Right out of the box, Lehman Brothers analyst Anthony DiClemente cut his rating on News Corp, Disney, CBS and Time Warner. Not one of them is now rated above “equal weight” by the broker. And he stuck the whole entertainment sector with a negative rating.
What’s the deal, DiClemente? Well, he points out that television and film companies are barreling toward the same sort of problems that have created such headaches for the music business. Remember how the major music labels seemed so ill-prepared for that whole Internet thing?
“In reality, while there are many obvious differences between music/audio and movie/video media forms, the core properties of video distribution and consumption are not different enough from music content to continue to justify why movie/TV content will be spared fragmentation,” DiClemente wrote.
DiClemente tried to give the movie and TV business the benefit of doubt.
“In our research of the entertainment industry to date, we have been increasingly eager to study and learn the reasons why widespread digital distribution of films and TV shows is not likely to eventually cause massive disruption to traditional forms of entertainment delivery. We have been largely unsuccessful in building compelling logical arguments in support of the continued growth for the movie/ TV content owners
in a digital environment. To us, the dual concerns of 1) deteriorating economics to the content-owners of legal online distribution; and 2) rampant piracy concerns are together too significant to ignore.”