Real movies in the virtual world

Gaia Online inks with SPT, WB for features online

Sony Pictures Television and Warner Bros. have signed separate licensing deals to exhibit films in Gaia Online, marking a first for major studios in virtual worlds.

In addition, Sony will take a minority stake in Gaia, a San Jose, Calif., outfit emerging as a dominant force in this burgeoning sector. Gaia is attracting nearly 3 million unique visitors per month, surpassing such other virtual-world rivals as Second Life and Habbo.

"We truly believe Gaia Cinemas represents a dramatic next step for online video," Gaia CEO Craig Sherman said.

If successful, Gaia could pave the way for a new format of online distribution that is distinctly different from streaming or downloading video. Whereas those modes are typically consumed in solitary, virtual exhibition is intended as a mass viewing experience.

Instead of watching alone from the remove of a desk chair, multiple users simultaneously watch in the vicarious form of their own avatars, customizable digital characters whose actions can be manipulated in the virtual world's three-dimensional setting.

"I think it has the ability to create an incremental revenue source with more potential than just solo viewing," Sony senior executive vp Sean Carey said.

Virtual exhibition brings the movie business back to the future, so to speak, re-creating the social viewing experience teenagers enjoy in a real-world theater.

"With the Gaia Cinemas, teens can now enjoy Warner Bros. movies with their friends regardless of where they are physically, (whether it's) just across town or on the other side of the country," said Andrew Mellett, senior vp VOD at Warner Bros. Digital Distribution.

When the new and improved Gaia Cinemas opens for business today, visitors will be able to take in Sony's "Gattaca" and Warners' "The Matrix" for free, but on screens outfitted with advertiser-fronted "skins."

The deal also will afford studios the flexibility to alternate between that business model, which will also eventually give them a cut of transactions sold from virtual tie-in goods that viewers can buy, and ad-free pay-per-view, for which Warner plans to charge $1.99 per ticket. The price of admission guarantees 24-hour exposure to the film, which can't be viewed outside Gaia.

Regardless of the business model, Gaia and the studios will share revenues. Neither side would divulge the terms of the split or whether a license fee would be exchanged for rights to the films.

Sony and Warner will each deliver 50 library titles to Gaia, including "Spider-Man," "Ghost Rider," "Batman Returns" and "Ace Ventura: Pet Detective." Sony will eventually supply other programming as well, drawn from TV-derived content channels it has designated for digital platforms, including the Minisode Network, a collection of condensed episodes from Sony's television library.

Although neither studio is making current releases available, Carey didn't discount the possibility of a time when, if the trials prove successful, the inclusion of top-shelf fare would mean the studios' already complicated distribution chain would have to accommodate a new window alongside VOD or DVD.

The deals are long-term and non-exclusive, which makes Gaia more than just a quick experiment, but also possibly just the first of more pacts with other virtual worlds.

While Gaia has seen its population of anime-style avatars quintuple over the past year, an even more eye-popping statistic is the 40 minutes-plus per session ComScore has tracked as the average time spent per user on the site — more than even MySpace or Facebook. The Gaia audience skews toward teens and is based mostly in the U.S., which generates 85% of its user base.

The Gaia deal reflects a growing interest among media conglomerates in establishing a beachhead in virtual worlds, which are commanding increasing portions of young audiences' media habits.

In August, Walt Disney Co. spent $350 million to acquire Club Penguin; the deal could see another $350 million in payouts depending on the acquisition's performance. In September, Warner Bros. decided to explore virtual worlds in-house, announcing the development of T-Works, an online habitat for its iconic characters.

Sony declined to elaborate on its stake in Gaia, but the company is believed to be one of a number of investors participating in a Series B round of funding totaling $15 million. Launched in 2003, Gaia collected nearly $9 million from Benchmark Capital and Redpoint Ventures, two firms that have been active in financing some of the Internet's biggest success stories, including eBay and MySpace.

Gaia's new movies also reflect the growing awareness in Hollywood and Silicon Alley that these two camps need each other. For media companies, virtual worlds like Gaia are yet another front in the digital world where they need to place their content because that's where eyeballs are gravitating. And yet new-media firms recognize that premium content may be necessary to keep their fickle audiences from moving elsewhere.

"Leaving a virtual space to just 100% user-generated interaction may not be as powerful as having super high-quality content," Sherman said.

While the studios' commitment to virtual theatrical exhibition is unprecedented, "in-world" video distribution is not a new innovation. MTV Networks pipes in TV programs to a number of its branded virtual properties, including Virtual Laguna Beach and Nicktropolis. As for films, there have been some lower profile examples, like Sundance Channel's exhibition of the documentary "Four Eyed Monsters" in Second Life last year.

Gaia has experimented with theatrical exhibition on its own, and the results encouraged the studios to participate. "Night of the Living Dead," a classic horror film that requires no licensing because it is in the public domain, attracted 1 million streams in just a few weeks.

Some studios have experimented in Gaia before for marketing purposes. Warner Bros. has deployed extensive promotions for its films there including screenings of trailers and virtual merchandise offerings connected to "Nancy Drew" and "The Last Mimzy."

With virtual exhibition, the collective viewing experience is simulated in a graphic rendering of a movie theater, complete with a concession stand that sells pixelated popcorn viewers can have their avatars throw at the screen or each other. Tomatoes are available for tossing, too.

Gaia's functionality also allows viewers to express themselves in thought bubbles, which can often provide the kind of ironic counterpoint to the viewing experience once presented on "Mystery Science Theater 3000."

Asked whether he minded if viewers virtually (and verbally) pelted the programming, Carey noted, "We understood quickly that we couldn't have a problem with that. We're allowing the consumer to have fun with our content."