How MTV Plans to Let Anyone on 'Laguna Beach'

TV Show Basis for Virtual World, and Advertisers Are Invited

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NEW YORK (AdAge.com) -- The main theater at Laguna Cinemas was almost full -- the red velvety seats filled with the young and the hip, some staring intently at the screen while others whispered to the cute person sitting next to them. About the only thing the cinema didn't have was the waft of popcorn.
Virtual 'Laguna Beach' is part of MTV's plan to tap into new revenue sources, including e-commerce and subscriptions.
Virtual 'Laguna Beach' is part of MTV's plan to tap into new revenue sources, including e-commerce and subscriptions.

It'll take a few more technological innovations for that. This iteration of Laguna Cinemas is part of a 3-D virtual world MTV has crafted around one of its biggest hits, "Laguna Beach" -- and part of the media company's plan to tap into several new revenue sources, including subscription and e-commerce. Think of virtual Laguna Beach as a cross between Second Life, the online virtual world community that opened in 2003, and popular computer game The Sims.

One resident's revenue potential
MTV Networks figures that a single "resident" of its virtual world can translate into $150 of incremental revenue, based on estimates from existing virtual world There.com, whose technology fuels VLB -- or "Virtual Laguna Beach." And that doesn't count revenue from potential advertising. MTV is already in talks with marketers Pepsi, Procter & Gamble, Cingular and Paramount about developing campaigns for the virtual version.

In addition to the cinema, where residents can watch "Laguna Beach" episodes and sneak peeks of movies, the world has dance clubs, surf shops, a beach club and several pools. Soon, it may also have characters from the show in it, if the cast decides to play with their own self-modeled avatars. (MTV is neither making promises nor requiring the cast to participate.)

"The [VBL community] is not here to meet famous people but they're going to live in this world like [the famous people] do," said Van Toffler, president, MTV Networks Music, Films and Logo Group.

The idea was born during the second season of "Laguna Beach," which wrapped up last November. Ratings for the show, which follows eight privileged teens living in Laguna Beach as they finish high school and enter college, were up 37% over the first season, and DVD sales were brisk. Season three premiered Aug. 16.

MTV dollars
When a person enters Virtual Laguna Beach, they're typically met by a greeter -- another player who has volunteered to meet the newbies. They use the keyboard to walk or run around the island and a toolbar along the bottom of the computer screen offers more functions and can adjust their physical appearances -- from hair color to face shape to complexion. They can go shopping, exchanging MTV dollars for, say, new clothes or a surfboard (they earn MTV dollars by spending time in the world and interacting with brands).

It's not yet clear exactly how the brands will be integrated into the space, but what is clear is that marketers are learning they have to "step away from trying to control every brand exposure," said Amanda Richman, senior VP-group director of strategy development and innovation at MediaVest Digital, which is working on behalf of P&G. "This is going beyond pre-roll, product placement, brand profile pages."

MTV promises advertising will be much more than billboards on the side of the virtual sidewalk or product placements and said the opportunities for behavioral targeting are "incredible." They also haven't worked out the ad rates -- in part because no one's exactly sure what the ad model will end up looking like.

"We didn't back into revenue expectations," said Sean Moran, exec VP-MTV 360 ad sales. "This is a case of you can't put the cart before the horse." (For context, however, in the kid- and brand-friendly virtual world Whyville, cost-per-thousand rates range from $6 to $30 and onetime sponsorship setup fees range from $25,000 to $250,000.)

Virtual worlds as proving grounds
Michael Wilson, CEO of Makena Technologies, which created and powers There.com, says the virtual worlds are a breeding ground for focus groups and consumer research. A fashion company, for example, could preview a collection in virtual Laguna Beach, letting avatars try on the clothing to gauge real-life interest. (American Apparel opened a store in Second Life over the summer.) "If none of the virtual ones sell, you never have to produce a stitch of real ones," he said.

Life in Virtual Laguna Beach resembles life in the TV show -- storylines included. For example, in a few weeks there will be a virtual Winter Formal, around the same time the Winter Formal episode airs on TV. Avatars can go to the formal, but they have to have a date -- which could lead to virtual hookups. But nothing too racy will be allowed. MTV authored the program, which means it built in certain restrictions. Avatars can't engage in sex or violence, for example. And they can't swear, either. Compared to Second Life, where the players essentially create the world and the rules, this is a more top-down approach -- and MTV is fine with that.

"There are a lot of unsafe places online, and we wanted to make this a safe place for our audience and our advertiser partners," said Jeff Yapp, exec VP-program enterprises at MTV Networks' Music Group.

Not for hard-core gamers
Some more seasoned gamers will probably protest. But, MTV execs said, it's not trying to target the hard-core gamers that might be current Second Life or World of Warcraft residents. They're going after the "Laguna Beach" demo, which skews female and ranges in the teens to early '20s.

"We talked a lot about letting go," said Mr. Yapp. "This is the ultimate let go."

Of course, there's always the ultimate question of If you build it, will they come? The audience is a fickle group and, let's face it, no matter how good the application there are a lot of other compelling places for them to spend their time online.

MTV developed the project primarily in-house, using about 20 employees over four months. So if it doesn't work, Mr. Toffler said, it's not like the company went out and spent $50 million on an acquisition that bombed. (MTV execs wouldn't outline exactly how much the initiative cost, but earlier this summer Viacom Chief Financial Officer Mike Dolan said broadband channel Overdrive was built with an investment of $5 million over eight months.)

Ultimate virtual lifestyle
But it won't fail, Mr. Toffler said. VBL is the first step in a series of virtual communities MTV hopes to build around music and lifestyles -- look for a Logo-themed world to launch in 2007, for example. Soon VBL will include an e-commerce aspect (the first step will be working with the actual stores in the real Laguna Beach before expanding it out to other national retailers) and launch a second-tier subscription-based service for residents who want the ultimate virtual lifestyle -- who want to live in a waterfront beach house, for example.

"We wanted it to be in the real world, in the moment, what's happening in the real world in real time," said Matt Bostwick, senior VP-franchise development, MTV. "We're going to allow the residents to buy real estate, create content, get jobs."

Added Mr. Toffler: "We don't need to be first on every platform but our goal is to be different, more engaging."
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