Kate Bulkley, Media Analyst.

Media Money: Why is the Competition Commission looking into Kangaroo?

By Kate Bulkley

Broadcast News

For Broadcast July 17, 2008

There is an adage in business that the more transparent you are, the less you have to hide. In the case of Kangaroo, so little is known about the mooted VoD joint-venture that the Office of Fair Trading was clearly baffled. It has bounced Kangaroo on to the Competition Commission, telling it to "collect better evidence on the key issues than is currently available".

The problem for the Kangaroo triumvirate (BBC, ITV and Channel 4) is twofold: first, they are losing time in the market while they pull together evidence for the CC; second, depending on what the CC decides, the potential revenues from Kangaroo could be lower than expected. Indeed, on the day of the CC referral, Deutsche Bank downgraded ITV's stock, saying Kangaroo would generate about £4m of losses this year and that ITV's £150m revenue target by 2010 for its online businesses looked "very optimistic".

The OFT and now the Competition Commission consider Kangaroo to be a "merger" of the broadcasters' online TV businesses and they want a clear view on Kangaroo's potential market power and the implications that has for pricing.

So far, Kangaroo has provided very little in terms of what the mooted service will look like. But one thing is clear: putting the programming (worth £2.5bn per year) of the three biggest UK broadcasters into one service will create a powerful online destination. That has to be better for consumers than doing a Google search every time they want an online episode of their favourite programme.

But the potential problem is excessive market power. ITV's executive chairman Michael Grade is right that delaying is handing the UK download market to unregulated competitors such as Google's YouTube. But the CC must also be concerned about Kangaroo becoming the only place for UK TV online, with monopoly prices to match. Let's hope Kangaroo can allay the concerns before the CC bounces it out of the marketplace.

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