What is interactive video? Veeple has a demo marketing video that shows how you can use clickable regions to allow the user to interact with your video. While I think they have a solid product and strategy I think their term clickable video is more appropriate than interactive video.
A truly interactive video would be one that itself changed based on your choices. There have been rich internet applications that have done this previously, specifically I recall a FIOS or U-Verse campaign that linked out to video from different props on a Flash stage. The fault here is that it is not a continuous story and the actors on the Flash stage typically repeat a very lame loop waiting for the next selection.
True interactive video, in my opinion, would be more like the adventure books I read as a child that had a choice at the bottom of each page. The story would continue in a different direction based upon the choice made. This would be an incredibly useful tool for a product selection wizard for example, the video would allow a comprehensive explanation of feature choices and the customer selections would tailor the video presentation to the consumer’s needs. I am excited to think about the possibilities for how that interaction could be implemented. The videos could easily respond to eye tracking or other mechanisms to transparently make decisions.
In the end I wonder if interactive video isn’t an evolutionary dead end. The basic problem with video is that it needs to be recorded and once it has been recorded it is difficult to change. As we move towards realistic digital actors on virtual digital stages, true interactive video will be the ugly stepchild to the video-like rich application.