The seminal sci-fi drama Battlestar Galactica put the SyFy channel on the map well before it became SyFy. So since the original series ended, efforts have been made to build on that pre-established brand, with the most recent effort, Battlestar Galactica: Blood and Chrome, taking the series back to its space-battle roots.

But while SyFy decided not to go forward with a full series of Blood and Chrome, the two-hour pilot is finding its way to Battlestar fans, beginning with YouTube network Machinima‘s exclusive online premiere, part of a three-tier distribution plan that could become a model for future projects.

Machinima began releasing Blood and Chrome in ten minute installments in November, months in advance of its SyFy television premiere, which is scheduled for February 2013. The first episode is currently at about two million views — subsequent episodes have trailed off, but according to Machinima Prime general manager Ian Moffitt, this is just one stage in the show’s online life.

“We found with Halo: Forward Unto Dawn that once all the episodes are up in a playlist, a whole new audience comes to life,” he said. “That’s the beauty of this platform — we can market and remarket to the fanbase constantly.”

Blood and Chrome, while produced on a TV-level budget, is surprisingly low-budget compared to, say, Machinima’s last high-profiile release, the series Halo: Forward Unto Dawn: Blood and Chrome reportedly cost $2 million, whereas according to the L.A. Times, industry insiders put Forward Unto Dawn‘s budget in the $5-10 million range.

Forward Unto Dawn, of course, was financed by Microsoft and served as part of the lead-up to the release of the game Halo 4 (which made $220 million on its first day).

But Blood and Chrome‘s YouTube release also contains a promotional component, specifically for other iterations of the pilot: Episode end cards on YouTube contain heavy mention of the February SyFy premiere, as well as the upcoming, unrated Blu-ray edition. (On YouTube, Blood and Chrome cuts around potential nudity, and profanity is bleeped by clattering tools and lockers slamming shut.)

Even the original Galactica series’s Google Play release gets a plug. “We consider ourselves not just a distributor but a promotional service — from our point of view, we’re helping them promote the other windows,” Moffitt said.

The series will remain on Machinima Prime until April 2013, but Moffitt said that continuing Blood and Chrome beyond the initial pilot is “definitely an option that everyone wants to believe is on the table. It’s fundamentally down to the creative team, as well as their point of view on where does the story go.”

Blood and Chrome isn’t the first content originally produced for television to find new life online: Just one example from 2009 — the short-lived cable series Pilot Season, which was reborn on My Damn Channel. But it does speak to the potential that lies in adapting to, and not resisting, the new media world order.

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While Google has given what amounts to seed money to its video production partners in the past, this contribution marks the first time the company has offered major capital backing for one of them.

Redpoint Ventures and MK Capital also contributed to the Los Angeles-based production company’s fourth funding round. Through three previous rounds, all led by MK Capital, Machinima raised $14.6 million.

Machinima has emerged as Google-owned YouTube’s third most popular video channel, commanding 23.1 million unique viewers in April, according to research company comScore. Notably, Machinima offers better engagement than any other top YouTube channel, with viewers, on average, spending 65 minutes in April viewing it, comScore said.

Machinima said the funding will be invested into its “content and global sales operations, international expansion, distribution strategies, and product and technology initiatives, as the company strives to create a global video programming brand that transforms the way a new generation.”

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Check out a complete list of the top 10 publishers on YouTube in January, according to comScore:

Note: This data doesn’t include Vevo, which is tracked separately by comScore. It also just lists views and viewers in the U.S. Worldwide, Machinima had 1.3 billion monthly views and 149 million uniques in January.

Our long-time contributor Liz Shannon Miller recently did an interview with Machinima CEO Allen DeBevoise. Here’s how DeBevoise explained his company’s success on YouTube:

Two elements were key to Machinima building that following — first, its approach to platforms, focusing exclusively on YouTube instead of diversifying. “We decided not to put all our content on every platform, instead saying ‘let’s just get this one right,’” DeBevoise said. Machinima currently has over 4.1 million subscribers on the platform.

Machinima is also part of YouTube’s new channel initiative, which was officially announced last October. The other participants of the initiative may not be as big as Machinima, and many of the participating channels only launched in the last few weeks, so it’s a little too early draw any conclusions anyway. However, early data from participants like Phil DeFranco and the VlogBrothers already looks very promising.

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Machinima CEO Allen DeBevoise, in the company's West Hollywood offices.

Drama is usually a tough sell for web audiences, but in 2011, Machinima used its primary YouTube channel to distribute three high-profile series: Kevin Tancharoen’s Mortal Kombat: Legacy, Felicia Day’s Dragon Age: Redemption and David van Eyssen’s RCVR. The first episode of Mortal Kombat currently has 16.3 million views, with following episodes averaging four to five million, while Dragon Age and RCVR‘s premiere episodes each racked up over a million views, with subsequent episodes earning solid six-figure viewcounts. In addition, all three shows were nominated for awards at the inaugural IAWTV Awards last month, with RCVR picking up best drama.

