Project Kangaroo online TV service banned by Competition Commission

On-demand video joint venture deemed "too much of a threat"

With the banning of Kangaroo, the UK still lacks a comprehensive video-on-demand service

Project Kangaroo, the on-demand TV joint venture led by the BBC, ITV and Channel Four, has been blocked by the Competition Commission.

After months of squabbling, the Commission concluded that the service could not go ahead as it represents a threat to other companies trying to break into the video on-demand (VoD) sector.

"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, chairman of the Competition Commission in its final report on Project Kangaroo.

"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 VoD services to UK viewers.

"We thought viewers would benefit from better VoD services if the parties - possibly in conjunction with other new and/or already established providers of VoD - competed with each other."

In a joint statement, the partners in the project said that the decision is "an unwelcome finding for the shareholders" and that "the real losers from this decision are British consumers".

"This is a disproportionate remedy and a missed opportunity in the further development of British broadcasting," they said.

The disappointment over the prohibition of the service was echoed by ITV chief executive Michael Grade.

"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 focused on our online growth."

Grade added that further updates on the broadcaster's online strategy will be unveiled in early March, when full-year results will be announced.

ITV had already announced its intention to continue channelling resources into online media last year. The firm plans to invest in areas such as interactive content in an attempt to increase revenues and fend off competition.

"We are spending a lot of money on winning more viewers not necessarily because we can monetise that, but because we can stop other channels from getting viewers and therefore increase our market share," ITV chief operations officer John Cresswell said at a European media conference last November.

Online advertising investment has outpaced advertising on mainstream TV, with spend reaching £4.36bn 2010, according to a survey carried out by media agency ZenithOptimedia.

It is expected that search advertising will hit £2.45bn, while online classified ads will reach £876m in spending and around £1bn will be generated via display advertising in that channel.