Threat of Netflix sends big media shares down

NEW YORK (Reuters) - Shares of big media and cable companies were hurt on Thursday on a research report that said streaming video offerings from Netflix (NFLX.O), Apple Inc (AAPL.O) and Google TV will catch on with consumers eager to cut the cable cord.

Credit Suisse downgraded the U.S. entertainment sector to "underweight" and cut the price targets of Time Warner Inc (TWX.N), Walt Disney Co (DIS.N), Viacom VIAb.N and News Corp (NWSA.O).

Shares of these companies ended from 0.1 percent to 1.5 percent lower on Thursday, while the S&P 500 Index .SPX ended little changed.

Analysts cited concerns that Internet-delivered video will cut into affiliate revenue, or fees paid by cable carriers to media companies to air their shows, and that an advertising recovery will stall in 2011.

Internet-delivered video will become a "prevalent investment theme in media over the next six to 12 months," the report said.

The report said companies like Netflix were poised to see solid growth as consumers with moderate income switch to its low-cost, subscription streaming service potentially cutting cable service from companies like Comcast Corp (CMCSA.O) and Time Warner Cable (TWC.N).

Shares of Time Warner Cable fell 2.8 percent to end at $50.96 on the New York Stock Exchange on Thursday.

Analysts estimated that 17 percent of Netflix subscribers have already pulled the plug on cable.

Earlier this month Apple introduced a new version of its Apple TV device alongside a programing bundle that allowed users to watch TV shows such as "Glee" and "Modern Family" for 99 cents thanks to partnerships with Walt Disney Co's ABC and News Corp's Fox. The move by Apple was followed by Amazon.com's (AMZN.O) decision to cut prices of some its TV shows to 99 cents from $1.99.

Google (GOOG.O) TV is expected to roll out its TV service this fall and will also likely offer competing program bundles.

There is some potential upside for media companies, analysts said, as tech and Internet companies look for content and may "actually over pay" in the short term. However they warn that the balance of power could shift away from media companies over time.

Netflix reached an exclusive $1 billion deal in August for online rights that allows its members to watch new films from the owners of Epix pay TV channel, Paramount, Metro-Goldwyn-Mayer Studios and Lions Gate Entertainment Corp (LGF.N).

(Reporting by Jennifer Saba and Yinka Adegoke in New York; Sayantani Ghosh in Bangalore; Editing by Aradhana Aravindan and Matthew Lewis)