The Competition Commission has blocked UKVOD, otherwise known as Project Kangaroo, the proposed video on demand joint venture between the BBC, ITV and Channel Four. It has concluded that none of the other remedies proposed could remove the threat to competition in the video on demand market.
“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,” said Peter Freeman, the chairman of the Competition Commission and of the inquiry group.
“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.”
“We looked closely at the possible benefits to viewers which this joint venture might bring. We found that these and other benefits could come just as well from other projects that were less damaging to competition. We expect these alternatives to be much more likely to develop in the light of our decision.”
A joint statement from the project partners expressed their “disappointment” in the decision to prohibit the joint venture.
“While this is an unwelcome finding for the shareholders, the real losers from this decision are British consumers,” they said. “This is a disproportionate remedy and a missed opportunity in the further development of British broadcasting.”
Michael Grade, the chairman and chief executive of ITV, who was previously chairman of the BBC and prior to that chief executive of Channel Four, seems to have seen no issue in the co-operation between the British broadcasters that between them dominate television viewing in the country.
“We are surprised by this decision because we believe 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,” he said in a statement. “However, in the two years since the idea for Kangaroo was born, the success of ITV.com has proved that our content is attractive enough to stand on its own and we remain focussed on our online growth.”
The decision seems to have come as a complete surprise to the broadcasters, who had expected that the concessions they had offered following an interim report by the Competition Commission would allow it to proceed.
To others, however, it had the appearance of an anti-competitive cartel. The proposals drew predictable criticism both from new entrants in the broadband video market like Joost and pay television providers Sky and Virgin Media.
The writing was on the wall for some time. Ashley Highfield, the former controller of future media and technology at the BBC, who left to head up the Kangaroo Project, resigned after a matter of months last November, before the publication of the interim report by the Competition Commission. He went on to join Microsoft.