projected to grow 12% in cable subscriber and advertising growth, according SNL Kagan, with revenue climbing to $1.77 billion. Over the last two quarters Viacom's ad sales are up 10%. Meanwhile Disney Channel subscriber revenue is expected to come in at about $1.36 billion, up 5.4% for the year.

Time Warner's HBO GO
Time Warner has a similar strategy with its HBO Go service, where users must also authenticate subscriptions to get the most out of the content.

As with the other companies, the point of Time Warner requiring the confirmation of subscriptions is to lock in customers to all of the ways content can be viewed, not only on digital devices.

The success of HBO Go confirms that it is worth taking the steps needed to secure customer loyalty. HBO Go is a unique property for Time Warner, but it shows the promise deals like this have for the industry.

Why the push?
The majority of younger people assume that they can watch content across all platforms. What the industry is attempting to do is bring that demand into the pay-TV business distribution model.

We've touched a little on the reasons behind these types of initiatives. The primary reason is to battle the growing propensity for consumers to cut their cable or satellite services and go with digital distribution as the primary means of content consumption.

Beyond slowing the process, the other major reason on the advertising revenue side of the equation is that broadcast revenue still commands the highest ad prices. The longer that media companies keep people within the pay-TV environment, the more time they have to boost alternative revenue sources.

Digital video is the emerging ad revenue source with the most value, as marketers have stated they are willing to pay more for video than they do for display advertising. They're only waiting for the metrics to be put in place so the number of viewers seeing the ads can independently be confirmed.

The success of these efforts will be tied into the quality of the content. If the content justifies retaining cable or satellite services, I see it being a positive for the industry. There will need to be a lot more series' to make it effective enough to be a positive effect on the bottom lines of companies, though.