“Could become a threat to competition”: BBC wanted to launch “its Netflix” in 2009, but the British authorities closed the project

Now the government blames the company for not being able to compete with Netflix. Abstract of Wired Material.

“Could become a threat to competition”: BBC wanted to launch “its Netflix” in 2009, but the British authorities closed the project

In February 2020, British Secretary of Culture Nicky Morgan spoke at a meeting in Westminster. In the report, she reproached the BBC: in her opinion, if the company does not become like Netflix and does not change the business model, it will repeat the fate of Blockbuster. The DVD rental network went bust when Netflix switched to video streaming.

Now one of the main sources of funding for the BBC is the licensing fee for viewers, which is 154.5 pounds per family per year.

In response, a BBC spokesman said: ten years ago, when Netflix distributed discs by mail, authorities did not allow the BBC to launch its own streaming service.

In 2007, Ashley Highfield, sitting in a pub, reflected on a daring plan. Highfield worked as director of technology and new media at the BBC and just launched iPlayer, an online broadcast service “following the air.”

Now he wanted to try to create a commercial product that would earn more. That's why he met in a pub with Ben Macowan-Wilson, who at that time was in charge of ITV's strategy.

They outlined a streaming service plan for digital television. He was called Kangaroo. The idea was simple: to collect the best of what was released by the BBC, ITV and Channel 4, add Hollywood films and work on the project together.

Kangaroo was a kind of prototype of Britbox, a streaming service that British TV companies still launched in 2017. According to Highfield, Kangaroo would be better at the expense of more diverse choices.

“The big players desperately wanted to be taken aback by the emergence of companies like Hulu, or the growing dominance of Sky in this market segment,” says Highfield. In addition, there were rumors about other streaming platforms that could drag the audience.

iPlayer also appeared not without difficulty, Wired source in the BBC shares: “The project faced huge resistance from the television industry.” Online was considered the “strange brother” of TV and radio, players in traditional broadcasting worried that digital services would “eat up” their audience. They seemed to be stuck in the 20th century and could not figure out why the model for viewing on demand is so good, writes Wired.

“Many did not understand why anyone should watch expensive TV broadcasts on a laptop,” the same source continues. Digital terrestrial television was just beginning to develop; laptops with good monitors were far from all.

But the situation with Kangaroo was different. BBC iPlayer exceeded expectations and quickly became a leader in the new online market. In addition, ITV and Channel 4 could not create a competitor to the service. Therefore, they decided not to fight the BBC, but joined it.

Broadcasters enthusiastically greeted the idea with Kangaroo, whose CEO became Highfield. They took the infrastructure of iPlayer as a basis and expanded it. “We learned a lot by developing iPlayer,” Highfield recalls. “The result was an impressive interface, the system as a whole.”

The team has already tested the finished product and closed legal issues related to content rights. “We were almost ready to launch, when they suddenly closed us,” Highfield recalls. “They” are the Competition Commission.

The commission is investigating mergers and organizing companies that may take up too much market share. The UK Antitrust Authority (OFT), a former consumer protection authority, asked the Commission to examine Kangaroo's role in the market.

“OFT correctly noted that the system is quite complex, and sent a request to the Commission to assess the potential impact on the market,” explains Patrick Barways, a professor of management at the London Business School.

The commission began an investigation in June 2008. She was asked to check if Kangaroo would take up too much share in the new industry - video on demand. An expert group with no experience in media and technology has banned the creation of a joint venture in February 2009.

“It will become a threat to competition in the emerging market and should be closed,” said Peter Freeman, a competition lawyer who led the group.

“I was defeated,” Highfield admits, “and after that I left the BBC. The project occupied all my thoughts. We managed to get ITV, Channel 4 and the BBC to work together, a huge achievement. ”

Highfield believes that the Commission made a big mistake and the decision was lobbied by potential competitors, including the Sky channel (and this was confirmed by the media). But the verdict was more influenced by something else.

“We talked a lot with the members of the commission,” says Highfield, “and they just did not understand and could not understand the strength of Apple, the strength of online companies and the relative weakness of traditional broadcasters, their market share. They simply compared the service with on-air TV and said that the market share and influence are too great. ”

Highfield left the meeting with the thought that the commission did not seem to be aware: ITV, Channel 4 and BBC are strong traditional television companies, but they weren’t in the digital world.

A source at the BBC believes that Kangaroo’s positioning also played a role in closing the project: “Perhaps the service was considered too commercial and not useful to the public.”

“The essence of competition is in understanding the market, and for this it is necessary to understand the behavior of consumers on it. The Commission did not have experts in this area, ”says Patrick Barways. The study did not include either live broadcasts, or a shifted broadcasting network, nor movies, nor short videos, like on YouTube, nor DVD, nor Netflix.

“If the market is so narrowly defined, the share of the new company will be large,” Barvis concludes. “I can’t imagine an expert who would study so much how people watch TV and make such a mistake.”

When Kangaroo was shut down, Highfield lost his job and British television had to wait for its own streaming service, Britbox, for almost another ten years. Wired wonders: what would happen if Kangaroo started up.

“Netflix would never take such a market share in the UK, which it occupies now,” says a source at the BBC. “All the local major players would have a share in the video streaming market and a product capable of growth.”

Barwise is not sure of the outcome. In the short term, Kangaroo’s entry into the market would not be an event, he said, because such platforms require development time. But with the gradual strengthening of streaming platforms, the absence of Kangaroo badly affected not only BBC, ITV and Channel 4, but also Sky.

“Netflix and Amazon had no competitors, and this was a blow to all companies in the industry,” Barwayz said. Kangaroo could have a good effect on the audience: the level of “fatigue”

I’m subscribed, ”when a large number of users annoy them, and the associated costs could be lower.

Kangaroo is also not sure. "Who knows? - thinks Highfield. “Maybe we wouldn’t succeed.” There wouldn’t be enough money for deductions to copyright holders. ” Nevertheless, he believes that Kangaroo could achieve some success, and BBC’s response to Nick Morgan is partly fair.

“I don’t think Kangaroo would stop others from growing,” he concludes. “But the British would have the choice and service that suits their tastes and desires.”