Plan for U.K. VOD service must be revised

LONDON — The proposed U.K. online video-on-demand venture, Project Kangaroo, backed by BBC Worldwide, ITV and Channel 4, has received another setback.

In a provisional ruling on the planned service, also known as UKVOD, the Competition Commission concluded the venture was likely to result in a “substantial lessening” in the supply of VOD content at the wholesale and retail levels and could restrict competition in Blighty.

To remedy the situation, the commission recommended rules that would control how content is offered to other providers or change the terms of the joint venture to combat “the anticipated lessening of competition.”

If these restrictions were not imposed “prohibition would also be an option,” the commission warned.

Commission chairman Peter Freeman, 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 Worldwide, ITV and Channel 4, who are normally regarded as close competitors, could restrict existing and future competition for VOD.

“Whatever benefits viewers would gain from this rivalry would clearly be lost.”

He added: “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, it would have the ability and incentive to impose unfavorable terms when licensing domestic content to rival providers.

“At the extreme, UKVOD might withhold content from its rivals altogether. Any reduction in access to content would be likely to impact unfavorably on viewers.”

The final decision on the proposed service, whose original CEO Ashley Highfield quit last month for a job at Microsoft, is expected in early February.

ITV, desperate to tap new revenue streams, will be especially unhappy at the findings by the Competition Commission.

In a joint statement, the Kangaroo partners said: “We welcome the commission’s recognition that UKVOD clearly has much to offer…

“The shareholders remain committed to engaging with the commission and will continue to work toward launching the service next year.”

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