Studios Fear Netflix Will Kill Cable VOD

Getting a DVR from your cable company? Then don’t expect Netflix (s NFLX) to run on it, even if it’s capable of doing so. TiVo (s TIVO) boxes supplied by cable TV provider Suddenlink are stripped of their Netflix functionality, Light Reading reported this week.

However, the culprit isn’t the cable company, for once. Suddenlink says it would love to rent out TiVo DVRs with Netflix to its customers, but Netflix’s contracts with the studios don’t allow it to do so. Netflix has since confirmed the story, saying its licensing agreements don’t extend to devices supplied by pay TV providers.

These types of restrictions add an interesting twist to the ongoing love-hate relationship between the studios and Netflix. The subscription video company and its booming streaming service has been blamed for everything from declining DVD sales to cord cutting in recent months. Looks like it’s time to add endangering VOD to that list.

It’s not hard to see why Hollywood is concerned; cable VOD has become a massive cash cow for the industry. Consumers are expected to spend $1.2 billion this year on VOD offerings provided by pay TV services, and studios want to increase that income through premium offerings and shorter windows. The plan is to offer new releases just 30 days after their theatrical release for $20 to $30 a pop straight through your cable box.

Of course, that proposition could look a lot less desirable if movies from Netflix were available on the same device for free. Granted, Netflix can’t quite compete yet with the films Hollywood wants to sell you for more than what a movie ticket would cost. However, the company has been busy striking deals with content owners to get access to premium content faster.

Earlier this year, it signed a deal with Relativity Media to get movies exclusively that otherwise would have gone to pay TV. This fall, it secured the right to show episodes of Saturday Night Live the day after they air on TV. And Netflix CEO Reed Hastings has reportedly offered as much as $100,000 per episode to get access to new TV content.

All this seems to make Hollywood nervous. The studios are willing to license some of their content to Netflix, provided that the price is right, but they’re not willing to give up on existing revenue streams like VOD — so don’t expect Netflix to pop up on your cable DVR anytime soon.

It’s unclear what these restrictions will mean for TiVo. The DVR maker has been losing subscribers by the hundreds of thousands, but hoped to make up for some of these losses by striking deals with cable TV providers like Suddenlink and RCN. Customers may feel less inclined to sign up for a TiVo DVR through their cable company if it doesn’t offer all the features a retail version does — but then again, it’s not like cable companies offer lots of different devices to choose from.

However, locking Netflix out of DVRs provided by cable companies could possibly spell trouble for a number of other innovative approaches for combining online video with linear cable programming. For example, cloud solutions provider Clearleap announced earlier this year that it integrated linear programming with Roku boxes. That sounds good on paper, but it’s hard to imagine any cable company shipping Roku boxes if the devices don’t offer Netflix.

Photo courtesy of Flickr user Hoggarazzi.

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