Hulu jumps into UK's online video market after Project Kangaroo is bounced out

Several developments during the past few weeks – and notably the past few days – will change the face of the UK market for online video, which we define as video content delivered to users over the internet, typically to a PC rather than a TV.

Short-form, user-generated content dominates the online video market in the UK, where YouTube accounted for more than half of all online video views in January 2009, according to statistics from comScore.  

Despite the high levels of publicity generated by the BBC iPlayer, combined views for long-form content from the top-five UK broadcasters’ online video sites (BBC iPlayer, ITV Player, 4oD, and Sky Player) accounted for only 2.5% of the total.

The market for professional content on the web continues to be heavily fragmented. Project Kangaroo, a joint venture between BBC Worldwide, ITV and Channel 4, sought to address this by providing a single online destination for some of the UK’s most-popular, professionally produced video content.

However, the UK Competition Commission blocked the project in February 2009 on the grounds that having all the digital content from the country’s public service broadcasters on a single portal was too much of a threat to competition in this emerging market.

It is somewhat ironic that Hulu – another joint venture dominated by content from leading broadcasters including NBC and Fox – could fill the void left by the demise of Project Kangaroo. Hulu is rapidly becoming the leading site for long-form content in the US, and the company has revealed an interest in various major markets worldwide.

It may target the UK with a combination of US and UK content as early as September 2009 – Hulu is already negotiating with Channel 4 and ITV. Other than its geographical origin, Hulu is little different from Project Kangaroo and may well have inspired the UK initiative.

In another twist to the whole saga, YouTube has just negotiated a deal to stream BBC archive content in the US, and may eventually be in a position to do so in the UK. Google’s site may dominate the online video market in terms of audience, but it has so far failed to find a business model that would enable it to monetize its low-value content, and is therefore seeking a means of moving up the value chain.