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Credit Research: Adam Rhodes, CFA Key Takeaways: With cable and satellite multichannel video programming distributors, or MVPDs, no longer serving as the exclusive gatekeepers of television, a battle is underway across legacy video bundle participants and legacy streaming services to function as streaming gateways, rationalizing the multitude of offerings in the current marketplace. Similarly, as legacy pay-TV bundle subscriber counts continue to decline, content companies are looking to compete for a place in an “ultimate bundle” of streaming services in the next phase of video, seeking to replicate the economics of the legacy cable bundle. Although these shifts in video consumption have occurred over time, we believe the current degradation of the MVPD bundle, advances in technology, including artificial intelligence, and Disney’s decision to provide ESPN directly to consumers are accelerating the pace of change. In our view, operators that are successful in achieving streaming gateway status could enjoy certain “economic moat” competitive advantages. However, replicating the industrywide economics driven by the pay-TV bundle’s former oligopolistic local distribution could prove challenging. Amid this uncertainty, industry participants must weigh sizable transactions and capital commitments, including for yearslong sport rights. Numbered channels and legacy set-top boxes are increasingly becoming relics of the[...]