While it’s true that both Kombat and Dragon Age are both video game-inspired, the three shows — a gritty martial arts thriller with some supernatural elements, a high fantasy epic and an X-Files-esque conspiracy drama — are relatively diverse in style and content. However, what they have in common, according to Machinima CEO Allen DeBevoise, can be categorized as “extraordinary characters in an extraordinary world.”

In a sit-down interview, DeBevoise attributed the company’s success with drama online in large part to its audience of video game enthusiasts. “It’s an adrenaline-oriented audience that engages with mythologies. Other companies have a demographic that’s more random — but we have 95 percent males, and we know there’s content they care about,” he said.

Two elements were key to Machinima building that following — first, its approach to platforms, focusing exclusively on YouTube instead of diversifying. “We decided not to put all our content on every platform, instead saying ‘let’s just get this one right,’” DeBevoise said. Machinima currently has over 4.1 million subscribers on the platform, and is one of the participants in YouTube’s Made For Web channel initiative.

In addition, rather than trying to appeal to all video game fans at once, it started with one small specific audience and then grew outwards. “First, we focused all our energies on Halo [gamers], then grew to shooter games, and then we went broader,” he added. “Machinima now stands for game-centric programming — not just gaming.”

That doesn’t mean Machinima would ever attempt a pivot, though: “Our core gaming audience will be something we never abandon,” DeBevoise said. “But we don’t have to give up gaming content to bring in a new audience. The shelf life on YouTube is essentially unlimited.”

Machinima has room to evolve, though; DeBevoise looks to premium cable channels like HBO and Showtime as inspiration. “We want to become a more consistent global entertainment commodity. There are always two or or three shows going on on HBO — are we doing that in every category? No, not yet,” he said.

He also looked to the importance of establishing franchises: “What’s our Simpsons? What’s our Sopranos? We need to figure out what our big franchises are.” Zombie comedy Bite Me is returning for a second season March 6, but followups to RCVR, Mortal Kombat or Dragon Age have yet to be announced.

Most importantly, though, DeBevoise expressed interest in finding content that taps into the zeitgeist of this current generation, reflecting upon the way movies like The Godfather resonated during their time. “We think about what would be The Godfather for us — really compelling but really rooted in our audience,” DeBevoise said.

DeBevoise pinpointed several elements that might connect with the Machinima crowd — the CGI aesthetic that permeates both modern gaming and much genre filmmaking, the distinction between a virtual world and the real world — and also the fact that in order to achieve that goal, the company needs a talent base. “We can’t be HBO without great writers or directors,” he said.

It’s overstating to say that what Machinima is doing is the future of all entertainment. But it does represent one of the most important trends of the evolving digital age — content that achieves success by knowing its audience intimately.

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The YouTube Breakout Room stage at VidCon 2011.

Even as online video viewing has expanded across an ever-wider range of sites, audiences at YouTube continue to grow. The latest evidence of this comes from comScore’s Video Metrix report for September, which shows that nearly half of all videos viewed online in September were delivered by the Google-owned online video site.

YouTube has long been the leading video distributor online, but despite more content companies putting their videos online than ever, the site continues to outpace the competition. According to comScore, there were 39.8 billion videos watched online last month, of which 18.6 billion were delivered by YouTube. That accounts for an impressive 47 percent of online video viewership.

Viewers are also spending massive amounts of time on the site: Viewers on average spent 378 minutes, or 6.3 hours, watching YouTube videos during the month. No other distributor comes close to that number, except maybe Hulu, where viewers spent an average of 180 minutes, or three hours, during September.

Music videos continue to be popular on YouTube: Viewership there was led by online music video provider Vevo, which served up 724 million videos to 57 million unique viewers. Vevo viewers also spent nearly an hour each watching music videos through the service on YouTube. Warner Music served up an additional 184 million videos to 29 million unique viewers, who watched an average of 28.5 minutes each.

But there are some serious independent content creators also scoring big through YouTube. Take Machinima, for example: It’s the number three site in terms of uniques, and served up 249 million videos in September to 17 million unique viewers. Its audience is also incredibly engaged, with the average viewer spending an hour a month watching videos from its channel. Maker Studios, the #4 channel within YouTube in September, delivered 72 million streams to 9 million uniques, with viewers watching for an average of 32 minutes each.

What’s astonishing about YouTube’s reach is that these numbers are primarily from browser-based viewing. Compared to some other distributors, YouTube has somewhat limited reach on connected TVs and other devices. But we expect that to change soon, particularly as YouTube undertakes a massive initiative around building channels of highly produced web original content.

