The allure of building a business around user-generated content is fading fast. SplashCast, a company which launched two years ago around the notion of helping consumers put together videos, text, graphics, and music in embeddable broadcast “channels,” is discontinuing its original product. “Most of us would rather consume than create. This is one of the big ticket findings of the Web 2.0 technology wave,” concludes CEO Michael Berkley.

And after failing to raise a B round of funding, he is now trying to sell the company. Instead of trying to make money off of user-generated broadcast channels, he is focusing on his newer Social TV product, which adds social features such as chat, commenting, and polling to professionally-produced videos.

The SplashCast product being discontinued was simply too complicated for most consumers. It was a full content-management system which allowed consumers to bring together videos with images, text, and sound. In a candid assessment of why it fell flat, Berkley says: “We were hoping to launch a publishing revolution. What we found, however, is that very few users are willing and able to make an ongoing commitment to publishing and distributing content. Lots of users test; few stick with it.”

While more than 100,000 SplashCast accounts have been created, “only a few thousand” use the product regularly, he tells me. Partly, this is the curse of building a business which relies on the creativity of users. “Like so many other Web 2.0 companies,” admits Berkley, “we simply haven’t found a way to meaningfully monetize user generated content. Users are loathe to pay meaningful subscription fees. Furthermore, advertising on user-generated video content hasn’t played out—just ask YouTube.” If only a tiny fraction of users create anything worthwhile, you either need a whole lot of users to make that work or you need to be able to attract the most creative people to your product.

But partly, SplashCast also suffered from the curse of not keeping things simple. Berkley is taking that to heart by shifting the company’s remaining resources to making Hulu-quality videos more social on Facebook and MySpace. Berkley says SplashCast videos reach 5.8 million unique viewers per month and it streams 7.2 million videos. A full 90 percent of those streams come from only 25 SplashCast channels, mostly centered around network TV shows like 24 and the Simpsons or major label music artists.

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One of the most social video experiences I’ve ever had on the Web was watching the Obama Inauguration speech on CNN.com alongside a live chat stream of commentary from all of my Facebook friends. It was like being in a giant living room that stretched across the country and hearing everyone’s reaction as the event unfolded.

The same dynamic on much smaller scale is happening with popular TV shows on Facebook and MySpace. Splashcast Media, which has created apps for about 20 different TV shows, two weeks ago introduced a new feature called Chatter into its embedded video players. For instance on Facebook it has apps for The Simpsons, The Office, Family Guy, and more. Once you install each app, you can watch episodes of the show, many of them streamed through Hulu. SplashCast tells me that it is getting about 7 million monthly video views from one million unique viewers across all of its apps, with Hulu videos being the fastest growing proportion of that.

The Chatter feature lets you have conversations both synchronously and asynchronously. You can invite your friends to watch with you and you can all chat on the side, or you can see what other Facebook members previously said about the show at the exact points in the video stream when they said it. Most of the comments are pretty mindless, as you’d expect, but it makes watching more fun.

It also makes online TV more engaging. SplashCast found that adding chat to TV on the Web keeps people’s attention longer. In the two weeks since it introduced the Chatter feature, SplashCast has found that viewing time has gone up 50 percent to an average of 14 minutes, and the number of viewers who watch a video all the way through to the end has gone up 42 percent. That is probably because they are not watching, but reading what people are saying, and it is also probably why SplashCast throws ads into the conversation stream.

CEO Michael Berkley says his ad inventory is “100% sold out” and that app sponsorships are going for $3 cost-per-click rates, which is a healthy price for an ad on Facebook or MySpace. The clickthrough rates on these ads are about 3 percent, he says, which is also above industry norms. How sustainable that is remains to be seen. Clickthrough rates tend to come down as a new type of ad’s novelty wears off and it scales to larger numbers. But if this is the way people are going to start watching TV, advertisers will want to be there as well.

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Launch partners include Justin Timberlake, Pink, and Chris Brown, who are offering official branded players.

