The UK Competition Commission has decided that Project Kangaroo, the collaboration between the BBC, ITV and Channel 4 to provide a single destination for video on demand in the UK, would be bad for the consumer and blocked its development to protests anguish from the tech and media press.
The beleaguered venture, which late last year lost chief executive Ashley Highfield barely four months into the job, has been deemed too much of a threat to competition in the nascent UK video-on-demand market. Up to 50 jobs will be lost following the decision, against which it is thought the project's backers are unlikely to appeal.
The Competition Commission, which in an interim report in December looked at remedies including stopping the partners joint selling prime catch-up TV content, ruled that none of its prospective remedies went far enough.
"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, in its final report on Project Kangaroo.
The commission said the case surrounding Kangaroo was about the control of valuable UK-originated TV content.
"BBC Worldwide, ITV and Channel 4 together control the vast majority of this material, which puts them in a very strong position as wholesalers of TV content to restrict competition from other current and future providers of video-on-demand services to UK viewers," said Freeman.
"We thought viewers would benefit from better video-on-demand [VoD] services if the parties - possibly in conjunction with other new and/or already established providers of VoD - competed with each other."
The prospect of a single destination, single display format and single set of hardware requirements is very attractive. 4OD, for example, is not accessible by Mac users and itv.com is largely off-limits to mobile phones. Setting one level of entry standards would make it considerably easier to choose which computer set-up to buy and what speed of internet access to pay for if video on demand is a major part of your online life.
For the broadcasters, too, this is an attractive proposition. A single point would make on-demand services easier to bring to mainstream public attention, and would be far stronger in terms of attracting advertising.
However, the Commission thought that Project Kangaroo would become an online cabal where the participants would have no incentive to compete with each other. There would only be one place to go if one wanted to organize an on-demand video service on another platform or with an innovative way of organizing the content, which would, says the report, ''enable the parties to offer less attractive terms to customers, resulting in viewers paying higher prices for some content, paying for a higher proportion of content, and/or receiving lower quality or less innovative offers.''
Michael Grade, the ITV executive chairman, said he was "surprised" at the decision and would give an update on the broadcaster's plans with its annual results on 4 March. "We are surprised by this decision because we believed 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.
"However, in the two years since the idea for Kangaroo was born, the success of ITV.com has proved that our UK content is attractive enough to stand on its own and we remain focussed on our online growth. We will provide a further update on our online plans with our full-year results on March 4."
A Channel 4 spokesman said: "We're disappointed by this decision. We believe the service as proposed offered clear benefits to British viewers as well as a valuable opportunity for Channel 4. "However, VoD currently makes a small contribution to our revenues and the short term effect on our business will be limited. Longer term, VoD still represents an opportunity for growth."
A statement from all three joint venture partners expressed "disappointment" at the decision. "While this is an unwelcome finding for the shareholders, the real losers from this decision are British consumers," they added. "This is a disproportionate remedy and a missed opportunity in the further development of British broadcasting."