I agree that this is going to hurt the quality smaller movies. This whole thing reminds me of the way that Christmas is slowly eating the other fall holidays and excreting a three month long glittery corporate turd that we are supposed to be happy to see every year.

There may be some hope, though. I have seen some pretty interesting movies that have had unconventional releases. The film Hits (which is currently available on Netflix and is great if you like a satire) was purposely released on websites that are normally used to pirate movies and that created enough buzz that Netflix was willing to buy the streaming rights. It definitely didn't make summer action movie money but at least it was distributed to a much larger audience.

Good post.