Fear of Web video stalking picket lines and posh offices in Hollywood, New York

The ongoing strike by entertainment-industry writers couldn't have come at a better time for producers of Web-based video. It makes me think we're about to witness a transformational moment in the massive business of video entertainment. 

Even as fear is paralyzing television production in Hollywood and New York, those who plan to distribute their content over the Internet are being presented with an historic opportunity: the chance to get their work in front of audiences that in a short time will be starved of their favorite shows by the strike.

Like drug addicts cut off by their dealer, those who habitually watch shows like "24" or "The Simpsons" will be looking elsewhere to get their fix of re-runs and alternative programs. As the soaring number of video downloads from iTunes shows, consumers are increasingly looking to the Web for video entertainment.

The current situation is the result of the decades-old battle between writers and producers intersecting with the explosive growth in broadband connections that now makes the Internet a legitimate means of delivering video content. 

Those who create scripts have a legitimate worry -- that their current contract short-changes them from sharing the residual profits that studios are getting by distributing shows via iTunes, Amazon.com and other sites.

What they may not realize is that the fear is not just walking among them on the picket lines -- it extends into the suites and offices of the studios.

I recently had lunch with a San Francisco intellectual property attorney whose firm represents several large media companies. When I asked him what his clients thought about the rise of Web video, he described them as being "in shock."

"You can smell the fear in the room,"  he told me. "These are people wondering whether their entire world is going to come crashing down around them."

While both sides in the dispute struggle to get a larger piece of the pie, they seem to have failed to see  that technology is allowing the pie itself to grow -- exponentially.

Around the world, millions of people are becoming their own production companies, while new Web-focused producers are taking advantage of the power of inexpensive Web distribution.

Many have entered our latest competition: the Demand Media/Vator.tv Challenge, a search for the best new media company. Click on the live link to see the pitches of the companies who've entered.

Others we've seen include For Your Imagination (featured in this post) and:

Evil Global Corp. 

Synchronis.tv

Fun Little Movies

NowLive

Lionwake Records

Johnny Berlin

MyFilmU

White Night Studios

Robert Boleyn

Granted, the Internet is not going to replace the studios as the primary means of distribution overnight. You can't undo a 60-year-old industry that fast. But the longer the strike lasts, the more opportunities new media firms will have, and the faster the transition to Web-based video will be.