Kangaroo would have offered BBC, ITV and Channel 4 shows
A plan by the BBC, ITV and Channel 4 to launch an on-demand video service has been blocked because it posed "too much of a threat to competition".
The Competition Commission said Project Kangaroo "has to be stopped" and that viewers would benefit if the three were "close competitors" rather than allies.
Kangaroo proposed to sell current shows from C4 and ITV and archived BBC shows.
The broadcasters said in a joint statement "the real losers from this decision are British consumers".
Commission chairman Peter Freeman said that, as the broadcasters controlled most programmes produced in the UK, the project could stop other on-demand video services developing.
"The three joint venture partners are the largest TV companies in this country and you would normally expect them to compete with each other on a thing like this," he told BBC Radio 5 Live.
"And we're not against the exciting invention - that's great - but there are lots of other people who can offer it.
"All we're saying is that we don't think these three people should do it together."
The commission's statement said that BBC Worldwide - the corporation's commercial arm - ITV and Channel 4 were in "a very strong position as wholesalers of TV content to restrict competition from other current and future providers of video on-demand services to UK viewers".
"We thought the joint venture parties would have an interest in doing so in order to make Project Kangaroo a success."
The broadcasters said in a joint statement: "While this is an unwelcome finding for the shareholders, the real losers from this decision are British consumers.
"This is a disproportionate remedy and a missed opportunity in the further development of British broadcasting."
ITV chairman and chief executive Michael Grade said he was surprised by the decision because he believed Kangaroo, "in a crowded online world against dominant global brands, was an attractive UK consumer proposition".
The Competition Commission had made similar provisional findings in December, but had said changes could be made to allay fears from other broadcasters that they would not be able to compete with Kangaroo.
The BBC's iPlayer already offers current shows for free while ITV does the same via its ITV.com website, as does Channel 4 via its 4oD service.