What We're Watching in the Internet TV Market

Neil Macker: We recently completed a deep dive into the pay television market, looking at the evolution of the delivery of television. Over the last four years, there have been a number of new entrants that deliver pay television via the internet or over the top, spawning the name "OTT" pay television.

OTT pay television has quickly gained acceptance among consumers with over 7 million subscribers already signed up. We believe the new services are helping to keep cord-shavers in the pay television ecosystem by offering a skinny cable bundle at much lower price point than traditional distributors. These new platforms are also attracting younger consumers.

The growth has been led by Dish's Sling TV and AT&T DirecTV Now. However, growth at both platforms has slowed down in recent quarters and management at both firms appear ready to raise prices which may stunt growth further. We believe the price increases may provide an opportunity for the number-three player, Hulu with Live TV, and the number-four player, YouTube TV, to sign up the majority of new subscribers in the near future.

Despite the slowdown in growth, we expect that the OTT space will continue to expand and even attract new entrants with T-Mobile and Apple among the more likely suspects. Among media firms, we think Disney is best suited to navigate the new OTT landscape. For traditional distributors, we believe that Comcast's combination of a strong broadband network and media assets at NBC Universal will help it weather the ongoing changes in pay television distribution.