The two companies announced within hours of each other late Tuesday and early Wednesday that they plan to launch in Denmark, Finland, Norway and Sweden. Netflix said it would debut by the end of 2012. HBO did not provide a specific date.
Netflix has been aggressive about expanding into international markets. The service launched in Canada in late 2010, in Latin America one year later, and in Britain and Ireland this year. It has 3.6 million international subscribers, compared with 26.5 million in the U.S.
With high broadband penetration and an affluent populace, the Scandinavian nations are a natural for Netflix, which will launch its online streaming service there but not offer DVDs by mail, as it does in the U.S.
However, the opportunity is not huge.
In a note to investors, B. Riley & Co. analyst Eric Wold observed that Scandinavia has 8.4 million broadband-connected households, compared with 20.4 million in the United Kingdom and 85.6 million in the U.S. "Therefore, even a significant penetration of this region over the next few years would be unlikely to generate any meaningful [financial] contribution," he wrote.
HBO, meanwhile is partnering with pay-TV veteran Peter Ekelund, operator of Parsifal International, the parent of URHOtv, an ESPN-like service popular in Finland.
There are already several pay cable channels in Scandinavia, as well as the Netflix-like LoveFilm, owned byAmazon.com
With the proliferation of Internet-connected televisions making Netflix the equivalent of another pay television channel — albeit not one connected to cable subscriptions — the service has become a competitor to HBO, Starz and Showtime in drawing consumers and bidding for exclusive content.
HBO won a key battle on that front in the U.S. on Wednesday as it renewed an exclusive deal for movies from 20th Century Fox. Previously set to expire in 2015, the agreement has been extended through 2022.
Netflix executives have previously said they hoped to bid for pay-TV rights from movie studios as existing deals expired.
HBO will pay between $230 million and $240 million annually for Fox films, according to people familiar with the matter but unauthorized to speak publicly.
Under the new agreement, HBO will allow Fox to sell its movies online for digital download at the same time as they air on the pay channel, which is currently prohibited. However, consumers will be unable to rent them online via video-on-demand.