When Will Paid Video Give Way to Video Ads?

We are now deep into the second coming of paid content, and it’s all about video.

We learn this morning that Google has joined iTunes as a provider of premium video downloads paid for on a per-episode basis. CBS is the first to pony up shows. It’ll be déjà vu all over again as network after network pushes content into the Google video index, just as they’ve done with iTunes.

The waning of these content owners’ enthusiasm for paid video should come in a year or two, as it becomes clear most consumers would rather not pay $1.99 for a single episode of Monk when they can Netflix a whole season. When that happens, in-stream video ads will be given a shot. If they’re discreet and respectful of the user experience, my guess is the audience will grow enormously in a short time.

Advertisers will be thrilled in that event, as the amount of “online” video ad inventory explodes. Online has to be in quotes here, since these videos and ads may very well be served onto a television, PSP, iPod or other device. A larger number of homes will have Windows Media Center (or an equivalent Apple-made or third-party digital media server), and the merger of TV and Internet will have its tipping point.

In other words, every device with a screen will be online. There will be less and less television advertising that isn’t delivered on the fly via a network.

That’s my best version of how online video advertising becomes TV advertising and vice versa.

But we have to start with $1.99 downloads.