Last week, the Competition Commission announced the preliminary findings of its inquiry into Kangaroo, the UK web-based video-on-demand service expected to launch early next year.
Kangaroo is a joint venture between ITV, Channel 4 and BBC World-wide, and the commission says it is 'concerned that a loss of rivalry between BBC Worldwide, ITV and Channel 4, normally regarded as close competitors, could restrict existing and future competition for video on demand'.
Its worry is that these broadcasters would be able to exercise excessive control over locally based content, which they see as crucial to the success of an online TV service.
To be fair, the venture hasn't made a very tactful start. One production company claims that, until recently, its only contact had been a call from Kangaroo's lawyers informing it that the company already had the rights to its content; the implication being that it shouldn't expect to receive any more money for it. Regardless of the legal position, this was never an approach likely to get content producers on-side.
Contrast this with Hulu, a US internet TV service, which has been taking advantage of the hiatus caused by the Commission's inquiry to build relation-ships with UK production companies.
Jointly owned by NBC Universal and News Corp and backed by a private equity stake that led to a $1bn valuation of the business at its outset, Hulu has big ambitions, and is not limited to its domestic market.
The site is currently available only in the US due to licensing restrictions, but Hulu intends to 'make its growing content line-up available worldwide'.
Sky, another News Corp TV business, has also taken advantage of Kangaroo's plight with the launch of its Sky Player last week.
According to media analyst Screen Digest, Hulu is likely to make $70m this year and $180m next. Its deep-pocketed backers, substantial revenues and international ambitions make it a potentially massive global player.
It is not alone, however. YouTube has been a web phenomenon, not least due to its $1.6bn price tag when Google bought it in 2006. Since then, Google has pushed the product hard, and its predicted revenue for 2008 is £100m.
The site had 83m unique users in September, compared with Hulu's 6m. In other words, Hulu makes 10 times as much money per user as YouTube.
It seems that long-form, legal, high-quality content is worth more to advertisers than short-form, user-generated video. This certainly seems to be influencing YouTube, which has been striking deals to buy feature-length content from MGM, CBS and Fremantle.
Joost has also been busy. Originally launched as a peer-to-peer system that required users to install software to view the service, Joost is now a streaming site with a wide variety of high-quality content ranging from C4's Peep Show to Adult Swim's Robot Chicken (and, of course, the Beyoncé channel).
These four big, well-funded, highly competitive businesses are vying to dominate the online video business. They have existing relationships with content owners, established and growing user bases, and ad revenue.
This is the competitive environment into which Kangaroo will be launching. The Competition Commission's view that the key competitive axis is between ITV, C4 and the BBC misses the point. Mergers and acquisitions have made media a global business, and the web is delivering global media to consumers.
If the commission continues to act like a parish council, all it will succeed in doing is guaranteeing that the future of online video in the UK will be determined by the US.
Andrew Walmsley is co-founder of i-level
30 seconds on... Kangaroo
- Kangaroo will offer a more extensive content archive than those of the broadcasters' individual VoD sites, as well as current content.
- BBC iPlayer, ITV Catch Up (to be renamed ITV Player) and 4oD will also continue to provide current VoD content. iPlayer material will be 'listed within' the service, too.
- Kangaroo is a working title; the service is expected to be known by a different name, possibly 'SeeSaw'.
- Content will be delivered by Kontiki, which also powers BBC iPlayer, and developed by ioko, the media platform designer that worked on ITV.com and 4oD.
- Kangaroo chief executive Ashley Highfield left the project for Microsoft last month after just seven months.
- The service was expected to launch this year, but was delayed by a referral to the Competition Commission from the Office of Fair Trading in June amid concerns it could be 'too powerful'.
- The Commission has urged the broadcasters to modify the plans in response to its preliminary findings, and invited consumer comments.