The SplashCast Facebook application allows users to add a player to their profile that includes a customized skin and comes preloaded with RSS feeds of the creator’s latest videos and images.

With the player, users can stream content organized into distinct channels (e.g albums, videos, music).

The new player is a big investment in Facebook by SplashCast. They specifically crafted a new administration panel for the application just for Facebook. Through the admin panel, owners can skin the player, manage their channels, and can even control the newsfeed update messaging. In exchange for the effort, they will be charging a base development cost that covers the first 1,000 users, increasing incrementally thereafter.

There have already been a lot of “fan applications” that let you follow a particular show on Facebook, but these have been custom jobs. The SplashCast player makes it easy for companies to create a multimedia fan application of their own.

I continually hear stories of Facebook application developers getting offers for work from companies looking to get on Facebook. White label applications like this may be a way to automate that process.

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The best way to understand SplashCast is just to look at the player, which we’ve embedded below. Feeds are organized into channels, making it possible to show your favorite videos, podcasts, and photos from within one player updated through RSS. SplashCast will continuously update the shows on the channel as new content is added.

Text based RSS feeds have had several multi-channel embeddable widget based platforms, including Grazr and SpringWidgets. Multi-channel video and audio RSS feeds are a smaller category, mostly consisting of widgets that play only your own content. Along with SplashCast, Cozmo.tv has been helping develop multi-channel video players updated via RSS, but only for social video sites YouTube and Blip.tv. VodPod has also released a new widget that plays RSS feeds of videos from social video sites.

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Splashcast is a little hard to describe, but once you get it it makes sense. It’s a Flash media player where the user can make various channels of content – including text, video, pictures, and audio files – and then embed the player containing those channels on a website. It basically incorporates functionality lots of other embeddable products. YouTube videos, photo slides shows like those offered by Slide, podcasts feeds, etc. can all be added as channels and will take up a fraction of the screen real estate required by all of those other services. For already busy websites, the Splashcast player is much easier to stomach than 3-4 widgets from separate companies.

Each channel of content also has a RSS feed, so interested viewers can subscribe to it and not have to come back to your website for access.

Splashcast will host content directly, but the real utility comes from plugging in videos from Youtube, photos from Flickr, etc., so that you can keep your media where you want to and not have to copy it over to Splashcast. You can even add voice overs to any of the show segments as Marshall has done below.

Splashcast originally started as QMind, a creator of enterprise e-learning software, and had raised $1.3 million from angels. They relaunched last summer as Splashcast and are currently working on a series “A” round.

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Kirkpatrick reviewed the service in November. He will now be responsible for SplashCast’s overall media strategy.

“For the past few weeks I’ve been planning on working independently but the combination of SplashCast’s technology, team, vision and the job they want me to do was irresistible,” Kirkpatrick told us. “I think the company is going to be a real game-changer and I’m super excited to be a part of it.”

Splashcast allows users to publish video, photos, audio and text via RSS feeds to a skinless Flash player. The service will officially launch in January but the beta player will be available within the next few weeks.

Congratulations, SplashCast, on getting such a great talent.

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There are several strategies the company is employing that I think are likely to become best practices in the world of embedded media players and online publishing – and that’s a very large market. Tools like Splashcast are only going to make the online media market larger because they remove so much of the friction that’s present in tools currently available.

Widgets are the topic of the day and Splashcast is one of them that I’m most excited about.

Splashcast was formerly known as QMind, a company that’s built a web based eLearning content creation tool that is largely being ported into their new product. They received good recognition for quality of their enterprise software, but the company is betting that the semi-pro consumer generated online media space is where the real action is going to be in the coming years.

I was skeptical when I first heard about another embeddable Flash media player, but as I talked to the company about all of the things that other companies in the space were doing well and that they are working to incorporate and the unique combination of a hands-off approach to the user experience and professionalism that they bring to the space – my skepticism was softened. When I got to put their approach together with a demo of their product, I was particularly impressed.

