Movie Studios Expand Into Virtual Web Worlds

NEW YORK With fewer bodies in movie theaters and consumers migrating en masse to digital formats, Hollywood studios are understandably keen to reach their market in new, hopefully more effective ways. Although virtual worlds have a spotty record so far, some studios clearly see great potential in these environments for both promotion and distribution of their output.

In April, Viacom’s Paramount Digital Entertainment signed a partnership agreement with Makena Technologies, making thousands of movie clips from the Paramount movie library available on, an online virtual world. Visitors who purchase the clips can use them to communicate with others by having their avatar “speak” lines from movies while the actual clip plays in a small window. Links allow users to purchase DVDs of the featured movies.

Sony and Warner Bros. have both struck deals with Gaia Online, a hybrid virtual world and social network. The deals make available selected television programs from Sony’s library and films from the Warner Bros. archive. The agreements also saw Sony and Warner Bros. put some money into Gaia. A representative from Time Warner, the parent of Warner Bros., said the move falls in line with company strategy: to invest in companies with “great potential.”

Lewis Henderson, svp of the digital media business at the William Morris Agency, said, “Film companies are seeing that these virtual worlds are places that young people go to and spend a lot of time in. They are attractive as new networks, new destinations, new eyeballs for them.”

For Derek Broes, svp of the new business group at Paramount Digital Entertainment, assessing the virtual landscape wasn’t difficult.

“We don’t look at it as how many people are there. We look at them as interesting growth platforms — and we feel that there’s promise in it. You have to get involved, you have to explore and invest and go where the consumer is. We can no longer sit back and say we are going to put our content here and expect the consumer to follow,” he said.

A Sony representative declined to comment.

But, of course, cashing in on such efforts is always a priority. According to Dan Taylor, analyst at the Yankee Group, film companies are trying to determine if these worlds may be considered “a primary revenue stream, secondary or if it’s direct marketing.”

The emphasis is on creating unique experiences intended to spur users to see the films being promoted or to get them to buy the DVDs on offer.

“What the movie studios are doing is a natural first step,” said Sibley Verbeck, CEO of The Electric Sheep Company, a creator of Web-enabled social and virtual world experiences. “[They haven’t set up a store] where you go out and pick a DVD. That would be a silly translation of a real-world experience. You have to meld into the virtual world.”

On, Paramount Digital Entertainment has created what Broes describes as video emoticons.

“We’ve all used happy and sad faces. These are simply video emoticons. For me it wasn’t a huge leap,” said Broes.

The movie clips have been in a private beta test with the site’s most frequent users, but Michael Wilson, CEO of and Makena Technologies, expects them to be made available to users globally by the end of this month. The site doesn’t disclose how many average monthly visitors it has, but does report having more than 1 million members.

One key issue is how to price the clips, which users can keep in perpetuity. Wilson said both parties are estimating in the ballpark of $1 per clip at the moment.

Regarding the link to purchase, Paramount’s Broes said that each time a clip plays, an information button about the movie appears with a question mark placed next to an image of the corresponding DVD.

Gaia Online, which has 5.5 million unique visitors a month, has been offering links to buy DVDs of the films it promotes since it started working with film studios a year ago. Using a customized movie theater experience it calls Gaia Cinemas, the company has done roughly 20 film promotions, including New Line’s The Last Mimzy and The Golden Compass, Paramount/DreamWorks’ Bee Movie, Disney’s Pirates of the Caribbean: At World’s End and The Invisible, Sony’s The Waterhorse and You Don’t Mess With the Zohan and Warner Bros.’ Nancy Drew. Some of Gaia Online’s promotions were for both theatrical and DVD releases, or one or the other. Most often, Gaia Online promotes a new film and then follows up with the option to purchase the DVD later on, said Joe Hyrkin, vp of business development.

To encourage users to view movie trailers, personalized announcements are sent to each member, who receives an e-mail detailing the film. If they watch the trailer, they receive a free virtual item.

Gaia Online’s approach is to permit young movie/virtual world-goers to do in a virtual cinema what is not permitted in the real world. This could be allowing chatting while the movie (or trailer) rolls, sneaking from one theater to another to view multiple pieces of content, throwing things at the screen — even purchasing fireballs and lighting an avatar’s hair on fire.

The benefit? Through engaging users, particularly in the lead-up to a theatrical film release, they have already created a connection to the films and have generated their own buzz about them.

“What we’ve done is to create persistent and immersive action with a movie brand and an entertainment experience that precedes the movie, interacts with the movie and then extends way beyond the movie into the DVD,” explained Hyrkin.

Integrated interactive marketing agency Deep Focus, which has a specialty in social media, worked with New Line to bring The Last Mimzy to Gaia Online. Deep Focus CEO Ian Schafer pointed to the site as being a great place to promote the film because of a good demographic fit and because of the site’s powerful word-of-mouth aspect.

“As much as the advertising is designed to get people into the theater, it’s also designed to get people talking about a film so that they can get others into the theater,” Schafer said. “And when you look at virtual worlds, that is an environment fueled by conversation.”

Engagement, of course, is at the heart of effectively reaching out to the masses online. To that end, selling virtual goods — using real money — is also a big part of the success of promoting anything in these alternate worlds.

This is central to the strategy for many of the virtual worlds, including Habbo, which claims to be one of the first teen virtual worlds, created in 2000 in Finland. Habbo has 9.5 million unique users spread over 32 countries, including Australia, Chile, the Netherlands, Spain and the U.K. The William Morris Agency’s Henderson said his firm began representing the site last February, taking the stance that virtual worlds are a great platform for all forms of entertainment, both on a content and marketing basis.

Two months ago, to promote the theatrical release of Paramount’s The Spiderwick Chronicles, the site sold props from the film, such as an animated raven for 25 Habbo coins ($5) and a chest that opens for 5 Habbo coins ($1).

What’s transpired is that kids who visit Habbo often re-create scenes from the films through the virtual goods they purchase, said Teemu Huuhtanen, president, North America, and evp of business development for Sulake Corporation, Habbo’s parent company.

In its talks with the film company to create promotions, Huuhtanen said Paramount Digital understood the importance of adding value in the way of interaction. But perhaps the greater value, he added, was that once users bought the goods related to the film, literally thousands of others saw them.

“Once the items are purchased, they own them forever. So, the promotion of the film is ongoing. This really builds brand values for the studios,” he said.

Huuhtanen added that film companies share in the profits from sales of the goods that pertain to their films through a traditional licensing model, where Habbo is creating the merchandise and selling it and the studios are the licensors.

“It’s a new revenue stream for the film companies. You obviously can’t compare it to the revenue generated at the box office, but it’s an innovative way to promote a movie and make some money while doing it,” said Huuhtanen. He added that later this year Habbo will also begin offering a direct link to purchase a DVD for Paramount films the site will promote.

Paramount Digital’s Broes said that in the future the studios would be able to not only sell a DVD, but also offer their titles online for download as well as through video on demand.

“We want to be able to supply the content to the consumer wherever they want to receive it,” Broes said. “Online is a natural environment for the marketplace, particularly when consumers are engaging in their preference of content.”

Electric Sheep’s Verbeck foresees film companies doing well in the space.

“Commerce being done by the movie studios with real-world goods makes a lot of sense. I think it has more chance to generate a meaningful amount of revenue. A lot of times, success with these efforts comes from creating the smallest leap possible that the user has to take from what’s already their current behavior,” he said.