The Competition Commission has published a statement of issues regarding the Kangaroo project, a proposed video on demand joint venture between the BBC, ITV, and Channel 4. It is inviting views from interested parties over concerns that it could be anti-competitive. PACT, the trade association representing independent producers, has already submitted its perspective, saying that it could significantly dampen competition in a nascent market.

The Office of Fair Trading has asked the Competition Commission to consider whether the joint venture between the leading broadcast networks in Britain could result in a reduction in competition, including the syndication of content rights for video on demand services.

The Enterprise Act 2002 allows the OFT to refer for investigation any significant merger that could create a 25% share of supply in the United Kingdom. The Competition Commission has published the terms of reference for its investigation. They are wide ranging, covering the wholesale and retail supply of video-on-demand services, the acquisition of content rights, and advertising, according to a number of possible market definitions.

The launch of any service is likely to be delayed until early 2009, although the Competition Commission could publish its provisional findings in early November. The broadcasters have asked for more time to submit further details about the venture, which they are apparently still negotiating.

The BBC, through its commercial subsidiary BBC Worldwide, ITV PLC and Channel 4 Television Corporation are proposing to establish a jointly controlled entity, currently codenamed Kangaroo. The aim is to provide a video-on-demand service accessible over the internet that will enable users to view or purchase long-form audio visual material including recently broadcast and archive material. The majority of the ‘catch up’ material previously broadcast within the last 30 days will be available free and advertising supported.

It will be a standalone business with dedicated staff and an expert management team recruited to focus specifically on the video on demand market. Ashley Highfield, the former head of future media and technology at the BBC, has been appointed to lead the venture. The BBC Trust has yet to approve the service and is likely to await the provisional outcome of the competition investigation.

The broadcasters say they will continue to operate their own standalone online offerings, including the BBC iPlayer. Kangaroo will apparently have a marketing budget to promote the service and the broadcasters say they will promote it through their own television channels and other media they own.

The plans have drawn criticism from PACT, an organisation that represents the interests of independent producers. In its submission PACT said it is concerned that Kangaroo will lead to a significant dampening of competition in the market for video on demand services in the United Kingdom by rapidly building a critical mass in a nascent market and possibly squeezing others out.

However, a submission from Walt Disney welcomed the move, saying that any expansion of the market would be beneficial to rights holders, service providers and consumers. Walt Disney said it did not have any competition concerns, providing that the parties continue to buy and compete for the acquisition of video on demand rights independently and in accordance with the confidentiality provisions in their acquisition agreements.

Further details are available on the Competition Commission web site.