Microsoft is not a company of fools. It knew the Zune was going to get pummeled by the iPod – and it knows that the Zune HD will never knock the iPod Touch or iPhone off of their throne. But it also knows there are a lot of people more interested in a good personal media player than an all-in-one device – and for them, Microsoft has hit the sweet spot.

While the Zune HD isn’t quite a home run for the company, it’s a solid triple – and has quickly become the strongest competitor on the market to Apple’s PMP empire. Priced fairly at $220 for the 16GB model and $290 for the 32GB one, the device is stylish, ultra-light and ultra-powerful. It boasts a solid battery life. And, come mid-December, it could be a tough item to find on store shelves.

One of the Zune HD’s major attractions is its 3.3-inch OLED screen, which offers a sharper picture than anything you’ll find on the iPhone. Like many competitive devices, the screen is touch sensitive and offers a 16:9 (widescreen) ratio. Ironically, videos shown on the Zune HD itself do not appear in high definition.

Most people won’t realize it, though. Video on the player is crisp and clear. As with  a high-end TV, though, it’s best watched in a darkened room. The Zune HD’s highly reflective screen makes outdoor viewing (and some indoor viewing) a bit challenging – and sometimes impossible.

To get true HD from the Zune HD, you’ll need a $90 dock (sold separately). With this, users can output 720p video from the device to their HDTV. The functionality is a big selling point for the Zune device – and it’s a feature that really shines. Videos look spectacular – and the interface works surprisingly well on the big screen, despite its shortcomings on the player itself.

The player’s interface is one of the Zune HD’s more notable stumbles. It’s minimalist, but perhaps a bit too much so. Figuring out how to navigate among choices isn’t as intuitive as some competitors, including Apple.

You won’t see Rachel Ray or Paula Deen anywhere on Hungry Nation TV, but you may learn how to make a cocktail in just 12 seconds.

Next New Networks is launching the new online video network today, with a focus on food for the common man – and frugality.

“We are always trying to identify areas that are underserved by the media and see if there’s a way to serve that audience online through video,” says Lance Podell, CEO of Next New Networks. “Much of what [cable’s] Food Network focuses on is professional, but it’s over-aspirational. … What we thought about was how much food is a part of our live and how we all enjoy talking about and sharing food stories, but in a more mundane and real way.”

Hungry Nation will launch with two shows - VendrTV and Working Class Foodies – and plans to add a third (12 Second Cocktails) next month. By December, it plans to increase that number to five.

The art of fan-made fantasy trailers on the Internet has come a long way. The latest -- this appeal to cast Nathan Fillion in the upcoming Green Lantern film -- could fool a lot of people. For the record, though, this is not an official trailer for the film. 

Fan films in tribute to their favorite movies are pretty common on the Internet. But this "Wolverine" viral video is pretty impressive. Hell, given the low quality of some of the effects in the actual movie, one way you can tell this wasn't secretly produced by Fox may be the the metal claws are too real.

Homemade Real Wolverine Like Claws X-Men - Funny video clips are a click away

Here's the good news, while DVD revenue was down a stark 14% last quarter, according to the Digital Entertainment Group (a home entertainment trade organization), Blu-ray revenue was up 105% and digital downloads were up 19%.

But here's the bad news: About a decade after digital movie downloads started and over two years after Blu-ray launched (and a year since HD DVD folder), their substantial growth is still not big enough to make up for the declines in DVD revenue.

To be precise, Blu-ray revenue rose $118 million to $230 million, while digital download revenue grew $78 million to $487 million.

Standard DVDs, however, fell $470 million to $2.89 billion.

That's a $291 million gap between growth in new formats and the decline of the old.

While Hollywood has been busy figuring out whether and how the future of movie distribution will arrive via digital downloads and streaming, a big legal case is presaging a different approach: ripped DVDs.

In the music industry, of course, consumers were ripping CDs onto their computers for years until labels started offering affordable and accessible downloads via iTunes. The fact that it was so easy to get tracks off a CD and then onto an MP3 player (or share it on the Web with friends or the world) was one of the main arguments used to spur the music industry into selling downloads and, finally this year, abandoning restrictive DRM software.

Though there's a decent amount of movies available to download or stream, it's nowhere near as wide a selection as music and the DRM is still very restrictive. One of the obvious reasons is that it's still the best alternative to piracy. Because DVDs come with copy protection, consumers can't easily copy movies onto their computers they way they have always been able to with CDs. And because movies take up numerous gigabytes on a hard drive, most people can't store anywhere close to their entire film collection on a single computer, they way they can their music collection.

