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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.