It is also thought that Highfield had grown disaffected by a lack of autonomy over the planned venture, with its powerful backers BBC Worldwide, ITV and Channel 4 retaining a large say in the fledgling operation.
According to a senior digital sales executive, Highfield and his team at Vodco, Kangaroo's holding company, have been navigating a "political nightmare" and are "toothless" in terms of having any power to make any decisions.
He said: "Every time even the smallest thing needs to be decided, they have to consult each of the shareholders [BBC, ITV, and Channel 4] - who all have very different idea and motives. The team are being pulled in so many different directions, I am not surprised that Highfield has walked out. He was totally at the whim of the broadcasters and lacked the autonomy I am sure he was expecting to have in that position," they explained.
Kangaroo was initially planned for launch earlier this year, but at the behest of independent producers concerned over Kangaroo's dominance of the nascent VoD market, the Competition Commission embarked on a probe into the service.
Richard Menzies-Gow, a media analyst at Dresdner Kleinwort Wasserstein, blames the lengthy regulatory review for Highfield's exit. "He didn't sign up for an unending regulatory review," he said. "It's not good news for the project that he has walked out. He probably had no idea how long the process was going to take and Microsoft came along at the right time with a better offer."
Numis Securities' analyst Paul Richards added: "Highfield's departure has to be seen as a sign of frustration with the regulators. It was a coup for the members of the joint venture to get him on board in the first place, and ever since then the whole thing has kept stalling. No wonder he is frustrated - he signed up to an exciting venture that hasn't yet been able to near a launch date."
Questions are now being asked about the future of the project. With the Competition Commission probe now in full swing, it is thought the venture might not now launch until the middle of 2009.
Another digital media specialist said: "It's getting harder and harder as time goes on for Kangaroo to announce its position. We have been hearing for a while that the team at Vodco has been aggravated by the amount of work that has gone in - without knowing a launch date. It will be interesting to see if there is any movement from ITV now. A lot of money has been invested by each of the shareholders and a player has been built, but people are unsure if ITV will hang around. Ultimately, everyone says it's hard to make a joint venture work, but with three effective competitors pulling in different directions, it seems nearly impossible to get this joint venture off the ground."
Highfield has become managing director and vice-president of Microsoft UK's Consumer and Online division. Ron Henwood, the former Channel 4 new-business director who launched 4oD, will step in on an interim basis until a full-time replacement is found. He will be supported by Mark Kortekaas, chief technology officer, and Christine Mullin, chief financial officer. Henwood is currently lead regulatory adviser at Kangaroo.