But the ongoing case of the motion picture studios against RealNetworks, initially about a piece of not particularly useful piece of software, has turned out to be about that very possibility. Ostensibly it's about the RealDVD software, which lets users copy a DVD onto their hard drive. Given that it limits playback to five machines, while plenty of free programs on the Web do the same thing for free with no such limitations, it was never going to be a major factor in the industry. Especially since, for the storage reasons I noted above, transferring DVDs onto a PC isn't too useful a proposition.

But in court yesterday, RealNetworks CEO Rob Glaser unveiled the real heart of the matter: Facet (that's a none-too-sexy prototype on the left), a new piece of hardware the company wants to sell that uses the RealDVD software, has a (presumably) huge hard drive to store hundreds or thousands of copied DVDs, and plugs directly into a television with its own simple interface for watching films.

It's essentially a cheap version of the well regarded by super expensive ($10,000) Kaleidascape.

"Kaleidescapes are like Porsches. They're very expensive. We thought we could develop Chevys, a $300 product that could replace a person's DVD player," Glaser said in court according to CNET News.

Theoretically, Hollywood should have no problem with the Facet's capabilities, as described by CNET:

During Glaser's demonstration of Facet, he showed how the box made the process of scanning, selecting, and pulling up digital DVD copies as simple as managing an iTunes music library.

In addition, the box could instantly provide a synopsis about a film or the movie's cover art, as well as enable a user who interrupts the playback for whatever reason to instantly return to the spot where the movie left off. Glaser used a copy of a box set from the show "The Sopranos" to demonstrate how a Facet owner could begin playing any episode within the set almost instantly.

One little problem, though. As Glaser has admitted, there's no way to ensure that a DVD has only been copied once. There's nothing to stop consumers from renting a copy from Netflix of Blockbuster and then copying it onto the Facet so that they own it for the price of renting. Or, even more alluringly, buy one copy and then share it with an infinite number of friends, all of whom can make a digital copy and then pass it onto the next Facet owner.

CNET summarized Glaser as saying the MPAA's case is nothing more than a "thinly cloaked attempt to quash competition." And it is, without a doubt, an attempt to maintain the current business model through which consumers have to pay more -- sometimes a few bucks along with a DVD, sometimes $10 -- to get a digital copy of a movie they might already own.

On the other hand, it's foolhardy and naive -- in that all-too-typical Silicon Valley way -- to suggest that Facet doesn't enable and encourage mass stealing of movies in the way I described above. If the Facet became popular, studios would have to respond with some draconian new DRM measure on DVDs or by eliminating the low cost rentals that serve consumers so well.

The only fair solution, it seems, is to find a way to build the Facet so that it can only copy any single DVD once. It's easier for me to suggest than an engineer to do. But it's the only way to address very real piracy concerns and keep Real's potentially very useful product on the market so that it really is a matter of legitimate new business model versus legitimate old one.

Jeff Bewkes is going to love this one.

By the end of this year, Comcast will launch a new service via its Fancast website that makes all of its cable content available online on stream. Just one catch: You have to be a subscriber.

Karen Gilford, senior VP of interactive for the cable provider, told PC World every cable subscriber will, for no additional charge (for now at least) get a login and password to watch programs on Fancast. Most notably, they won't just be cable networks that already stream on their own website or on Hulu, like Comedy Central and TNT. It looks like it will include some that don't -- even pay channels like HBO. As PC World notes, "[W]ith its long-standing relationships with virtually all major video content producers (the networks, HBO, CNN, etc.) [Comcast] is in a unique relationship to provide a single omnibus video site that has a broad range of content and a consistent way of viewing it all. Those relationships might allow Fancast to feature a lot of content that other online video sites don't have."

The greatest fear of television executives (besides greenlighting the next "Do Not Disturb") is that more of us will follow the small but growing number of young people who cancel their cable/satellite subscriptions and get all their TV via the Internet, either on a PC or by using one of a number of devices that put the Web on a TV. With no cable carriage fees and a fraction of the ad revenue they get on-air, their business models would be destroyed.

But if you have still subscribe the old-fashioned way (or with a new-fashioned Internet plan) to get the good stuff, executives would be fine with it. Then we're just transferring the old business model onto new technology. Quick and easy. No pain. That's why Bewkes recently said a model like Comcast's is necessary.

A senior television executive recently told me in an interview that he feels forces (like Bewkes) pushing against online TV and he could foresee a day when the only free stuff online is promotional clips and library content. If Comcast's technology works and if consumers take to it, you've got to wonder whether a lot of television executives won't be pushing to make that day come faster.

Or will they have to accept that the only way to compete with free piracy is with free, but ad-supported, streaming?

Last week my wife needed to watch some episodes of a TV show that aired earlier this season and aren't yet on DVD. She needed to watch a bunch in a row and didn't want to do it hunched over her relatively small TV screen.

