Most multichannel TV forecasts assume a stable industry model facing incremental changes that will play out over many years. We believe that assumptions for robust ARPU gains, higher ad sales, and a stable subscriber base are unrealistic, given high current prices, pressures on consumer budgets, and increasingly strong competition. A accelerating cycle of a growing on-line audience, increasing internet ad spend, and improving streaming content, fueled by advancing technology is a serious threat to the status quo inherent in these forecasts. While recent cord cutting has been modest, as the on-line cycle approaches a tipping point where the audience reaches critical mass, we expect the phenomenon will strongly accelerate. As a result, we remain skeptical of the long term health of multichannel TV and favor companies levered against the eventual move to an on-line distribution model.
