Wall Street Doom and Gloom

[Ben]

http://www.homemediamagazine.com/new...ticle_ID=13083

Analyst Drops Boom on Hollywood
Author: ERIK GRUENWEDEL
Posted: July 7, 2008

Hollywood got hit with a strike July 7 that had nothing to do with labor or residuals.

In a series of research notes, Anthony DiClemente, media analyst with Lehman Brothers in New York, significantly downgraded fiscal earnings per share estimates for CBS Corp., News Corp., The Walt Disney Co., and Time Warner Inc. — citing emerging threats of digital distribution, digital video recorders and falling ad-revenue, among other issues.

While the analyst specifically outlined apprehension regarding the corporate parents of 20th Century Fox Film Corp., Warner Bros. Pictures, Walt Disney Studios Home Entertainment and MySpace.com, among others, his “digital is too disruptive for movies/TV” mantra affects the entire Hollywood supply chain.

Viacom Inc., which owns Paramount Pictures and is having its best theatrical season ever, emerged relatively unscathed as its target share price was cut to $32 from the upper thirties.

DiClemente said News Corp.’s heightened exposure to falling newspaper ad revenue and economic downturn will continue to limit its options acquiring third-party entertainment properties.

He said CBS is the largest publicly traded radio and TV broadcaster and had the most exposure to traditional types of media, including publishing.

DiClemente cut from $25 to $15 News Corp.’s price per share target. He cut CBS’ price per share goal to $16 from $25, and $14 per share from $20 for Time Warner.

“We believe the feature film and television content business is on the verge of structural changes that appear destined to have a direct impact on the core revenue and profits of entertainment business models,” DiClemente said. “Content may no longer be king in the entertainment business.”
The analyst said technological changes such as legal and illegal downloads that radically altered the music industry, could materially disrupt the core economic models of film (including home entertainment) and TV studios.
The report said the apparent rate of decline in DVD sales was outpacing most discernable growth by digital.
DiClemente said with Warner Bros. representing significant studio, home entertainment and TV programming suppliers, digital distribution could adversely affect 37% of Time Warner’s earnings before interest, tax and depreciation (EBITDA).

The note said Fox studios and 20th Century Fox Home Entertainment represent 19% of News Corp.’s fiscal 2009 estimated revenue and operating income.

“We believe the growing threats of digital distribution of film/TV content, [online movie distribution and DVRs] pose risks to the Fox film/TV business, which we believe is entering a period of secular decline,” DiClemente said.

He said Fox’s assets contribute about 60% of News Corp.’s consolidated group revenue and 70% of its operating revenue.

Edward Woo, media analyst with Wedbush Morgan Securities in Los Angeles, said concerns in Hollywood about following the downward spiral of the music industry are not new.

He said the proliferation of pirated movies available online poses an even greater impact on revenue going forward.

“I think things can get rough if they don't find a solution to piracy, which should be the bigger threat than the DVR,” Woo said.

Rob Enderle, independent media analyst with The Enderle Group in San Jose, Calif., recalled similar concerns when the VCR emerged.

“Change brings with it opportunities and risks,” Enderle said.

The analysts said those opportunities revolve around getting more content to people when and where they want to consume it. He said the current ad-supported TV model has been broken for decades.

“Even if you didn’t fast forward, how many people leave the room or simply ignore TV ads?” he said.

Enderle said the market is expanding and digital distribution eventually will benefit the studios. When this benefit becomes reality will depend mostly on how quickly the studios learn to monetize the increased services they will be providing.

“It’s simply the way things work,“ he said.

[The BJD]

My main man Enderle is back in the news.

[zombieflanders]

The analyst said technological changes such as legal and illegal downloads that radically altered the music industry, could materially disrupt the core economic models of film (including home entertainment) and TV studios.

But-but-but, downloads are our lord and savior. I was told so by Lee and mikemorel!

The report said the apparent rate of decline in DVD sales was outpacing most discernable growth by digital.

No! That's impossible! Why would they lie to us?

Aaaaand...my sarcasm can only go so far.

[zombieflanders]

Originally Posted by The BJD

My main man Enderle is back in the news.

Given his track record on predictions, this should mean Blu-ray growth will explode .

[ack_bak]

Very interesting read. You can see why Warner is talking about moving away from DVD and towards VOD and Blu-Ray. Both of which offer higher revenue and more protection from piracy.

But none of this is new is it (piracy). I mean when I was a kid I remember people hooking up to VCR's and copying movies tape to tape and not paying a dime to the studios either. Piracy is here to stay. The studios need to figure out the best way to offer quality and value to the consumer for a fair price. Which is why the price of Blu-Ray will need to fall over time if they want the masses to buy in. Otherwise, people will simply turn to cheaper methods, including piracy.

[Wulf]

Originally Posted by ack_bak

Very interesting read. You can see why Warner is talking about moving away from DVD and towards VOD and Blu-Ray. Both of which offer higher revenue and more protection from piracy.

But none of this is new is it (piracy). I mean when I was a kid I remember people hooking up to VCR's and copying movies tape to tape and not paying a dime to the studios either. Piracy is here to stay. The studios need to figure out the best way to offer quality and value to the consumer for a fair price. Which is why the price of Blu-Ray will need to fall over time if they want the masses to buy in. Otherwise, people will simply turn to cheaper methods, including piracy.

"Show me the money!"

