The Competition Commission in the United Kingdom has published the submission from the backers of the proposed Kangaroo project, a joint video on demand venture between the BBC, ITV and Channel 4. The parties claim they will provide a differentiated competitor in a dynamic marketplace, rejecting concerns that it could be seen as a cartel. Some opponents have lodged strong objections, arguing that it could substantially lessen competition.
The joint venture parties submitted their case over a month ago, but it has only just been published in redacted form, following submissions from other interested organisations which have expressed views both for and against the proposed project.
“Although the VOD markets are at an early stage of development it is already clear that there is a significant level of competition at all levels,” argue the broadcasters. “While market entry itself is not difficult, the strength of competition in the market and the diverse business models adopted by the various players means that success is highly uncertain.”
The joint venture, which refers to itself as UKVOD, says it will come to these markets with a differentiated product that will focus on the range, quality and choice of content which it argues could not be replicated by any of the parties alone. It says it will not have the advantage of related hardware devices, existing internet distribution businesses, a strong subscriber base or the ability to enter into global deals, and that all its major competitors will have one or more of these benefits.
The broadcasters concerned collectively share over half the television audience, receive just under half of the total television revenue in the country, and fund over 90% of original programming, which has prompted concerns from competitors.
The broadcasters say they expect to gain about 21% of the transactional video on demand market for broadcast programming, but have not published any further figures to support this estimate, which does not include free or advertising supported material.
Virgin Media, which operates video on demand services over its cable network, submits that the Competition Commission should be wary about claims of hypothetical future consumer benefits, suggesting that without Project Kangaroo it expects innovation and competition would continue unabated and may even intensify.
An anonymous submission from another company that currently provides services with which Project Kangaroo would compete, is more robust in its objections. “We simply cannot see why the Kangaroo parties need to create a joint venture in order to produce a viable internet VOD service,” it says in its submission. It argues that the separate successes of the BBC iPlayer, ITV.com and 4OD services demonstrate their ability to do so.
“If a joint venture of the three biggest broadcasters in the UK were to go ahead, it would have untold consequences on a nascent internet VOD market,” concludes the opposing submission. “If the market is taken over in this way, it would make it difficult for any other such enterprise to compete.” The result, it suggests, “would almost eliminate competition in the provision of online VOD services for long-form non-user generated programming”.
BT Vision, which has announced plans to launch a reduced version of the iPlayer called BBC Replay on its own broadband video platform, for which it intends to charge £3 per month, is one of those that stands to lose from the existence of a strong online service.
Joost, the online video service that was launched with much promise but which has failed to gain real traction, notes that its “inability to obtain content from the Joint Venture’s parents on reasonable commercial terms is a key issue limiting its ability to compete in the UK, which could well be exacerbated by the increased incentives of the parents to favour the Kangaroo platform, once it is operational”.
The submission from the broadcasters is brief, at just over five pages as published, suggesting a lack of anticipation of the issued raised. So far it seems to have done little to allay concerns from competitors. It remains to be seen whether these will be held to be legitimate issues, but it seems likely that some concessions may be offered or imposed if the Kangaroo project is to proceed as planned.