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HBO is cutting its own cord in Spain

By Adam Epstein

Long gone are the days when the idea of watching HBO on the internet without also needing a cable TV subscription was considered farfetched. In at least one major market, you soon won’t have a choice—the only way to watch HBO will be on the internet.

The pay-TV giant will rollout a standalone streaming service in Spain by the end of 2016, Bloomberg reported. That news, by itself, is not entirely unexpected, given the country’s high rate of broadband internet penetration. But there’s a wrinkle.

The way HBO makes money in many countries outside the United States is by licensing its original content—shows like Game of Thrones and The Leftovers—to cable TV providers in each territory. In Portugal, for instance, HBO doesn’t operate its own cable network. Instead, the premium channel TVCine e Séries pays HBO a fee for the right to broadcast those programs to its subscribers.

In Spain, though, HBO is letting its licensing deal expire. As that happens, TV-watchers in the country will be forced to subscribe to the new online-streaming offering if they want to continue watching new episodes of HBO shows. The company is, essentially, cutting its own cord.

“We follow the money,” HBO CEO Richard Plepler told Bloomberg. Clearly, HBO is confident that the experiment will be more profitable than continuing with licensing deals—or at least profitable enough to perhaps use as a model for other countries in the future.

The service is ideal for Spain because of how rampant online piracy is in the country. The theory goes that a good amount of would-be pirates would pay for HBO content if it was reasonably priced and easily accessed online.

The most valuable part of HBO’s business is, undoubtedly, its hit shows. The company could increasingly choose to opt out of its licensing agreements with networks in other countries, in favor of retaining the ability to broadcast its own shows—whether it’s via similar online streaming services, or networks that it owns. If this new service is successful in Spain, expect to see it implemented in other places where most homes have broadband internet access.

But it’s not going to be easy. When HBO rolled out a similar product in Scandinavia, called HBO Nordic, it was quickly trumped by Netflix in the region. Netflix, which is now undeniably a global company, launched in Spain last year, and figures to make life tough there for HBO’s streaming service. Not to mention there are already several other subscription video services to compete with.

It’s still too early to tell if HBO’s standalone streaming service in the US, HBO Now, is truly successful. It may take several years to find out. But it might not matter: HBO’s tussle with Netflix over the future of TV is now an international war, and the US is just one piece of it.