Kangaroo "not competitive" according to Competition Commission's provisional decision

9 December 2008

ITV, BBC and Channel 4 were dealt a major blow when the Competition Commission decided that a video-on-demand venture would restrict competition.

The development of on-demand services has been a highly sensitive area and many broadcasters link it with declining television-advertising revenues.   Many of the large broadcasters already operate their own 'catch-up' services for those viewers who have missed an episode of their programming.  However the proposed venture would have gone much further. 

The planned video-on-demand service, Kangaroo, was officially announced in November 2007 with plans to have over 10,000 hours of programming.   The service, which would have combined programming from ITV, BBC and Channel 4, would have had an effect comparable to the introduction of freeview to digital TV. 

Kangaroo would have acted as a 'one-stop shop' for most mainstream television content offering users access to programmes ranging from BBC's Eastenders to Channel 4 documentaries.  It was envisaged that most of the video streams would be offered for free but would be combined with advertising in order to maximise revenue.  

However, the Competition Commission, whose stakeholders are the three involved in the development of Kangaroo, announced that such a service would reduce 'rivalry' and irreparably damage competition for future on-demand services.  The 'provisional' decision was announced on 3 December 2008 and will come as a major blow to the broadcasters.

Peter Freeman, Chairman of the Competition Commission and the enquiry group into Kangaroo, stated that a unified programming service would allow Kangaroo to demand hugely unfavourable terms from third parties seeking to gain a content licence.  The long term effect being that future video-on-demand development would be restricted by Kangaroo's commercial decisions.  The Commission's decision also indicated that the service would have brought together three large competitors within the broadcasting industry, whose autonomy should be protected.

The provisional decision does have suggested remedies, including: a regime to protect third parties seeking to use content, restructuring the venture deal and, in the extreme, a complete prohibition on the service.  Further hearings will now be held with the main and interested parties before a final decision on the competition issues and remedies is decided. The deadline for the final report is 8 February 2009.