Analysis: True video-on-demand moves closer as Kangaroo project finds its feet

If anything, the announcement - when it came - seemed rather rushed, because the proposal is yet to receive formal aproval from the BBC Trust and each of the broadcasters' boards. Nevertheless, the concept behind Kangaroo makes sense and, according to some in the industry, is long overdue.

The web-based service will provide a single platform for viewers to access recently aired programmes from the three broadcasters, as well as content from their archives.

Over time, the broadcasters say, they want other content providers to sign up, in much the same way that the digital TV service Freeview offers viewers access to a range of channels. Also like Freeview, it means that the networks can share the costs of developing the technology behind the scenes.

"The idea of Kangaroo is great from our point of view because they are creating a common system for accessing their content, so we can have digital TV products that tap into that," says Simon Gauntlett, technology director at the Digital TV Group (DTG), which manages Freeview on behalf of its shareholders (BBC, BSkyB, Channel 4, ITV and National Grid Wireless).

It's good news for advertisers, too, according to many media agencies.

"Project Kangaroo is an exci-ting concept and one that could lead to the VOD/IPTV (video-on-demand internet protocol TV) platform fully taking off," predicts Paul Nasse, buying director at Zed Media. "With the potential for big audience figures, a wealth of high-quality content and a possible standardisation of creative, both agencies and clients can really start allocating significant marketing spends to IPTV," he argues.

WORLDWIDE MARKET

Indeed, research house Understanding & Solutions expects the worldwide market for internet TV advertising to be worth as much as $10 billion by 2011. Little wonder then that there has been what it describes as "an internet TV goldrush", as conventional broadcasters and cable networks vie with new internet upstarts, such as Joost and Babelgum, to launch online TV services.

Apple already has its own set-top box, Apple TV, with access to a viewer's iTunes library, and - if the rumours at the time of going to press are to be believed - movie rentals will follow soon. Microsoft launched on-demand film rentals in December through Xbox Live; BT has BT Vision, an integrated Freeview set-top box with a broadband connection, and Sky has its Anytime online TV service, which launched ahead of everyone else at the start of 2006.

While Kangaroo presents a competitive threat to each of these services, many of Kangaroo's 'competitors' also see its entrance into the market as confirmation of the sector's potential.

Valerio Zingarelli, Babelgum's chief executive, comments: "The BBC director of digital media has described this as 'an era of co-opetition'. We agree, and we continue to focus on our priorities - building a differentiated service that delivers niche content to niche audiences around the world."

Indeed, one of the complaints from media agencies is that there's still not enough content to go around.

"Partly, that's because audiences are spread across lots of different services," says Ed Ling, strategy development director at i-Level. "What Kangaroo presents is the convergence of a number of publishers or broadcasters working on a single platform, which makes an awful lot of sense."

SLOW ROLL OUT

Before the launch of Kangaroo, the BBC, ITV and Channel 4 had each developed its own video download service: the BBC has been criticised for the slow roll-out of its iPlayer service, which was still in beta trials at the time of going to press; ITV.com launched in May 2007 and offers click-to-play programming and a 30-day catch-up facility; while 4degD from Channel 4, which launched in November 2006, is the most popular TV internet service, according to Continental Research.

Given each broadcaster's investment in its own internet TV platform so far, the three founders have agreed that the joint venture will complement each of their own offerings. Kangaroo will initially launch online (and only for PC users at the beginning) but will be available for distribution on other platforms eventually, presumbly a nod to the very likely possibility in the future of set-top boxes or TVs coming with built-in broadband connections.

"What Project Kangaroo is essentially enabling users to do is replace the 14-inch laptop with 42-inch widescreen TVs and move the Electronic Programme Guide from the TV on to the internet," says Nasse.

This is also what many define as 'true' IPTV - the delivery of TV programming over an internet connection via a set-top box to a TV; whereas services such as 4degD, which are watched on a computer, are more commonly known as internet TV.

Clearly, these are exciting, if turbulent, times in the TV industry, and the launch of Kangaroo is recognition from the three broadcasters of viewers' changing media consumption patterns. Youth marketing agency, Face Group, carries out an annual investigation, called Tech Tribe, into the buying patterns and behaviour of 16 to 25 year olds. "What's clear is that this group's consumption of traditional TV is declining year on year. It's down to 13 hours a week in 2007 from 17 hours in 2006," says Andrew Needham, founding partner of Face Group.

