Hollywood hits the stop button on high-profile Web video efforts

As a result, by the time 60Frames and Stage 9 launched in late 2007 and early 2008, respectively, DotComedy and This Just In were already gone and Super Deluxe was struggling. So these new companies took the opposite approach: They would be distributors only and spread their videos to any other sites where they thought viewers would watch them. But the ad dollars didn't grow fast enough to cover production costs, let alone overhead.

60 Frames closed its doors in May when it ran out of cash and couldn't raise more money. Stage 9 was eliminated as part of cutbacks when ABC merged its production studio with its network in March.

"It was a combination of hubris and bad timing," said Dean Valentine, a former president of Walt Disney Television who now runs Comedy.com, which collects funny videos and ranks stand-up comedians.

That's not to say Hollywood has abandoned original Internet video, so long as it serves some larger objective, such as cross-promoting programs or facilitating relationships with talent.

Comedy Central still produces some comedy shorts for its Atom.com website, but then also shows those segments on the cable channel's late-night program "Atom TV." Sony Pictures Television uses original series to lure viewers to its Crackle.com site, where it makes more money by getting them to watch TV shows it already owns such as "Rescue Me." Warner Bros. produces Web videos with talent it wants to bring to television, as it recently did with former "Daily Show" correspondent Rob Corddry.

The number of studios bankrolling Web videos has shrunk significantly, however. As a result, many who continue to believe in the promise of Web video are coalescing around new ideas such as integrating sponsors into projects ahead of production.

"There are fewer buyers now, so increasingly that conversation involves working backward from what a brand needs, rather than financing a Web video in complete isolation," said Jordan Levin, chief executive of production company Generate, which specializes in digital content.

With the search for a sustainable business model ongoing, many wonder how long talented people will continue to work for peanuts and the promise of rewards somewhere over the rainbow.

Los Angeles-based Big Fantastic, a group of filmmakers, has produced six series over the last two years for various Web production companies. Still, writer and director Chris Hempel admits they're waiting for their big reward.