We’ve written here about a lot of companies taking many different steps to enable media and website publishers to create and distribute content. Brightcove lets video and page publishers create and display channels of video in an embedded player. VideoEgg and Flixn offer Flash video capture right in the browser. Revver retrieves new advertisements to display after each time a video is played. Widgetbox lets users drop one piece of code onto a page and switch out content through a simple admin dashboard. Tagloops lets publishers drag and drop multimedia items to an RSS feed that populates a player. OneTrueMedia lets publishers combine multiple forms of media into one player with a web based movie editor. Scrapblog’s web based media creation workspace is as smooth and powerful as simple desktop layout tools. Feedburner allows text headlines to be syndicated around the web through an embeddable widget.

Splashcast looks like it’s going to do all of the above, it’s a super media widget. Stickam is the company’s most likely general competitor and Splashcast may or may not want to add the live chat capabilities of that service. In some ways they are different kinds of products, Stickam being more communication based and Splashcast being a media tool.

Splashcast is building one of the most usable systems I’ve seen yet for nontechnical and semi-technical users to upload and capture any kind of media content into channels that are then available for site publishers to choose between after they have dropped the Splashcast code into their sites. Shows and channels can be filled with a combination of different media types, organized by drag and drop and audio narration can be added. After a show finishes playing, an auto generated “credits” screen scrolls all information available about the files that were included in that show.

The most immediately remarkable thing you’ll notice when you start seeing Splashcast players around the web is that they are beautiful. They will typically be just a square on the screen – no branding, no play button, nothing but a clear-as-glass image on the page until you mouse over it. When hovered over, a spartan border with play, stop and “get this item” links rolls over the top and bottom of the player.

Viewers will be able to select between multiple shows to watch in the player displayed on whatever site they are at. At first there will be limited choices determined by the site publisher but in time that won’t be the case. Eventually each Splashcast player will be a small portal into a whole world of Flash media content. Think Zooomr portals but with viewers and publishers sharing control over what can be seen when you stick your head into the Splashcast player.

Instead of a Flash widget that lets you display items you like on Amazon (like MyPickList) publishers will be able to share any kind of media they want with their site visitors and the visitors will be able to turn through each item in the channel like it was a multimedia scrapbook or photo album. The Splashcast dashboard, accessible by hovering over any Splashcast player, will act like a bay of video screens that a TV producer switches between to send to the viewers’ screens. We’ll all be the camera people, the TV station producers and the audience. The frictionless process through which all parties involved will be able to contribute and select between channels will make this very appealing.

If I had a Splashcast player on a page of mine, I’d want to show my site’s visitors the Scoble Show today, CookingUpAStory tomorrow, photos of where I live all the time and whatever else I discovered as I discovered it. If I saw very compelling advertising media, I’d be happy to show that too and share it with creators of content I showed in my player. Will I be able to share all that different content from other people through one player? If it’s as technically easy to do as Splashcast aims to make it, and I cannot – then we’ve got a political or business model problem. There is no reason why media creators ought not want their work shared as far, wide and fast as possible if they are given credit and compensated for their work.

How will it be monetized? Splashcast believes that an era of creative multimedia web publishing and consumption is just dawning and that some publishers will pay site owners to play their channels or occasional shows and that some site owners will pay to be able to display other channels. Chanel publishers interested in promoting their bands, brands or causes will have to create content that’s compelling to small web publishers like bloggers if they hope that bloggers will accept payment to share time on their Splashcast player with the advertisers.

Is that a realistic vision of the future? I’m too often skeptical that there is ever going to be enough quality content in the small, short form web media world to drive an economically viable ecosystem. After I spent some time this weekend going through the nominees from the Vloggies awards, watching shows at Podtech and looking through photos at Zooomr – I’m far less skeptical. Once our original channels are an asset and a starting point but not a constraint, when media can be thrown up online and around the web as easily as Splashcast aims to make it – I wouldn’t be surprised if quality content becomes much easier to find.

Watch this space for coverage of SplashCast’s launch, hopefully early next year.

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