Re: my friend's four-year-old
My kid is the same. Even from baby-like times, "computer" was synonymous with "device that plays my favourite video when Daddy presses the button". And TV was the same.
Broadcast TV is all but dead - it's only a matter of time - because I do the same thing myself. If I hear from a friend about something I should watch, I try two episodes. Anything less is potentially skipping something quite good by accidentally hitting a rubbish episode. Anything more means I should go out and buy it for myself. Then I go and buy a boxset.
Waiting for things to come on TV is like a token-ring network, newsgroups, gopher and batched email - dead.
I don't think the alternative is VoD (because that has problems - and pricing - of its own), but just pre-recorded content on personal devices. A bit like music - nobody really listens to the radio for the latest /greatest / favourite songs any more. It's background noise and a nice mixture for those who need something playing. Their music is stored in pre-recorded content on devices they own and they have EVERYTHING they want on there and NOTHING else.
If you hear a song on the radio that you REALLY like, do you a) Go and google somewhere to buy it, b) wait for it to be played again on some radio station?
It's a *good* thing. I'd rather my daughter chose what to watch than watching mind-numbing adverts for things she's NEVER going to get crammed in between programs that she doesn't like, don't hold her attention or I disapprove of. And then, when it is a rainy day, she's quite happy to go watch some pre-approved DVD that I know is "appropriate" for her for the millionth time (hell, I did stuff like that when I was a kid too, even WITH a plethora of TV available) rather than being bored by, and subjected to, blatant commercialism which I might have to "censor"/"audit"/"veto" constantly.
And thus, TV by its very nature, removes its own funding source (advertising) unless it moves onto VoD or ruining pre-recorded media (which is fine - do that, and I'll find a way to UNDO it just like I did for DVD CSS, etc.)