Pileated Pictures: Littlest Pet Shop Only the Beginning

Yesterday Pileated Pictures announced its involvement in Hasbro's Littlest Pet Shop VIP world that launched in September. Pileated will be handling additional development of the Pet Shop, but that's only the beginning. With its own Planet Cazmo, a music-themed virtual world recently in open beta, Pileated plans on making virtual worlds its major focus.  "Us completing [Littlest Pet Shop] and getting a product up there and running with the community was crossing a major line in the sand for us as well as now soon after launching Planet Cazmo," said President and CEO Michael E. Levine. "We're excited about this space and see it as our focus for the next foreseeable future."

"We're trying to work with music companies and content to make [Planet Cazmo] the MTV of virtual worlds because I just don't see MTV doing it," explained Levine. "I've heard Habbo is doing something for MTV, but right now they're all downloadable. Planet Cazmo is aimed after the Habbo market because we think Habbo is really old tech. We think what we've created—and I hate the phrase—is really Web 2.0 or next-gen. You can see that in LIttlest Pet Shop with the full 3D animation, the unlimited customization and modularity, and 3D characters. We can take the avatars into other settings, 2D side scrollers, 2.5 perspective, anything. No matter what your pet is wearing in the virtual world, it's always very accurate."

Cazmo, which Levine describes as "sort of Hip Hop meets Animal Crossing," went through a soft launch limited beta, but is now in an open testing process, and Levine says he expects to make a full public announcement in the coming weeks.

"We're really refocusing on it," he explained. "People are checking it out just virally. We want to make some noise now. And I'm not afraid to ruffle some feathers in the virtual worlds industry because they need ruffling. I think the Raph Kosters of the world are great, but as much as he understands the Web, he hasn't lived it yet. For this space, I had to really unlearn a lot my instincts from seven years of gaming."

With a background at LucasArts from the Day of the Tentacle days, Levine and Pileated have been working in the gaming and Flash space since 1999. Already working with Hasbro on other projects, Levine then got turned on to the virtual world phenomenon.

"Hasbro became a main client a few years ago, and then I saw this virtual worlds trend happening," he explained. My nieces and nephews told me about it, so I saw it first hand from the ground floor. I made a decision about a year and a half ago to start developing technology for the space. At one pont Littlest Pet Shop was a full MMO, but it morphed into more of a Webkinz experience. It's mostly single player with a community experience right now. Phase two is coming out in February to up that multiplayer experience. We're calling it sort of a kids' Spore or Animal Crossing."

When asked how he views Pileated's entrance into a booming space, Levine focuses on its online position. When so many products get lumped into the "virtual worlds" group, he believes that browser-based versus downloadable clients are a prime difference.

"I've said for years, possibly 5, that coming from the games industry, that industry hasn't understood the Web browser," said Levine.  "It's the TV set of the Internet. It's what people feel most comfortable viewing it through. As soon as you ask someone to download something, you lose an audience. Before Pileated made a decision to make virtual worlds part of our main business, we'd dabbled in casual games. And they're happy to usually get a 1 percent conversion rate to the download."

That sets Littlest Pet Shop and Planet Cazmo apart from worlds like Second Life or There.com, but there is still a wide rage of  toy-based worlds already out there, from BarbieGirls.com to Zibbie Zone. Levine recognizes that, but argues that there's even more room to grow, particularly for worlds that can find new niches.

"For Littlest Pet Shop specifically, the market is getting crowded and is only going to get more crowded," he said. "But it's also ripe for the picking. Webkinz was never in Wal-Mart or Target. It was only in specialty stores. That showed the big Hasbros of the world the potential. There wasn't anything targeting young girls. Barbie is out there, but I think it's a very different experience and appeals to different kids. Littlest  Pet Shop is specifically for young girls."

Littlest Pet Shop was already a major brand--both in the general toy space and for Hasbro--and Pileated worked closely with the company to make sure the experience stayed consistent. But as it rolls out new features, toys, and localizations for Hasbro, Pileated also has its eyes on its own retail space.

"With Planet Cazmo even through there's not a retail aspect, we always built it with the idea that there could be some day," Levine said. "There's a huge misconception among the bigger companies that retail doesn't have to be a part of these virtual worlds. Part of it is that they look at it as a chance to break free of the middle man. To me, looking back at the casual game industry, they've learned the same lessons. They ignored retail, and now PopCap and those guys are at Wal-Mart. It's not an "and/or equation." It's an "and." There are people in the middle of the country who are still going to feel more comfortable buying at Wal-mart. Once you bring them over, then you can take their subscription from there."

For kids' worlds, that becomes even more relevant, he says. It's a simple matter of economics for the parents.

"The real difference, though, about the toy factor, what it really comes down to is the money," said Levine. "I think it's interesting as you watch the business model change and talk to the kids, Club Penguin, like most MMOs, is a monthly subscription rate. Webkinz and Littlest Pet Shop, you buy a toy for $15 and have access. What are you going to choose if you're a parent especially if your kid  doesn't know either way? It's going to be interesting to see how it fleshes out."

Levine says that Pileated is also in talks with several major brands to help extend them into the virtual worlds space.  It's existing partners include music labels like Universal Records and MCA Records as well as artists with a large pop or hip hop base like Nelly and Britney Spears. Pileated has also worked with gaming companies like LucasArts and THQ, among other non-entertainment brands.

"We're realizing you've got to be careful with how many of these things you can manage at once," said Levine. "[Littlest Pet Shop] has taught us a huge amount. We're really looking forward to what we can do with that and everything else we're working on in the future."