Kangaroo Says Cartel Concerns ‘Misconceived’, Targets 11 Percent Of UK VOD Market

BBC Worldwide, ITV (LSE: ITV) and Channel 4 have rejected concerns their Kangaroo VOD JV would allow them to operate an online video cartel.

In a submission to the Competition Commission’s inquiry – dated July 25 but published today with significant redaction – the JV trio said: “This concern centres on the argument that the parties have strong market positions in respect of rights over UK TV content and that UK TV content is unique… Both of these propositions are misconceived.”

The inquiry has already heard concerns from Joost, Lovefilm backer Arts Alliance Media, the Institute of Practitioners in Advertising (IPA) and the Producers Alliance for Cinema and Television (PACT) over Kangaroo’s ability to set prices for wholesale content and advertising.

But Kangaroo’s submission says its strength in conventional TV would not be replicated in VOD because “much UK linear content, such as sport, news, talent shows and soap operas is unsuitable for VOD“. It said Kangaroo would not result in consumer prices rising because VOD platforms like those offered by Apple (NSDQ: AAPL), Sony (NYSE: SNE) and Microsoft (NSDQ: MSFT) are incentivised to set low prices in order to sell their hardware. Since it is not in the business of shifting hardware, Kangaroo said it will offer “dusty” archive content that wouldn’t otherwise get an airing (ie. the long tail).

And it argued it “will face strong competition”: “It cannot be doubted that players such as Apple, Sky, Amazon (NSDQ: AMZN), Microsoft and Sony have the know¬≠-how and resources to make highly competitive offers for VOD rights if they should wish to do so. Independent production companies such as Endemol are large and sophisticated organisations that are perfectly capable of taking advantage of commercial opportunities by separating linear and VOD rights.”

New details on the JV…

Targets: Kangaroo said it estimates it will control 11 percent of the UK VOD market if the offering includes both TV and film content, 21 percent if it’s just TV. It estimates it will get about one percent of internet advertising.

Catch-up: A separate submission says Kangaroo will offer TV catch-up shows broadcast in the last 30 days, suggesting some kind of integration with iPlayer, ITV.com and 4oD.

Rentals: Free catch-up programming will be ad-funded, viewers will get to purchase shows to own and – this just in – there will be a cheaper, rental option. There “may” be subscriptions.

In making its case, Kangaroo is using competitors’ words against them. Like this from Joost CEO Mike Volpi: “Today we have 7,500 hours–one of the largest portfolios out there. We’d love to have more, but our success or failure will not be dictated by signing another deal.” And this from BSkyB (NYSE: BSY) broadband director Griff Parry: “We believe our Sky+ customers enjoy the UK