Investing in the entertainment industry can be a risky endeavor, especially with fast-changing consumer tastes.

With today's fourth-quarter earnings release, Madison Square Garden (Nasdaq: MSG) proved that the company is more than just "The Garden." After all, investors (including the Fool) who bought into the entertainment conglomerate have been rewarded with a 50% return over the past year.

First, though, the bad news. Analysts had projected EPS of $0.45 for the quarter, and actual EPS was $0.44. Even though earnings increased by 37.5% and operating income rose by 19.2% for the quarter, Madison Square Garden paid the price for not meeting expectations as the stock price dropped by more than 7%.

MSG Media drove the company's overall revenue growth of 5% with its strength in affiliate fee revenue pricing. MSG Entertainment sported 0.3% revenue growth with a 3% loss in operating income while MSG Sports delivered a 4.1% increase in revenue and a 250% decline in operating income, moving from a $400,000 gain to a $600,000 loss.

The company did see some weakness in live production and sporting event revenue, which isn't surprising considering the current economic climate. Madison Square Garden isn't alone in these declines: Pseudo-competitor World Wrestling Entertainment (NYSE: WWE) also saw some weakness in its live entertainment revenue in its last quarter.

To its benefit, Madison Square Garden has built a strong balance sheet with no long-term debt and more than $354 million in cash. But expect this cash to be eaten up by major renovations that are expected to cost more than $977 million versus the previously forecasted range of $775 million to $850 million. Madison Square Garden is also considering a purchase of the L.A. Forum, but that would only put it out about $25 million.

Since its spinoff from Cablevision (NYSE: CVC), Madison Square Garden has more than found its own way. With the addition of Carmelo Anthony to the Knicks, MSG has positioned itself well for future growth on the sports front. A looming NFL strike could also benefit Madison Square Garden if sports fans are forced to search for football alternatives this summer or fall. If the company can continue to strengthen affiliate pricing while improving live entertainment revenue, expect continued strength for this interesting power play.

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