Kangaroo's power may be diluted by commission's findings

The service, due to be launched in 2009 by BBC, ITV and Channel 4, has divided opinion since its inception.

The CC provisionally concluded today that the project "will restrict competition in the supply of VOD services in the UK" and one of the potential remedies could be to alter the terms of content exclusivity between the joint venture and its parents - BBC, ITV and Channel 4.

This could mean content appears across several different platforms to allay competition concerns.

Caroline Binfield, business director, television, Arena BLM, said: "The attraction of Kangaroo to clients was a one-stop shop to get these broadcasters' content exclusively.

"If the content has to be spread elsewhere, it might give those agencies that aren't tied into agency deals more negotiating power. I do think the spread of the content might dilute Kangaroo's power, as it was meant to offer unique content. However, being able to negotiate the price down might offset that."

Richard Oliver, managing partner, investment, at Universal McCann, thinks it depends on how much content Kangaroo would have to put elsewhere - and places more value on the aggregation of content the service offers.

He added: "It's not the exclusivity of content that gives Kangaroo its value - it's the aggregation of content. It will provide mass audiences and a more compelling and easier online proposition.

"But if it was the majority of all content that would have to be made available to third parties, it would clearly dilute the offer because anyone could produce any number of Kangaroos."

However, Rhys McLachlan, broadcast implementation director at MediaCom, called the findings "disingenuous" and said any imposed restrictions will only make Kangaroo work harder.

"I don't think these findings present insurmountable hurdles. Kangaroo already exists in beta - I have seen it," he said.

"The CC's report doesn't affect the infrastructure or the technology - it just means the partners will have to work to find a way around this. There are plenty of search engines out there, but we all use Google because it's the best.

"I anticipate that regardless of what else is out there, consumers will use Kangaroo because it will be the best - and any added competition will only make it work harder."

There is concern elsewhere that the CC's comments could hamper any type of launch. Paul Richards, media analyst at Numis Securities, does not think the service will lessen competition in any way in such an early developing market.

"This is a real chance for the UK to create a real competitor to YouTube and it's been thwarted by the CC," he said. "I think it's a dreadful mistake. It's difficult to see how the project can launch after this."

In its report, the CC outlined the three potential remedies it has at this stage. The first option is to scrap the whole venture, more commonly referred to as the ‘prohibition' remedy.

The second suggests an access remedy which would ensure content was made available on a "fair, reasonable and non-discriminatory basis" to third party companies.

The third option is refers to "material modification", which would either: limit Kangaroo's ability to sell Channel 4 and ITV's catch-up TV content, or its ability to wholesale catch up TV content, or stop Kangaroo wholesaling catch up and archive content - meaning the individual broadcaster would sell their own VoD content.

The CC will hear further hearings before publishing its final decision by 8 February 2008.