HBO cuts the cord for international launch

Nordic region won't need pay-TV subscription to get net

By Andrew Wallenstein

HBO will make the Nordic region the first market where its programming will be available to consumers without requiring that they have a pay-TV subscription. The move sets HBO up to go head to head in competition in those countries with Netflix.

Unveiled in a press conference Thursday in Stockholm, HBO Nordic AB will launch in mid-October. The pay-TV network disclosed its plans earlier this month to move into Sweden, Norway, Finland and Denmark via a joint venture with Parsifal Intl. The announcement came less than 24 hours after rival service Netflix made its own plans in the country known, though the streaming service has specified only that its launch will be before year-end.

In addition to the standalone launch of HBONordic.com, HBO Nordic AB will be available for less than 10 euros per month or as an add-on to basic pay-TV subscriptions in the region. Netflix has yet to reveal its pricing in the four countries.

An HBO spokesman made clear that this launch does not reflect a strategic change for the company in any of its current markets. "Each market is unique and HBO approaches each one with what we consider to believe the best business model specific to that territory."

The announcement marks a major shift for HBO's traditional business model, which has always required paying a monthly surcharge for a linear channel on top of a basic subscription to cable, satellite and telco providers. Even in other markets outside the U.S., HBO has either pursued that business model or simply licensed its programming to existing networks. HBO does have a standalone digital product active in Poland, but it is rather small.

What's different this time around is that Scandinavia is a market where HBO doesn't have to protect an entrenched business model as lucrative as the one in the U.S., where a standalone product would jeopardize its deals with distributors from Comcast to DirecTV. HBO's digital offshoot, HBO Go, has been available only to current HBO subscribers -- a decision that has drawn plenty of criticism in the blogosphere.

HBO is also eyeing competition from Netflix, which has executed the very business model the pay-TV giant hasn't been able to pull off until now. The service has been ramping up outside North America over the past year in several European countries including the U.K. and Ireland.

While much has been made of the HBO-Netflix rivalry, the Nordic market will mark the first territory where they collide with similar products. Netflix CEO Reed Hastings made light of the competition in a post on his Facebook page on Tuesday.

"Excited to see HBO join us in offering standalone streaming service in Scandinavia...what about the USA? We thought the first match-up would be in Albania."

The Albania reference is a call-back to a 2010 jab Time Warner CEO Jeff Bewkes took at Netflix, likening the hype around the Los Gatos, Calif.-based streaming service to the Albanian army "taking over the world."

Direct competition from HBO could prove problematic for Netflix, which is looking to international sub growth as a means of financing its massive content costs. Both companies won't have the market to themselves either, given News Corp.-owned Sky and Amazon-owned LoveFilm are already there.

While a population of just 25 million, Scandinavia also has a young affluent market and mature broadband infrastructure, which is necessary for any major video service launch.

HBO Nordic AB will offer subtitled versions of the same programming available in the U.S., from original hit series like "True Blood" and "Boardwalk Empire" to theatrical content from the Time Warner-owned business' output deals.

HBO Nordic AB will not only offer the same current programming as would be available to HBO linear channel subs, but will also feature content from its rival networks in the U.S., Showtime and Starz, which lack international businesses. That arrangement is common for HBO, which has a bigger international footprint than its domestic reach of just under 30 million.

With over 27 million subs at last count, Netflix has added over 1 million in its first six months in the U.K. The company revealed a total of 3.62 million international subs in its second-quarter earnings report.

HBO has an international presence in over 150 countries, where its network business reaches approximately 60 million subs. Hungary represented HBO's first European market entry in 1991, and the company has spread to Asia and Latin America as well.

HBO Go is available internationally but only to those who purchase the HBO premium channel. While HBONordic.com and HBO Go are similar products, HBO's standalone product in the new countries will not be branded HBO Go.