Magazine article Marketing

Andrew Walmsley on Digital: Kangaroo's Global Contest

Magazine article Marketing

Andrew Walmsley on Digital: Kangaroo's Global Contest

Article excerpt

The Competition Commission should start viewing the VoD service in more than parochial terms.

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 Worldwide, 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 relationships with UK production companies. Jointly owned by NBC Universal and News Corp and backed by a private equity stake that led to a dollars 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 dollars 70m this year and dollars 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 dollars 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 pounds 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. …

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