In fact, we wouldn’t be surprised if YouTube is the big star of next year’s CES, as it seeks to follow the lead of companies like Netflix and Hulu Plus in getting its content in front of consumers everywhere and on every device. And when that happens, there’s no guessing how much more share it can steal from the competition.

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Converting Warcraft’s medieval fantasy trappings into Starcraft’s military sci-fi milieu was a painstaking task that Clint estimates took the brothers about 700 hours to complete. At the end, however, they had a machinima appealing to both Warcraft and Starcraft fans. (Both games, not coincidentally, are from Blizzard Entertainment.) That’s likely to attract more viewers to their Danish series, which according to Clint, has already been viewed over 10 million times. (He says the Starcraft II parody, which went online July 4, has already attracted 50,000 views.)

Known professionally as Myndflame, the Hackleman brothers have developed a lucrative career from their machinima; Clint tells me the projects earn them $50,000 to $100,000 annually. Adhering to Blizzard’s rules around machinima, the brothers don’t sell DVD copies or downloads of their Warcraft movies, but instead monetize them with online ads and CD sales of the movies’ soundtracks. In fact, Clint tells me, “Blizzard is going to be adding some news to their community sites to promote our latest movie next week and seems to be in good spirits (as they should, given the free advertising!)”

To create the Warcraft-to-Starcraft conversion, the brothers used WoW Modelviewer, a program that extracts characters and models from World of Warcraft’s game engine, then heavily modified and composited these elements in 3-D with Maya. “The scene with the shoulder armor being placed onto the gnome was probably the most difficult,” D.W. tells me, “because it used a complex combination of 2-D and 3-D effects with more than a hundred layers.” That’s one way to get medieval on a Marine.

Illegal Danish 3: The Ballad of Dirti G is set for a fall release. But what’s with the title, anyway? “The Danish itself is a mysterious pastry (think of it similar to The Simpsons’ ‘Forbidden Donut’) with powers that vary depending on who’s telling its tale,” Clint explains. Glad that’s cleared up.

Illegal Danish link resources:

Illegal Danish 3 Prelude, HD version,
Side-by-side comparison of Starcraft 2 cinematic and Illegal Danish 3 Prelude,
Zinwrath: The Movie,
Super Snacks,
Escape from Orgrimmar.

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Like the game itself, Valve’s video series is a clever reworking of traditional first-person shooter conventions, eschewing realistic violence and macho fantasy for cartoonish graphics and ironic wit. (In Meet the Sniper, TF2′s ruthless Aussie marksman gets flustered by his disapproving parents.) Meet the Spy is by far the most ambitious installment, depicting a trio of befuddled squaddies who try to locate an enemy agent in their midst, only to be undone by comic mishap and a surprisingly romantic plot twist.

The series was originally based on monologues that Valve writer Erik Wolpaw drafted for internal use, first as audition scripts, then as a reference guide for the voice actors ultimately hired to record the in-game dialog. According to editor and director Marc Scapparo, the plan was always to evolve these movies over successive installments, from mere character sketches to full-fledged shorts. Working with a Wolpaw script, Scapparo and his team spent a month capturing in-game footage for Spy, then another month enhancing it in post-production. As with Valve’s games, the video was constantly screened to test audiences, and iterated according to their feedback. In the original version, for example, the Red spy was unmasked as the Blue spy, which confused many early viewers, especially those not familiar with the game — sending the team back to the studio for a story overhaul. “Humor’s pretty subjective,” as Wolpaw put it to me. “[But] if someone doesn’t understand what they saw, that’s a pretty objective [problem].”

While Meet the Spy was just a single element in the promotion of Team Fortress 2′s latest update, it’s certainly one of the most buzzed about. TF2 lead developer Robin Walker partly attributes this popularity to the fact that Scapparo and Wolpaw are members of the game’s development team, not external marketers. In the Valve development philosophy, he said, “marketing is a game design problem.” Then there’s the buzz you get from unauthorized distribution: Though it was officially put on Steam, Valve’s online distribution service, on May 19, a leaked copy had already been uploaded dozens of times and seen by countless gamers days earlier.

Denying persistent Internet rumors to the contrary, Walker told me the video was not intentionally leaked by the company. However, he added, “We regard [the leak] as an unbridled success,” pointing to the additional burst of press it provoked. The developers even added a last-minute knowing wink to the final product. If you look carefully at the alarm system in the beginning, the “Intruder Alert” signal sits alongside a new warning message: “Leaked Video.”

