How Cheap Must Web Video Be To Make Money? Very.

This morning’s OMMA roundtable on “content costs and creation” touched on a key topic for web video producers and distributors (NWS, GOOG, et al): How much does it cost to make Web video, and how much money can you make from it?

Next New Networks CEO Herb Scannell argued that Internet video only works if it’s dirt cheap or less. Scannell, who spent more than two decades at Viacom’s cable channels, scoffed at the notion that web video could be made profitably for 10% of conventional TV programming budgets: $50,000 for an hour of web video, he argued, was still much too high. Instead, he said, he was looking for programming that costs  “hundreds of dollars a minute.”

Meanwhile Shawn Gold, who runs marketing for News Corp.’s (NWS) MySpace, noted that even a monstrous web hit — say, one that brought in 20 million viewers — would be hard pressed to generate more than $400,000 per episode using video ads alone (we reached a similar conclusion a couple of weeks ago). That’s a problem for MySpace, which has agreed to bankroll “Quarterlife” at a budget of $500,000 per episode. Gold’s answer is one we’ve heard several times: Companies like MySpace will be able to generate ancillary revenue by creating discussion boards and other pages around professional content, and sell ads on those pages.

Gold is a clever marketer, but we think Scannell’s vision for profitable online video has a greater chance of success.