From Colin Mann in London
The Competition Commission (CC) has provisionally concluded that the proposed VOD joint venture between the BBC through BBC Worldwide ITV and C4, 'Project Kangaroo', will restrict competition in the supply of VOD services in the UK.
In a summary of the provisional findings, the CC has concluded that the joint venture is likely to result in a substantial lessening of competition
in the supply of UK TV VOD content at the wholesale and retail levels. The CC does not, however, expect the joint venture to lead to a lessening in competition in online advertising or content acquisition. The full report will be published shortly.
UKVOD (aka Kangaroo) is proposing to provide a 'one-stop-shop' for UK TV VOD. The web-based service will provide viewers with the opportunity to access recently-aired (catch-up) programmes as well as archive content. Catch-up content will continue to be available on the broadcasters' individual websites, so a key element of UKVOD will be access to archive programming.
Peter Freeman, CC Chairman and Chairman of the inquiry group, said that Video on Demand was a relatively new and rapidly expanding medium and that "UKVOD clearly has much to offer." He said, however, that the Commission was concerned that a loss of rivalry between BBCW, ITV and C4C, 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.
He said that evidence suggested that domestic content was key to being able to offer strong competition to UKVOD's proposed service. "The parties control most of that content, putting them in a powerful position in relation to competitors and viewers. We think that it would be difficult to obtain content from third parties to match UKVOD's offer in scale or attractiveness."
He also suggested that UKVOD would have the ability and incentive to impose unfavourable terms when licensing domestic content to rival VOD providers. "At the extreme, UKVOD might withhold content from its rivals altogether. Any reduction in access to content would be likely to impact unfavourably on viewers" he concluded.
The CC is now seeking comments on how to address the loss of competition and its adverse effects for viewers and will hold further hearings with the main and interested parties before publishing its final decision on the competition issues and remedies. The deadline for the final report is 8 February 2009.
The UKVOD partners said they welcome the Commission's recognition that "UKVOD clearly has much to offer," and confirmed that they would continue to make the case for a service that will be both in vast majority free and non-exclusive, and of great benefit and value to British consumers. "The shareholders remain committed to engaging with the Commission and will continue to work towards launching the service next year," they said.