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The kit comes with an empty shooting stage that can be dressed as desired, ringed by a lighting system with customizable controls and multiple cameras for viewing the action with different angles and camera shots. There’s a backdrop that can be loaded with pre-set scenery (a beach, a cityscape, etc.) that also functions as a green screen, which you can use to composite your own video footage during the editing process. But here’s the catch: the Stage Set doesn’t come with internal recording tools or an editor.

Hugh Hancock, who helped coin the term “machinima” and wrote a book on the subject, is tentatively interested: “[It seems] pretty comprehensive for a simple machinima tool, the lighting system in particular,” he told me by e-mail. “I’ll definitely be firing up my PS3 and experimenting.” Phil Rice, who created the viral machinima hit “Male Restroom Etiquette“, seemed even more enthused: “I’m not sure machinima has ever had such powerful control over dynamic lighting when combined with such an easy-to-use interface,” he e-mailed me. “That, and the generally very nice-looking graphics engine, seems a big pro.”

On the con side, both were concerned by the Stage Set’s lack of an internal video capture/editing system. Sony’s demo video promises how-to tutorials for that part of the process, but until then, machinima newbies will need to fend for themselves. As Rice put it, “I think insisting on this additional step and hardware purchase greatly reduces their potential participation level, versus a model where movies can be created and shared all within Home.”

Presumably, Sony can address this drawback in later iterations, but that remains to be seen. It would be exciting if the Living Room Stage Set evolved into a full-fledged machinima platform. For now, though, it’s at least a fun kit for would-be machinimators who already own a PlayStation 3.

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“We like machinima because our customers sell our product better than we do,” said Terri Perkins, Funcom’s media strategy director. “It’s not very likely that someone is going to share a banner ad with their friends, but it’s very likely they will share videos.”

And Funcom needs people to spread the word, as the company suffered a pretty rough 2008. After launching last summer, Age of Conan dropped to fewer than 100,000 subscribers from a high of 700,000. The game director quit last year, and the company ended 2008 with an operating loss of $23.3 million attributed to Conan’s poor performance.

FunCom had seen Age of Conan-based machinima such as “AoC good times with a horse” (embedded) rack up hundreds of thousands of plays, and in December decided to launch an official machinima marketing campaign, including video tutorials created with Machinima.com on how to create animations using Age of Conan. The tutorials were part of an overall marketing campaign Funcom conducted with Machinima.com that involved display and in-video advertisements.

Other game companies like Blizzard and Microsoft also encourage people to create machinima from their IP, but they have terms and guidelines set up as to what can be created. When I talked with Perkins, she said that there weren’t any restrictions (other than one takedown instance where a user had uploaded footage that hadn’t been released yet).

“There have been some that we didn’t like,” said Perkins, “I think that’s just part of it.” That’s a pretty lenient policy for the Internet, which tends to foster a rather juvenile sense of humor. “No one mistakes the videos that are created as official videos,” Perkins said, “It doesn’t hurt us in any way.”

But how much it helped has yet to be seen. A look back through Age of Conan machinima titles show the ones attracting the most plays were created last summer, before the partnership with Machinima.com. However, Funcom was pleased enough with its first foray to launch another machinima-inspired marketing campaign this May.

The company feels it has turned a corner and that its situation in 2009 is improving. Funcom says that its Conan subscriber base has been “relatively stable” during the first quarter of this year and play times have increased. Now it hopes that machinima can play a part in attracting new users to the brand.

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It’s notable that Machinima.com is getting funding during an economic downturn that has the potential to adversely impact the startup on just about every one of its fronts. A number of online video sites are announcing layoffs, video game companies, which were once thought to be recession-proof, are reducing headcountsas well, and online advertising is starting to weaken. Never mind that Machinima.com is all about user-generated content, which advertisers have been reluctant to spend money on.

According to CEO Allen DeBevoise, Machinima.com videos were viewed 35 million times last month, and the company is getting roughly 3 million uniques a month. Machinima.com’s YouTube channel ranks ninth in terms of subscribers, and it frequently appears on Video Breakouts’ top 10 list of the most-viewed Internet video producers (which can be found in our weekly StatShot).

Ads are being sold on its YouTube channel through both Machinima.com’s own sales team and through YouTube. And DeBevoise said his company has escaped any advertising downturn as video game companies ramp up marketing efforts this time of year, which is traditionally its busiest season.

However, the company is hedging its bets by opening up other revenue streams as well. DeBevoise said Machinima.com is pushing more into e-commerce and is experimenting with taking in inventory and selling games through the Amazon fulfillment program.

Machina.com, which currently has fewer than 20 employees, will use the new money to fuel business expansion. DeBevoise also said it will expand its original web series development in 2009 to include content from more creators, similar to the deal it has with Felicia Day (who will speak at NewTeeVee Live next week – get your ticket here!).

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