Cable operators—as well as their satellite and telco competitors—worry a lot these days about cable networks going “over the top” to reach consumers directly. They should. But amid all the talk of broadcast and cable nets going direct, it’s easy to forget that the Hollywood movie studios have their own over-the-top plans that potentially affect everyone, distributors and networks alike. They should also be on cable’s radar screen. Let’s face it: While movies aren’t the top VOD category and hardly account for Hulu’s success (thank TV fare for that), Hollywood’s dream factory still accounts for a lot of cable’s premium content—not to mention the allure and prestige of its VOD offerings.
 
Movies are almost magical in their ability to transport audiences from the drudgery of their lives, if only for a couple hours. It’s powerful stuff. And the studios would love to go direct. During Fall Connection in Denver, Starz chmn/CEO Bob Clasen perhaps said it best as he sat on a panel discussing over-the-top threats with Mediacom chmn/CEO Rocco Commisso and others. Said Clasen: “We’re always policing the people we buy from… They’re always looking for a way to bypass me and to bypass Rocco.” He was talking about the studios, which make up most of Starz’s content pool. But the threat is equally salient for the rest of the industry.
 
Motion pictures have always been a big part of both broadcast and cable TV. And despite great original series that now define top premium nets, the availability of Hollywood movies is still an important lure. Movies also help anchor other ad-supported cable nets. A well-known movie—even one that’s several years old—can be the perfect lead-in for original fare or a great space filler on a Saturday night… or just a way for a net to attach its brand to a popular piece of pop culture. But increasingly, movie studios seem to be plotting and scheming as if they were evil villains in their own action/adventure thriller. At least that’s how traditional distributors may soon start looking at it.
 
Movie studios aren’t exactly hiding their ultimate intention to reach consumers more directly. Hulu, iTunes and others have plenty of direct-to-consumer movies in their arsenals. ZillionTV, which partners with the major studios, is also trying to cut out the middleman to some degree. Meanwhile, the studios are using every means necessary to increase exposure, including deals with video game console makers, online stores and others to create competitive VOD environments. Even studio-owned Epix (Lionsgate, MGM and Viacom/Paramount), which is trying to gain cable carriage the old fashioned way, is simultaneously creating an Internet presence for its new and extensive back-catalog of movies through EpixHD.com. As video distributors work on their own master authentication systems to contain their subs within sponsored online bubbles, it’s unclear how EpixHD.com would integrate into those efforts—if at all. Right now, it’s just for Epix TV subscribers. But the studios could always open it up to anyone willing to pay an online subscription fee or even implement a pay-as-you-go system (especially if cable continues to balk, and Epix finds itself unrestricted by license deals). Verizon is the only major distributor to say “yes” to Epix. Maybe others should do so as well, if for no other reason to discourage Epix from someday going completely over the top.
 
All of the major production studios also churn out TV programming, of course. And they’re probably not looking to cannibalize their own lucrative deals with networks, which pay for them through the license fees they collect from distributors. But this complicated and decidedly symbiotic chain of relationships is starting to weaken. And it may not be the content aggregators (ie, the cable networks) that ultimately become the weakest link. Rather, it may be the Hollywood studios and production houses that end up most disrupting this tried-and-true business model.
 
The good news is that cable operators and programmers have immense power here. A Comcast-NBCU, for example, is on more than equal footing with any one of the big studios. That’s more than we can say for the beleaguered movie-theater chains, which now face an MPAA that’s lobbying for new copy protections to make it easier to release movies via cable and satellite while they’re still in theaters. It just goes to show that some over-the-top plans aren’t always bad for cable. But they’re usually bad for somebody.

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