• by Laurie Sullivan  @lauriesullivan, December 5, 2007

Sony Pictures Entertainment and Warner Bros may have found the ultimate marketing tool. Each signed separate licensing agreements to bring blockbuster movies and related paraphernalia to Gaia Online.

The deals put digitally created avatars in the cinema seat as consumers watch movies over their shoulders through their computer screens and chairs. The online forum aims to recreate the social experience of viewing movies with others in a big theater. While streaming flicks through a virtual theater could pave the way for a new online distribution format, rather than downloading videos, industry insiders believe the real value will come from creating buzz.

Craig Sherman, the Gaia CEO who transitioned from venture capital firm Benchmark Capital, calls the model "a radically more effective proposition" for entertainment companies than uploading videos to News Corp.'s MySpace because users become more engaged.

Gaia partnered with Warner Bros earlier in the year to market the Nancy Drew movie in which the virtual world became the No. 1 referral site, driving more traffic to trailers, despite the fact the movie studio advertised on Yahoo and MySpace, Sherman explains. "Nancy Drew became an avatar and invited you to watch the trailer and behind-the-scene stuff in a virtual movie theater," he says.

Moviegoers to Gaia Cinemas have an option to see Sony Pictures' "Gattaca" and Warner Bros' "The Matrix" for free. Each will provide 50 titles, such as "Spider-Man," "Ghost Rider," Batman Returns," "Ace Venture: Pet Detective," and Caddy Shack."

Sony ultimately plans to offer TV programs from The Minisode Network, Funnybone and AXN. The agreement also includes licensing to sell virtual goods based on the content for Gaia members to outfit their avatars.

The agreements allow studios to show movies, alternating between ad-supported and pay-per-view business models. Warner Bros. plans to charge $1.99 per ticket, which guarantees admission into the virtual theater for 24 hours.

Matthew Small, director of media strategy for Millions of Us, a marketing agency specializing in virtual world, says it makes sense for Sony Pictures and Warner Bros. to experiment with both ad-supported and pay-per-view movies as the entertainment industry continues to tease out what works best.

Look at the deals as an exploratory effort to transition movie entertainment online, and an attention grabbing PR stunt that will bring Sony Pictures and Warner Bros more eyeballs than an ad, says Aram Sinnreich, managing partner at Radar Research, a Los Angeles firm focused on the entertainment industry.

"There's an arms race to come up with innovative distribution models, and the prize translates into consumer dollars depending on how much news you can generate," he says. "Each announcement is an effort to bring attention to the content without paying hefty advertising fees, and at the same time these are tentative forays in the direction media is moving, the convergence of platforms."

A learning experience, perhaps, but interest in San Jose, Calif.-based Gaia has quadrupled in the past year. ComScore Media Metrix estimates that Gaia entertained 1.2 million unique U.S. visitors in October, compared with Second Life's 747,000. Movies would likely increase the 271.8 minutes per visit that the research firm tracked in Gaia that month. Compare those numbers with 31.1 minutes per visit for Second Life, and it's a no-brainer for advertisers looking to capture time with 13-to-24-year olds.

Ad-supported Gaia doesn't require consumers to download software. The free site attracts about 85% of its members from within the United States. Recent advertisers include Toyota Scion, Warner Bros. and New Line Cinema, according to research firm eMarketer and comScore.

Sherman says the ad campaign with Toyota allowed users to build, customize and race Scions. Consumers created 2,800 cars in the first hour, and more than 480,000 in the first two months.

The interest by automotive and media companies wanting to advertise could explain Sony Pictures Entertainment's decision to take a minority stake in Gaia, which some estimate attracts nearly 3 million unique visitors monthly.