So predicted former Disney Chairman and CEO Michael Eisner at an event in New York Tuesday exploring online video and sponsored by Veoh Networks, in which Eisner's Tornante Company is a key investor.

Like movies, broadcast TV and cable TV before it, online video will "turn into long-form, story-driven content in one form or another," said Eisner. "When it becomes original content, that's when you'll see a flock of advertisers."

Highlighting the shift to longer-form video online, Veoh also presented findings from a Forrester Research study it commissioned showing that "engaged viewers"--those who watch more than an hour of online video a week--are more likely to interact with video and be receptive to advertising.

A panel of television network and advertising executives were also on hand to discuss research and how online video fits in with their programming strategies. But the ex-Disney chief was the star attraction in a one-on-one interview with Advertising Age writer Brian Steinberg at the crammed Helen Mills theater in New York.

Asked what types of video content have proven successful so far online, he got things off to a rolling start, quipping: "Sex seems to work." He also suggested a show starring Sarah Palin. "That wink goes a long way, he said. Through his Vuguru studio, Eisner has produced Web series including "Prom Queen" and more recently, "Foreign Body."

Simply distributing TV shows via the Web through video portals such as Hulu, the joint venture of NBC Universal and Fox, is not necessarily going to be the best way to exploit the medium. "That makes them feel like they're doing something (in new media), but I don't know if it's the right thing," said Eisner.

As with the early days of cable TV, he doesn't think online video will take off as a medium in its own right until it generates long-form, original programming and hits boasting audiences that eclipse popular TV shows.

In regard to video advertising, Eisner expressed disapproval of pre-roll ads longer than 15 seconds. But he said ads of that length could be used not only as pre-rolls but for mid-roll spots within long-form programming.

He also sees great promise in targeted advertising for online video, whether by geography, interests, demographics or other factors. But he added the Internet also holds the potential to deliver the largest mass audiences of any medium to date, so that a balance would have to be struck in offering various kinds of programming. "I think this is all coming," he said. "How you get there, I don't know."

Through its research project with Forrester, Veoh tried to provide some answers, or at least insights. By focusing on engaged viewers, the study aimed to show that a large part of the online video audience is doing much more than "snacking" on short clips.

Engaged viewers make up nearly 40% of that audience and account for nearly 75% of all Web video watched. "This is no longer just a YouTube phenomenon," said James McQuivey, a principal analyst at Forrester. "People are watching everything."

Not surprisingly, this group skews younger, with roughly one-third between 13 and 34, and are more likely to watch videos all the way through and interact and rate content than less devoted viewers. And 37% say they pay more attention to online video than a TV show because it's not as likely to be on just in the background.

More important to advertisers, this group is twice as likely to recall in-video and pre-roll ads and agree more readily that that advertising is a fair exchange for watching video without paying. McQuivey stressed that engaged viewers are open to advertising but that it has to be "fair, useful and entertaining. It has to meet those three criteria."

Forrester breaks down the engaged viewer category further into "Connectors," "Controllers," and "Watchers," with Connectors being the most dedicated video consumers. Although they account for just 7% of online viewers, they watch 20% of all Web video and are responsible for 42% of all video-sharing.

Because Connectors also watch more long-form video than others (and notice brands more), Forrester suggests advertisers should try to reach them in that type of format. Which just happens to be the kind of programming Veoh is shifting toward through partnerships with content providers including ABC, Warner Bros. and MTV.

Following McQuivey's presentation, executives from ABC, CBS and MTV supported the Forrester findings, noting that their online video audiences were highly engaged, tended to be younger than TV viewers, and, at least for CBS, showed higher recall on advertising. They also agreed that the Internet was adding to their total viewership rather than cannibalizing it.

Patrick Keane, executive vice president and chief marketing officer at CBS Interactive, said that 35% of the networks' viewers say they're watching more TV because of programs distributed online.

The network executives also indicated that online video is included more often in cross-media ad buys, benefiting marketers. "Brand advertisers buy both online and TV and see their brand equity increase more than if they were just on TV," said Albert Cheng, executive vice president, Disney-ABC Television Group.

Unlike other broadcast networks which syndicate programming more widely across the Web, Cheng added that 98% of its viewers come though ABC.com.

Despite the inroads the networks have made online, Keane noted that a lack of uniform metrics and pricing models across Web video remains a challenge for the nascent medium. "Ad buyers just look at TV and online a part of a video bucket," he said.

Amanda Richman, senior vice president and director of digital at MediaVest Worldwide, suggested more convincing was still needed on the agency side. "What does online video do to drive purchases or transactions," she asked. "That is going to be a challenge for us to prove out."

And with Web video generating only about 1% of TV advertising, there's still a lot of proving to do.

This news story is important. I recommend that everyone read it.