Often this age group will source its TV content online, although what's also interesting is that two-thirds of them are not paying to watch programmes on the internet, preferring instead to download content for free from one of several illegal sites - even if the quality is not always very good.

"So this is where it comes back to pricing," continues Needham. "If they can get programmes cheap enough for them and the quality is very good, then that might make a difference."

MIXED MODEL

Kangaroo will offer viewers a mixture of free and paid-for content.

"We're not specifying the amount of content that will be available either paid-for or free, but it will be more than just seven-day catch-up," promises Tom Betts, commercial and acquisitions director at ITV.

"First, there is still a lot of discovery work to be done around viewers' consumption habits and, second, we anticipate that the proportions will change continually based upon the content on offer."

The founders of Kangaroo are not prepared to disclose how revenue will be split between the three partners but, says Betts: "It will come from a mix of paid-for (download-to-own, rental and subscription) and advertising revenues."

Screen Digest estimates that advertising will generate the lion's share of UK online TV revenues by 2011 at £85 million, compared with £57 million from download-to-own, £8 million from pay-per-views and £21 million from subscriptions. Based on such forecasts, it's a fair assumption that most of Kangaroo's revenue will be coming from advertising.

But what impact could this have on traditional terrestrial advertising?

"It's not just internet TV but the internet that's cannibalising terrestrial TV advertising," says Adam Berrey, vice-president of marketing and strategy at Brightcove, which provides branded internet TV services for broadcasters and publishers. "But we're not looking at a situation where broadcast TV advertising is going to have some kind of precipitous decline. It's a more gradual transition than that. Advertisers are becoming multichannel brands. They may be shifting dollars from linear broadcast into internet TV, but the broadcaster is still capturing advertising dollars, just in a new way."

NEW SELL

Ben Wood, managing partner at media agency Vizeum, says: "For us, what's great about IPTV opportunities is that we can get clients to look at these opportunities through the same glasses they use to look at television. Sometimes it is hard to say to clients, 'Why not use half of your television advertising budget to build your brand online?' So the angle we're taking is that all of our television schedules now span traditional multichannel TV opportunities as well as IPTV opportunities."

Kangaroo will offer advertisers pre-roll and post-roll advertising opportunities, similar to those currently running on ITV.com. In many ways, these formats replicate the offline TV advertising experience, so it's a good starting point for brands that haven't dipped their toe in online yet. But many in the industry believe it's barely scratching the surface of the two-way interactions that online advertising offers. Arash Amel, head of broadband media at Screen Digest, goes so far as to call the concept of in-stream advertising a "potentially dying art form".

OPPORTUNITIES

"Advertising agencies have to grasp that there are new and more innovative opportunities," he argues.

"What we're seeing on YouTube, for example, is increasing involvement with display, overlays and links. What we're also seeing from content producers is embedded advertising in the content itself - so if I'm watching a piece of golf programming, suddenly I can see a strap with a web link offering ten per cent discount on certain golf products."

This is an area that digital advertising agency Digitas has been discussing with its client Joost, a rival to Kangaroo from the founders of Skype and Kazaa.

"If a viewer downloads Casino Royale, for example, advertisers know that people watching that film probably have a sense of adventure, so you could provide value to the user by showing them travel deals to locations shown in the movie," suggests Felipe del Corral, vice-president director, brand experience at Digitas.

"This will also put the onus on the owners of the TV content, the producers and distributors in each country to look at what sort of deals they can make with travel agencies to advertise these locations."

It's a far more complex sort of advertising, but one that he believes will significantly enhance the viewer experience.

It's not the only area in which complexities exist around video-on-demand - managing the copyright for programmes downloaded or viewed across multiple platforms presents new technical, as well as legal, problems, for instance. Agencies would also like to see some form of cross-channel currency to gain a better understanding of the reach and frequency of new IPTV channels and compare it on a like-for-like basis with offline media.

Once the initial excitement behind Kangaroo has died down, next will come the hard work of making it a reality.

As Vizeum's Wood says: "The year 2007 was exciting, with brands launching and creating different propositions, but it'll be 2008 when we see some real scale, and with that comes real advertising spend, good case studies and well-known brands getting involved."

Many in the industry will surely raise a drink to that this year.