The future of Kangaroo, a joint online video-on-demand (VoD) venture from BBC, ITV and Channel 4, rests in the hands of the Competition Commission after Internet video service providers Joost, Babelgum and Virgin Media all opposed its establishment. Virgin Media already runs BBC and Channel 4 catch-up services and has recently struck its own deal with ITV.

Occupying the middle ground is Pact (Producers’ Alliance for Cinema and Television), which represents the independent production sector. Pact opposes all-out prohibition and instead proposes revised terms of trade between independent producers and Kangaroo, enabling its members to secure direct contracts with retailers for VoD rights after a seven-day catch-up period.

The three opponents believe that Kangaroo will mean the concentration of video content with just one single party, and argue for its prohibition. NMK spoke to a number of industry players to gauge their thoughts on the Kangaroo project and what it means for the VoD sector.

Stand and Deliver

For Richard Ward from strategic brand consultancy Dave, aggregation of BBC, ITV and Channel 4’s programmes alone is meaningless. He also believes that ITV has enough internal problems of its own just now that it may not be able to concentrate on the Kangaroo project.

“Kangaroo needs to stand for something in its own right if it’s genuinely going to rival Sky, Joost and the rest. Its back catalogue is impressive but working out the commercials behind who gets paid what could lead to yet further delays,” he told NMK. “It also poses the question; who is really to gain? Channel 4 and the BBC both have strong brands, loyal followers and potent online content services. ITV, on the other hand, does not and as such has much more to gain.”

Consumer Choice

For Jens Bachem, managing director of digital agency Digital Outlook, neither the Government or Internet companies should decide whether Kangaroo stands or falls, but the consumer.

“Virgin comes to the rescue of the consumer? Let's be honest, any platform trying to block Kangaroo outright is purely acting in the interest of their shareholders,” he said. “Yes, there is a reality that only a certain number of platforms are probably sustainable, but shouldn't the consumer decide which ones, rather than the Government or the established players?”

Andrew Walmsley, founder and co-chairman of digital advertising agency i-level, doesn’t believe that Kangaroo could dominate the video-on-demand market even if it was given the go ahead. Walmsley believes Kangaroo’s owners would have to create a market for it and also find it difficult to compete internationally.

“Media is now a global market - Univeral/News Corp backed Hulu, Google-backed YouTube, and Joost are big players with international ambitions - it will be hard to be a local player in this market,” he said. “Also, web-based VoD competes with so much other Internet content that this will be a tough space to play in, so tying the hands of the only credible UK-based player is the best way the Competition Commission could have of ensuring that the future of UK VoD isn't a UK-owned one.”

Regulation Stuff

BiBC provides technology and licensed content behind Internet Protocol television (IPTV) and on-demand video services. The company claims to have the largest audio and video downloadable content database in the UK. Paul Hague, BiBC’s managing director, was also consulted during the regulator Ofcom’s enquiry into Kangaroo and submitted his thoughts to the report.

Hague believes the anti-competitive investigation into Kangaroo is a real brick wall for the service, one which could prove insurmountable, but could prove to be a blessing in disguise for the IPTV industry.

“If Kangaroo went ahead it would mean the development of an exclusive, dominant content delivery system leaving many smaller players and independents without a hope. The sheer buying power and exclusive content deals that such a behemoth could negotiate would mean that the small companies would never escape from its shadow,” he said.

“Other companies would have to operate on higher overheads, smaller economies of scale and limited content with almost no hope of success. If the Competition Commission really wants to foster free competition and innovation in the IPTV market it must either stop Kangaroo in its tracks or regulate the industry effectively. Doing this is the only way it can encourage a free, innovative and lucrative market for the IPTV industry.”

Born to Run

Dave’s Ward concludes that Kangaroo’s complexity will mean that, even if approved, its teething troubles will be many.

“ITV’s share price is tanking and has more than halved in the past year. Troubles at home will naturally mean [ITV boss] Michael Grade turns his focus inwards to deal with his own difficulties ahead of any external projects,” he said. “A partnership that looks to combine aspects of three competitive companies will always take time. Add to that the obvious inequality of the partnership, and this has the potential to run on and on.”

The Competition Commission will deliver its findings in February.