This claim is constantly made to support the xxAA's agenda, but the evidence simply does not support it. Certainly, the industry's revenues remain high, despite the recession (and despite their use of Enronomics to understate their income and thereby chisel on various percentage-based payments).
A few years ago I bought a DVD player and big screen TV, thinking that I would never go back to a theatre, but each month when I look over the DVD releases, I see nothing but junk. The studios are afraid to release their really good work for fear that someone will copy it.
Leaving aside the dubious claim that anything out of Hollywood these days constitutes "really good work", how many major motion pictures can you name that are not released on video within a few years of theatrical debuts?