Apple TV no longer works off-line

Trying to figure out if this is just me.
It is normal for me to power down my modem at night but leave my router on-line.
Previously this has not caused a problem with my apple TV since the network is up still just no internet access. I did it tonight however after updating my apple TV and it would no longer play content.
It would connect to my library and see the content but when I went to play it the message was my computer "was not authorized".
Now this has happened a long time ago (the authorization going away on my iMac) so I simply restarted the internet to authorize it again only to find out it had not lost the authorization.
Power down the modem again and try my apple TV only to get the same "not authorized"
Does the latest update to the Apple TV require an internet connection to play content now?

vazandrew,
Prior to this last update:
If my cable went out I could still watch iTunes purchased content on my ATV.
When the cable is down the ATV will see my library you can select albums, TV shows, movies, etc and it will tell you the information but if you try to play iTunes purchased content it will not let you because it can't "verify" the authorization.
I find this confusing because I have never stored my iTunes user name or password in my ATV so I was under the impression it always played content as long as the computer connected to the ATV was authorized for that library.
I can play iTunes purchased content on my computer without an internet connection so I am confused as to what the ATV is trying to "verify" that it can't without an internet connection.

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