(FORTUNE Magazine) – This summer Hollywood is all about bigness: Big stars, big budgets, big sequels, big effects, and big marketing plans. Sony has Spider-Man and Men in Black 2, New Line has the third Austin Powers film, while Fox has yet another Star Wars installment. The hope is that big, safe, pre-sold projects with multiple revenue streams will provide insulation from the unhappy fact that roughly half of all major studio releases don't earn back their costs. "Most movie studios are running at a loss," says Peter Chernin, chief operating officer of News Corp. and overseer of the Fox studio. "The economics are lousy."

But upstart moviemakers at Nickelodeon and its sister cable channel, MTV, think they have found a way to beat the odds. Since the Viacom-owned channels formed a unit called MTV Films to produce movies for Paramount, Viacom's studio, MTV and Nick have made 18 movies, and every one has earned a profit.

The cable guys have built their winning streak by holding down costs, marketing on their cable channels, and thumbing their noses at the Hollywood establishment. "We come out of left field," says Albie Hecht, 49, who's in charge of Nickelodeon's movies. "We're not from Hollywood, and we don't have a preconception of what a movie ought to be." Ask Van Toffler, 43, who runs MTV's movie unit, why they've done well as outsiders, and he jokes, "Ignorance and stupidity." Having grown up at MTV, Toffler and his people resist being told what to do: "We've taken a completely nonformulaic approach to moviemaking and marketing."

While the average Hollywood movie cost $47.7 million to produce and $31 million to market in 2001, MTV and Nick have never spent more than $30 million on production and $15 million on marketing. They've made several movies for less than $5 million. "It's more of an indie film model," says Hecht. In a way, the MTV-Nick strategy is a new twist on an old idea--genre films like horror movies or midnight flicks that were made cheaply for young viewers.

Some MTV and Nick releases are big-screen versions of cable shows, including The Rugrats Movie, Beavis and Butt-head Do America, and Hey, Arnold. All rely on contemporary animation that's less expensive than the classic styles favored by Disney and DreamWorks.

Others are live-action movies that don't need big stars because they target kids, teenagers, and twentysomethings who seem to prefer new faces. So, for example, MTV's Orange County, a movie about a high school senior desperate to get into Stanford, stars Colin Hanks (son of Tom) and Schuyler Fisk (daughter of Sissy Spacek), who were directed by Jake Kasdan (son of director Lawrence Kasdan). Those pedigrees, and an offbeat script, got Ben Stiller, John Lithgow, Kevin Kline, Lily Tomlin, and Chevy Chase into the movie in small roles, with salaries to match. Total cost: $16 million. Released in January, the movie has grossed $40 million.

Citing a lack of star power, other studios passed on a movie starring black comedians Steve Harvey, D.L. Hughley, Cedric the Entertainer, and Bernie Mac. But Toffler saw them perform together and persuaded Spike Lee to direct a film about their show. Shot in three days, The Original Kings of Comedy cost just $3 million and grossed $38 million in theaters after MTV promoted it on cable and radio and with "street teams" that plastered urban neighborhoods with posters.

Nickelodeon's latest movie, Clockstoppers, was produced by Gale Ann Hurd, who has made big-budget blockbusters like The Terminator and Armageddon. She downsized to produce Clockstoppers, which cost less than $30 million, because she wanted to make a film her 10-year-old daughter could enjoy. "I don't think a moderate budget is a handicap to making a good movie," Hurd says.

Clockstoppers brought in a disappointing $10.1 million on its opening weekend, behind Fox's Ice Age and Disney's The Rookie. But that won't change the small-is-beautiful approach at MTV and Nick. MTV is now making a movie based on its gross-out reality show Jackass that'll cost next to nothing, and Toffler wants to make movies that are even less expensive and more adventurous. "I've had this dream that we would create a slice of MTV Films that makes midnight movies, maybe for as little as $300,000," he says. His unit recently acquired Better Luck Tomorrow, about Asian-American teenagers who are honor students by day and gang members by night. It cost less than $1 million.