Channel Five has pulled out of the Project Canvas consortium. The channel is looking for a buyer and its parent company RTL is apparently unconvinced of the value of investing in the proposed joint venture project. The decision damages the credibility of the platform as a combined proposition from the main terrestrial television networks in the United Kingdom.

Project Canvas, which is expected to launch under the YouView brand in 2011, is projected to cost £115 million in the first four years, including £48 million on marketing, with the seven partners paying an equal share of the costs. It seems that Five did not consider a £16.5 million pound commitment to be particularly good value, given that the resulting platform will supposedly be open for anyone to participate on equal terms, whether or not they are shareholders.

The announcement can only be seen as a blow to the joint venture, just a week after the BBC Trust gave the go ahead for the public broadcaster to participate in the proposed partnership with commercial broadcasters and network providers. The approval was given on the condition that the BBC does not exceed its estimated costs by 20% over a five year period. It seems they could already have risen by 16.7%, unless another partner can found.

Five was the smallest of the broadcasters to back the project and recorded an overall loss of £37 million last year with revenues down 20%. When it joined Project Canvas a year ago, its chief executive Dawn Airey said: “It’s vital for broadcasters and other industry stakeholders to form partnerships such as Canvas if they’re to open up new commercial opportunities and thrive in the digital world.”

Dawn Airey clearly sees the value of online video. In addition to her current role at Five, she recently became a non-executive director of LoveFilm, the DVD subscription company which has started streaming movies to network-connected televisions.

With the loss-making channel up for sale, Five is reconsidering its priorities. Earlier this year the broadcaster passed on the opportunity to provide its channel in high-definition on terrestrial television, preferring to launch on the Sky satellite platform.

Charles Constable, the director of strategy at Five said: “We continue to support the objectives of Project Canvas and despite withdrawing our interest in the venture we believe it will be a critical part of our strategy for reaching consumers in the future”.

“We are very disappointed,” said Richard Halton, the director of Project Canvas, told the Financial Times, but he brushed off the significance, saying “We don’t think this changes the likely scale or impact of the platform”.

As ITV and Channel Four are both under new management and carefully considering strategy and costs, the loss of Five will further test the resolve of the remaining partners in the consortium, in the face of continued opposition from pay-television operators and the prospect of alternative open platforms coming to market in the meantime.