Project Kangaroo rejected by regulator

Plans by UK broadcasters the BBC, ITV and Channel 4 to launch joint TV-on demand catch-up service for UK viewers Project Kangaroo where this morning rejected by the UK Competition Commission.

The Competition Commission provisionally concluded that the proposed joint venture will restrict competition in the supply of video-on-demand services in the UK. It does not, however, expect the joint venture to lead to a substantial lessening of competition in online advertising or content acquisition. The full report will be published shortly.

The proposed web-based service will provide viewers with the opportunity to access recently-aired (catch-up) programmes as well as archive content. Catch-up content would also continue to be available on the broadcasters’ individual websites.

The parties expect the great majority of views to be free and funded by advertising but cus-tomers will be charged for some content. As well as providing a retail service to customers, UKVOD plans to license its VOD service, or a substantial part of it, to other VOD services on a wholesale basis.

Peter Freeman, Competition Commission Chairman and Chairman of the inquiry group, said: “Video on Demand is a relatively new and rapidly expanding medium and UKVOD clearly has much to offer. However, we are concerned that a loss of rivalry between BBC, ITV and C4, who are normally regarded as close competitors, could restrict existing and future competition for video on demand. Whatever benefits viewers would gain from this rivalry would clearly be lost.”

He continued, “Of course there are already several other well-established providers of various types of VOD services. However, the evidence that we have seen tells us that domestic content is key to being able to offer strong competition to UKVOD’s proposed service. The parties control most of that content, putting them in a powerful position in relation to competitors and viewers. We think that it would be difficult to obtain content from third parties to match UKVOD’s offer in scale or attractiveness.

“In this situation, UKVOD would have the ability and incentive to impose unfavourable terms when licensing domestic content to rival VOD providers. At the extreme, UKVOD might withhold content from its rivals altogether. Any reduction in access to content would be likely to impact unfavourably on viewers,” he sad.

The Competition Commission also published for consultation a notice of possible remedies to address the perceived competition problem, including the enforcement of measures to ensure content is made available to other providers, adjusting the scope of the joint venture’s activities or the terms of exclusivity between the joint venture and its parents

Further hearings with the main and interested parties will now be heard before the Commission publishes its final decision on the competition issues and remedies. The deadline for the final report is 8 February 2009.

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