Twenty months after the venture was announced, the Competition Commission has now finally blocked the Kangaroo VOD project from launching, reiterating that its trio of shareholders would control too much UK VOD and concluding that “none of the ... remedies proposed could remove the threat to competition in the VOD market” (release and final report).

This is a massive blow to BBC Worldwide, ITV (LSE: ITV) and Channel 4, who wanted to pool their archive content for sale and ad-supported free download through the service but which are all now denied that extra income. BBC iPlayer, ITV Player and Channel4.com, each designed only to show only programmes from the last seven days, now have no single on-ramp to long-tail revenue.

The consortium issued its response within 10 minutes of the verdict: “We are disappointed by the decision to prohibit this joint venture. While this is an unwelcome finding for the shareholders, the real losers from this decision are British consumers. This is a disproportionate remedy and a missed opportunity in the further development of British broadcasting.”

ITV executive chairman Michael Grade: “We are surprised by this decision because we believed that the Kangaroo joint venture, competing in a crowded online world against dominant global brands, was an attractive UK consumer proposition, free at the point of use. However, in the two years since the idea for Kangaroo was born, the success of ITV.com has proved that our UK content is attractive enough to stand on its own and we remain focussed on our online growth.

The commission’s final report says that this decision will mean no “high costs” to the industry, despite Kangaroo partners having already incurred “certain costs” since starting out in 2007. The JV has 50 staff, a central London office, has been in development and testing throughout and last month appointed Publicis’ Fallon agency to sell ads on the service. Rubbing salt in the wound, the report says “we do not take these costs into account ... since the parties were aware of the risks in incurring such costs ahead of our decision.”

Full statement from inquiry chairman Peter Freeman follows…

“After detailed and careful consideration, we have decided that this joint venture would be too much of a threat to competition in this developing market and has to be stopped.

The case is essentially about the control of UK-originated TV content. VOD is an exciting and fast-moving development in TV, which makes programmes previously broadcast available to viewers at a time of their choice. The evidence we saw showed that UK viewers particularly value programmes produced and originally shown in the UK and do not regard other content as a good substitute.

BBC Worldwide, ITV and Channel 4 together control the vast majority of this material, which puts them in a very strong position as wholesalers of TV content to restrict competition from other current and future providers of VOD services to UK viewers. We thought the joint venture parties would have an interest in doing so, in order to make Project Kangaroo a success.

Without this venture, BBC Worldwide, ITV and Channel 4 would be close competitors of each other. We thought that viewers would benefit from better VOD services if the parties—possibly in conjunction with other new and/or already established providers of VOD—competed with each other.

We considered very carefully a combination of measures aimed at removing the wholesaling activities of the joint venture and safeguarding commercially sensitive information, but we were not persuaded that these measures would overcome the risk that membership of this joint venture would influence the parties’ commercial decisions, particularly in relation to the wholesaling of VOD content. “

(Photo: Mykl Roventine)

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