In the competitive spirit of college basketball's annual championship tournament, The Motley Fool brings you Stock Madness 2007! Our writers are making head-to-head arguments for their chosen stocks (but not necessarily investment recommendations -- this is, after all, a game), and you'll pick the winners with your article recommendations and Motley Fool CAPS ratings. Who will win the right to cut down the net? Let's tip things off and find out!

This is a matchup of titans. Income Investor selection Diageo (NYSE:DEO) has a powerful grip on the spirits industry, while Disney (NYSE:DIS) combines the best-known animation company with studio, television, and cable assets. But for all of Disney's greatness, it's no match for mighty Diageo.

In the world of consumer products, it's tough to beat Diageo's stable of brands in the spirits space, not to mention its laser-like focus on the industry. In its arsenal, the company has brands that include Captain Morgan, J&B, Tanqueray, Jose Cuervo, and Smirnoff, the top spirits brand in the world. On the beer side of the business is Guinness, Harp, and Red Stripe. These are all brands that bars want to have on hand and that people develop attachments to.

Disney also has a powerful library of content and controls a number of channels it can use to distribute that content. The problem is that whatever content Disney broadcasts or sells can be copied and replicated. It's illegal, but it's also something over which the company has only partial control, by doing things like partnering with Apple (NASDAQ:AAPL) for distribution. But the Viacom (NYSE:VIA) lawsuit against Google (NASDAQ:GOOG) shows that the owners of content don't have a tight grip on distribution. I also consider Disney's tourism assets a mixed blessing. They're good for the brand and do well during strong economic periods, but they suffer when tourism does and have high expenses and capital-expenditure costs.

This is quite different from Diageo, which has a stranglehold on its distribution channels. In a recent update to Income Investor subscribers, lead advisor James Early had this to say about Diageo's presence in the U.S. "Diageo company has a leading 28% share of the spirits market and is an exclusive single distributor in almost 40 states, which covers 80% of its spirits and wine volume in the U.S. Without distribution, you can't sell product, and Diageo's exclusive distribution makes it very difficult for other spirits companies to compete." That, folks, is a powerful competitive advantage against competitors Fortune Brands (NYSE:FO) and Brown-Forman (NYSE:BFB).

In Diageo, you get a company with leading spirits, beer, and wine brands that are well known and sold globally. You also get a company that returns a large chunk of its earnings to shareholders and, since cutting away its non-core businesses, is set to grow cash flow, which perpetuates further dividend growth. That's a tough proposition to beat, and it's one I don't think Disney can overcome for this contest.

Does Diageo deserve to move on to the next round? If so, simply follow this link and rank the stock "outperform" in Motley Fool CAPS. If not, vote it "underperform." Later this week, we'll tally your votes to determine which stocks will advance one step closer to the title.

Click Disney to read the opposing article in this contest, and click here to read all of the other entries in the tourney.

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Diageo is an Income Investor pick, and Disney is a Stock Advisor selection. You can check out either Foolish investing service free for 30 days.

At the time of publication, Nathan Parmelee had no financial interest in any of the companies mentioned -- but that's nothing personal. He was ranked 44th out of 24,254 CAPS investors. The Motley Fool has an ironclad disclosure policy.