iPhone is the right way to think about it…it broke the cell phone model with its UI and ability to monetize using micro-transactions. User interface will really matter! Customer needs to know what to watchCompanies need to know how to encourage conversion at the menu level: Hulu sees a $20 VRD compared to $1-$2 on Comcast. It proved micro-transactions can happen in the US. Aggregation: Aggregation could evolve into a financier’s game. It is the most important issue to watch. If ISPs can’t compete on innovation and user experience, they will compete on pricing. They have content people want to watch and are willing to pay for. Two key issues to watch for:

The single most important thing that’s going to shape things is metered internet pricing. Very deep pockets. The second most important issue to look for is User Interface and User Experience. Hulu, Netflix, Google could become the next Sirius Radio-XM Satellite deal. NFL and HBO are in the fundamentally positive position.

By Ravit Lichtenberg (blog)

Within a matter of 15 minutes, Bill articulated the key trends, barriers, and success factors in the video tornado. Below is a summary of Bill’s talk. Bill is the author of Above the Crowd; coming from design engineering and analyst background; he brings a truly unique perspective to his VC role at Benchmark.

Bill Gurley, General Partner, Benchmark capital gave the Keynote address at the OnHollywood conference this morning.

DRM was a speed bump; Blue-Ray is a smaller speed bump. Right now people have unlimited access to all DVDs but it’s not going to be the same with online content. Silicon valley has misconception about Hollywood—a naivet?—while Hollywood is well aware of what’s happening; boardroom meetings are happening as we speak. A single episode of Lost costs around $1mil. Studios are either not making content available on line or they sold it already. The video market is in tremendous transition:

The playing field is being defined right now! TV and online used to be thought of as two separate worlds but Hulu showed up on Boxee and blew that model away. The $25 all you can eat model isn’t going to exist for online content. The incumbents will use their strength to compete with Hulu: Cox, Comcast, Time Warner will continue to do what they can. Great content is expensive: over the past 20 years, user expectations of their TV experience has come close to their expectations of feature films. Affiliate fees is a huge deal.

It is a great area for startups who can innovate but it will only happen after the platforms solidify. Interactive TV is a term often used but it is not clear what it means. Beyond the Traditional TV model:

Opportunities beyond traditional TV: people will be looking for non-traditional content relevant and specific to their interests. Companies are working fast and furious to understand, develop, capture the TV OS/Deck models. The intern et is coming to TV NOW.