HBO targets lucrative western European pay-TV market with Dutch cable deal

EL SEGUNDO, USA: Home Box Office Inc.’s (HBO) joint venture with a Dutch cable operator may represent the opening round of the U.S. network’s bid to become a major player in the large and growing market for pay-television services in Western Europe.

The Western European pay-TV market amounted to $37.5 billion in 2011, and is expected to expand to $47.8 billion in 2015, according to the IHS Screen Digest TV Intelligence Service. This year will be particularly strong for the market, with revenue rising by 8 percent to $40.5 billion.

HBO entered into a joint venture with leading Dutch cable operator Ziggo—called HBO Nederland—marking the launch of HBO’s first branded linear channels in Western Europe. Three advertising-free channels, HBO, HBO2 and HBO3, commenced broadcasting on Ziggo's cable service on February 9. Each channel is available in standard or high definition. Subscribers to HBO Nederland also will have access to HBO’s online video service, HBO GO, and its video-on-demand service, HBO On Demand.

“HBO’s move into the Netherlands may presage the launch of linear channels in other countries in Western Europe,” said Guy Bisson, research director, television, for IHS. “The company’s growing library of original content has given HBO an increasingly strong brand outside its home market in the United States, creating the possibility of further international expansion. The Ziggo deal could serve as a model of how to expand in Western Europe, with HBO possibly establishing similar joint ventures with cable operators in other countries in the region.”

HBO so far has concentrated on less developed pay-TV markets to launch international versions of its premium channel brands. In more developed markets like the United Kingdom and France, HBO has entered long-term output deals with pay-TV operators that rule out the launch of HBO-branded channels as long as those deals remain in place. However, if the Dutch venture proves successful, it could prove the viability of further premium pay launches in other markets.

A potential move by HBO into the wider Western European market could have major implications for other premium channels. HBO previously has acted as a supplier of content to other channels in Western Europe. With HBO launching its own channels, this key source of content may dry up.

Beyond boosting its linear TV business, HBO’s move into Western Europe could serve as a precursor to its increased involvement in over-the-top (OTT) services in the region.

HBO goes on air in The Netherlands
Ziggo customers will be the first to receive HBO’s Dutch pay-TV services in the Netherlands, although it is understood that carriage deals are being negotiated with other operators in the country despite Ziggo's undisclosed interest in the venture. Ziggo had two million residential digital subscribers at the end of 2011. The HBO channels will be offered as a standalone premium package for the price of €14.95 per month.

The Netherlands boasts high pay-TV penetration of around 98 percent of television households, and also has seen the launch of a studio-backed premium channel in the form of the short-lived Cinenova, backed by Sony, Walt Disney and UPC. Ziggo is the largest pay-TV operator in the Netherlands, with a market share of slightly more than 40 percent of TV households, providing access to a large amount of potential subscribers.

HBO’s first foray into Western Europe will face a strong competitor in the form of Film1, owned by Chellomedia. Film1 has been active since 2006, and offers channel packages through the majority of Dutch pay-TV operators, with the exception of KPN’s IPTV and pay-DTT services. Most recently, Film1 pre-empted the widely rumored and reported HBO launch with a new Film1 Series channel, inaugurated in January.

The most obvious target next for HBO Nederland is KPN, the third-largest Dutch pay-TV operator behind Ziggo and UPC. KPN does not currently offer a film or series premium package on its IPTV service. A deal with UPC, which shares the same parent company as Chellomedia in Liberty Global, appears unlikely.

Source: IHS iSuppli, USA.