Our less-than-ideal solution was to boot up the Playstation 3 and use its Web browser to surf onto Hulu. It worked, but the video player was spotty, indicating that the version of Flash -- the primary software used to stream videos online -- on the PS3's Web browser wasn't working smoothly.

But Adobe, the maker of Flash, is now aiming for a much simpler solution. According to numerous reports, the company is announced at the National Association of Broadcasters Show today that it is launching a new version of Flash that will work directly on set-top boxes, Blu-ray players, and the growing number of TVs connected directly to the Internet.

Hulu isn't the only major video site to use Flash. Most of them do, including a little one called YouTube.

So now we have a growing number of new TVs that connect directly to the Internet, as does nearly every new device that plugs into to your TV. And they will all come with a version of the primary software needed to watch videos on the Internet.

The result could just be that long-heralded "connected living room," where online video and traditional TV merge together into one big confusing blob library of programming from which viewers can choose whatever they prefer, be it "Southland" or viral videos starring adorable kittens.

The only potential hiccup is Silverlight, Microsoft's Flash competitor that has a few big partners, most notably Netflix and several big sporting events like CBS' NCAA coverage (Major League Baseball tried Silverlight last year and then switch back to Flash). That can cause two concerns: How annoyed will users be if their device has Flash but not Silverlight and they want to access one of the relatively small number of online videos that use the latter? And will Microsoft be willing to install Flash on its living room devices, most notably the Xbox 360?

That's a relatively minor problem, however. The major development is that watching online video is about to get a whole lot easier on televisions. Much as they support sites like Hulu, that's really the last thing most major studios and networks want. Unless and until they can figure out how to make real money from the Web, they don't need any it becoming any easier to replace cable subscriptions and watch the same shows -- legally or illegally -- via the Web, where they make a fraction of the revenue they get for the same content on-air.

After a brutal push back from many active Web users and questions from politicians like New York Sen. Chuch Schumer, Time Warner Cable has decided to "shelve" its trial of consumption based broadband Internet pricing, where those who use more bandwidth pay more instead of getting unlimited Internet content for a flat fee.

To a certain extent, that's good news for big media companies. After all the content that eats up the most bandwidth comes from studios, networks, labels, and game publishers -- TV shows streaming on Hulu, movies downloaded from iTunes, music on last.fm, games played or downloaded via Steam and Xbox Live. Bandwidth charges could have put a real crimp in their efforts to build online business models.

On the other hand, those models aren't building smoothly so far, particularly for TV networks, which have seen, to quote Jeff Zucker, analog dollars replaced by digital dimes (in other words, the same shows streamed on the Web generates a fraction of the revenue as when it airs on TV). Many in Hollywood don't want to make it all too easy for their content to be distributed digitally. They'd rather see that happen slowly, giving them time to figure out new business models while preserving old revenue.

And of course the biggest bandwidth hogs probably aren't Hulu or iTunes or Xbox Live: They're bittorrent applications, aka piracy. People who engage in piracy are usually looking to save a few bucks. If downloading a bunch of movies or TV shows moves them into a new pricing tier for Internet access, some would-be pirates might think again.

CBS has just released the final statistics for its March Madness on Demand service and they're very impressive, once again demonstrating that sports are the one TV genre that translate smoothly and non-competitively onto the Web.

Unique visitors who checked out at least one game or highlight on CBS's player was 7.52 million, up 58% from 2008's 4.76 million. The total hours streamed were 8.6 million, up 75% from 2007's 4.92 million.

Hours watched are growing much faster than total viewers. Interestingly, the exact opposite was true last year: Total viewers grew 180% from 2007, while hours viewed were up 80%. (In 2006, the first year March Madness On Demand was free, CBS didn't release comparable stats).

Growth in the total number of viewers, while still big (most business would kill for a 58% increase in their audience base), slowed substantially, indicating that CBS is getting closer to reaching the total audience of people willing and eager to watch NCAA basketball games on the computer at home and at work.

Meanwhile, growth in total hours viewed was only down slightly. Do some basic division and you find that in 2007, the average viewer watched 1.6 hours of basketball. in 2008 it was 1.06. But this year, the figure bounced back up to 1.13 hours per person.

Normally you'd expect to see average viewing hours falling, since the most devoted basketball fans and Internet users are likely to sign up first, followed by more casual folks. And since it's sports, there might always be some variations depending on how good the games are.

But if CBS can keep the average hours watched per viewer increasing even as the total audience growth rate slows, it's in remarkably good shape. As the Internet matures and the broadcast TV business struggles, March Madness on Demand is transforming from phenomenom to real growth business.