All Blu-ray's are out there and rip able just like their HD-DVD counterparts! Just like DVD it's only a matter of time before the ones that ripped DVD start ripping HDM (like wait for it, Blu-ray). What a shock, not really.

Truthfully, I think the public that ripped DVD will be more inclined to do this because of the change in the movie medium. We'll see I guess.

[zombieflanders]

Originally Posted by Wulf

"Show me the money!"

All Blu-ray's are out there and rip able just like their HD-DVD counterparts! Just like DVD it's only a matter of time before the ones that ripped DVD start ripping HDM (like wait for it, Blu-ray). What a shock, not really.

You act as if that's the only factor. It's not. Just off the top of my head, there's the bandwidth issue (not likely to be fixed soon, according to cablecos and analysts), the dynamic copy protection (something DVD did not have), and the greater revenue coming from packaged media.

Truthfully, I think the public that ripped DVD will be more inclined to do this because of the change in the movie medium. We'll see I guess.

The "public" doesn't rip DVDs. An almost infinitesimal percentage of consumers have the know-how, let alone the urge to do so on a regular basis. The number of people doing this with hi-def is just a tiny a portion of DVD as DVD is to the general public.

If the "public" had been doing this, sales of media servers, Windows Media Center Edition, Windows-capable Extenders, and programs like MyMovies would have been through the roof. Instead, they're all virtually unknown. Microsoft doesn't even do DVD streaming, which given your assumption, would be the minimum effort required.

[Fettastic]

Originally Posted by Wulf

"Show me the money!"

All Blu-ray's are out there and rip able just like their HD-DVD counterparts! Just like DVD it's only a matter of time before the ones that ripped DVD start ripping HDM (like wait for it, Blu-ray). What a shock, not really.

Truthfully, I think the public that ripped DVD will be more inclined to do this because of the change in the movie medium. We'll see I guess.

Soccer moms aren't going to be ripping anything. Sure geeks do things like this and no doubt it hurts the industry, but as has been said, movies have been pirated since they first apeared on video and I'll bet people were recording them in theaters with super 8 cameras too.

I think as long as Americans have disposable income, they'd much rather pick up a BD while shopping at Wal-Mart and be able to pop it in as soon as they get home than spend the time downloading a down-resed copy and converting it to play on their system.

[dvdman]

Why don't I feel sorry for millionaires. They are crying because their profits are no longer double digits. Give me a break!
They won't get any sympathy from me.

[crazzeto]

Originally Posted by Fettastic

Soccer moms aren't going to be ripping anything. Sure geeks do things like this and no doubt it hurts the industry, but as has been said, movies have been pirated since they first apeared on video and I'll bet people were recording them in theaters with super 8 cameras too.

I think as long as Americans have disposable income, they'd much rather pick up a BD while shopping at Wal-Mart and be able to pop it in as soon as they get home than spend the time downloading a down-resed copy and converting it to play on their system.

beleive it or not, soccer mom's know geeks that can do this for them... I saw a soccer mom on my detroit to raleigh flight last night watching a Hulk DVD (the new one) made from someone bringing a cam to a theater in asia. It was a very elabroate DVD too...

[vektsilver]

It would be a horrible move to drop physical media for VOD when the new format Blu Ray has yet to hit the affordable price point. With out an affordable price point any media will be slow to uptake. Blu Ray is just getting to the point of being a complete format and getting close to the magic number of 200 dollars.

My thoughts are if we are looking at 200 dollar players or less by xmass we wont be hearing about VOD/DD trumping anything.

Digital downloads is only a rental scheme not an ownership and should only be treated as a supplement to physical media

[DaveS1138]

Originally Posted by dvdman

Why don't I feel sorry for millionaires. They are crying because their profits are no longer double digits. Give me a break!
They won't get any sympathy from me.

Ahhh......yet again the "Its OK because I only steal from people that have more than me." argument. I'm sure you will feel the exact same way when somebody that has less than you decides to steal from you?

[ack_bak]

Originally Posted by dvdman

Why don't I feel sorry for millionaires. They are crying because their profits are no longer double digits. Give me a break!
They won't get any sympathy from me.

Piracy does not just affect the CEO of the company and/or the big stars who make millions. In fact, I doubt it affects their bottom line much at all. You do realize that many people make their living making these movies and distributing them to consumers right? I mean people who are just trying to get by right? How do you think they get paid? Monopoly money?

[kowhite]

Originally Posted by ack_bak

Piracy does not just affect the CEO of the company and/or the big stars who make millions. In fact, I doubt it affects their bottom line much at all. You do realize that many people make their living making these movies and distributing them to consumers right? I mean people who are just trying to get by right? How do you think they get paid? Monopoly money?

Not to mention...you'd think people on this board are movie fans. And you'd think they'd understand the health of the industry means more films, more content, more things to watch. Personally I like seeing Hollywood make money...it means, more money gets spent on movies.

[kamiller42]

Originally Posted by crazzeto

beleive it or not, soccer mom's know geeks that can do this for them... I saw a soccer mom on my detroit to raleigh flight last night watching a Hulk DVD (the new one) made from someone bringing a cam to a theater in asia. It was a very elabroate DVD too...

I love when people bring up exceptions as if they define the rule.

Do you know for a fact that the mother requested a geek to find a pirated copy of The Hulk, or did a geek son or daughter give it to her and say "Let's watch this!"?

dvdman,

Never let jealousy determine the right or wrong of an issue.