MSN Video is a free service for MSN Premium subscribers offering news, sport and entertainment programming that is entirely subsidized by advertising revenues.

Microsoft confirmed the launch, saying, “MSN Video 2 is expected to launch today per communications sent out to MSN Premium subscribers.”

If you have downloaded Windows Media Player 10 the interface may look a little familiar to you, MSN Video 2 mimics the Windows Media (WM) Player 10 interface, uses regular WM player controls, supports 16:9 videos, and offers a new flash “showcase” utilizing Macromedia’s famed Flash Player to promote MSN video content.

The new player also possesses drag and drop functionality so that users can create custom video playlists. This is pretty cools so you can tailor your video viewing experience, say you want to catch up on your weather, news, and sports teams you can place in the queue and what them in the order you select. When videos on the playlist are watched, they are removed from the list and archived in a “recently viewed” category so you can go back and view something if wish to show it to someone else or to go back to.

The goals of these new design efforts is to compete with rivals America Online, Yahoo! and RealNetworks in mutually exclusive efforts to provide customers with exclusive on demand content available only through their service. For a tour of the services and how it works head here.