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Summary:

Here’s a bracing tonic to cure that post-holiday hangover: Lehman analyst Anthony DiClemente kicked off the fresh week with a big, across-th…

Here’s a bracing tonic to cure that post-holiday hangover: Lehman analyst Anthony DiClemente kicked off the fresh week with a big, across-the-board downgrade of the entertainment industry. His message: digital media is proving too disruptive to the film and TV industries. The companies he called out specifically were Disney (NYSE: DIS), Time Warner (NYSE: TWX), Viacom (NYSE: VIA), News Corp (NYSE: NWS). and CBS (NYSE: CBS). This is kind of old news (see the stocks of all these companies), so the interesting question is timing. Why now? DiClimente’s view is that the cannibalization of physical media, DVDs particularly, has so far been limited, but that this is set to rapidly accelerate.

Accelerating the decline of the DVD are a slew of new digital distribution models that are starting to crack the mainstream: “To date, we have argued that until a capable video distribution player device finds a user-friendly means of transferring Internet-based movies and TV shows to the living room HDTV screen (i.e., widespread take-up of Apple (NSDQ: AAPL) TV penetration, Slingbox, Tivo, Xbox, or PS3 as potential device platforms), the traditional home video model remains “safe.

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  1. steamboat willie Tuesday, July 8, 2008

    Shouldn't this contain a link to the report? Or something?

  2. the two charts shown has nothing to do with content itself. it has everything to do with technology advancement and how consumers adopt to it. content will remain the king, experience is the king-maker. to be entertained is human nature and this will never change. what is changing is consumers ability to consumer entertainment content across multi platform: TV, web, ipod and wii…yes, ipod and wii have their own category. it's up to content providers to facility this challenge. but most of the content will continue to be in tv form, simply because the environment consumer created (comfy sofa and flat screen) give them the best experience, for years to come, at least 5-10 years.

    peterHe

  3. David Holbert Wednesday, July 9, 2008

    I agree with peterHe, you can't get too far away from content without building sandcastles. Analogies with music are not entirely apt. Music is sampled, purchased and then consumed repeatedly. "Video Entertainment Content" is not easily sampled (to sample is to consume), more often rented than purchased, and most often viewed once or a very few times. Most consumers value (or, at least are accustomed to) a filter to bring them a certain quality level. If that filter is not TV networks and studios what is it?

  4. The two charts are not comparable, and the effort to compare them actually proves nothing. The VHS/DVD chart shows the % of sales of each format, which ALWAYS adds up to 100% — by definition this chart MUST show a clean hand-off. Even as gross sales of DVD decline, they will still be 100% of sales (until/unless BluRay takes off). On the other hand, the tape/CD chart shows numbers of units, not a % split. If the tape/CD chart simply showed the % of sales by format, it too would show a clean hand-off.

  5. Ethan Bauley Tuesday, July 15, 2008

    Great point, Ken. I'd love to see the rest of the charts.

    I suspect it still proves the point…but good catch.

    Can the author, Joseph, speak to this?

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