It's Showtime at AOL

When it comes to showing video on the Web, Time Warner's (NYSE:TWX) America Online really might be onto something. AOL's new video service has launched, with several well-known advertisers already lined up. It's not too hard to imagine that this service highlights the interesting elements of the hookup between AOL and Time Warner in the first place.

AOL's service, called In2TV and described as the first broadband TV network, will launch with Intel (NASDAQ:INTC), Kia, Kraft Foods (NASDAQ:KFT), and Hershey (NYSE:HSY) as advertisers. Such advertising will allow AOL to offer the searchable streaming video service free to Internet users. AOL is also contemplating a download service that allows users to download shows for $1.99 a pop, which is the customary price point for such content.

We've known AOL's video service was on its way for a while now. It will offer a lot of classic TV -- that's where Time Warner comes in, since it's already got the rights to a lot of video content through Warner Bros., putting AOL way ahead of the game from the start. Whereas other rivals might worry about copyright, AOL can offer this content on an easy, legal, low-cost basis. It already has thousands of pieces of content lined up, although it's also in talks to provide content from other companies. For now, skeptics might wonder how popular super-retro content like Growing Pains;Scarecrow & Mrs. King;Welcome Back, Kotter; or Wonder Woman might be, but then again, I was surprised to read recently that Survivor's "Eye of the Tiger" has enjoyed a resurgence in popularity through digital downloading, so one really never knows.

The time is right for AOL's service, too, considering that Internet bellwether Yahoo! (NASDAQ:YHOO) recently tuned out of original content, although it will still seek to provide video from other media companies or users. Google's (NASDAQ:GOOG) in on the game, too, but the real contender right now is Apple (NASDAQ:AAPL), which has been slowly but surely increasing access to video content, such as SNL and Comedy Central's The Daily Show -- available on a per-episode or per-season package basis -- and sports games (yesterday, it announced it will offer March Madness coverage). And of course, there's the upstart YouTube, which is popular but still faces the copyright issue.

Although the AOL unit of Time Warner has struggled for quite some time for relevance in a changing online world (where broadband became cheap and prevalent, and users were far more sophisticated, making AOL's old-school, dial-up-newbie advantage quickly obsolete), things are indeed looking rosier right now. After all, Internet advertising is very hot at the moment (some might argue too hot, given rising rates for such marketing), and a service like this definitely highlights a logical element of the future of this media conglomerate. After some shaky years, maybe AOL is really starting to get it.

Time Warner is a longtime Motley Fool Stock Advisor selection. To see more recent picks from David and Tom Gardner, click here for a 30-day free trial. Kraft is a Motley Fool Income Investor pick.

Alyce Lomax does not own shares of any of the companies mentioned.