Overlay TV, the one-year-old start-up that allows users to overlay any links, images, text bubbles, and widgets into their videos, is opening its API to software developers, the company announced yesterday.

I interviewed VP Ben Watson from Toronto via video Skype about the news.

Video publishers with limited budgets can now use Overlay TV’s technology to build their own custom interactive video features on the cheap, according to Watson. Overlay TV also works directly with a wide range of clients, from musicians–they created karaoke widgets for the Jonas Brothers music videos–to advertisers and publishers.

Here is a report and review of new API by Josh Lownsohn at CNET’s Webware.

–Kelsey Blodget, Associate Producer