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Content Still King as TV Evolves

As users gravitate to new services, Disney and others could benefit over the long haul.

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Over-the-top pay-television platforms such as Sling and YouTube TV are gaining momentum as subscribers and viewing time have grown rapidly over the past year. The subscriber growth of the new OTT pay-TV distributors has helped to offset many of the subscriber losses at the traditional distributors, helping to stabilize the overall pay-TV market. Also, households with an OTT pay-TV subscription are much larger consumers of all OTT video than households without a subscription, according to a new report from comScore. We believe that the gains in subscribers and viewing time have allowed media companies to become more open to placing their networks on the platforms of new untested partners such as FuboTV and SiliconDust. These new players should help to bring some long-needed innovation in pricing and bundles to the traditional pay-TV landscape.

We continue to project that the OTT pay-TV distributors will help to stabilize the overall pay-TV market, which will help the media companies with cable networks that have or could gain carriage on every platform. Among the media companies we cover, this includes wide-moat-rated  Walt Disney (DIS) and  21st Century Fox (FOX)/(FOXA) along with narrow-moat-rated  AMC Networks (AMCX). With Fox and AMC trading in 3-star territory versus our fair value estimates of $46 and $69, respectively, we prefer Disney, whose shares trade at a larger discount to our fair value estimate of $130.

Neil Macker does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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