UPDATED with more Sundance VR projects: Virtual reality, an emerging medium that has taken viewers on virtual excursions to the International Space Station, the Great Barrier Reef and the Great Pyramids of Giza, may finally be having its Pixar moment with an adaptation of Neil Gaiman’s children’s book The Wolves in the Walls.

The project from the newly launched Fable Studio is among those selected for the New Frontier section at the now underway Sundance Film Festival, which for a decade has showcased groundbreaking works at the intersection of art and technology. The story casts the viewer as the imaginary friend of 8-year-old Lucy, a sensible girl who hears noises coming from inside the walls — and is convinced it’s wolves.

Wolves in the Walls evokes the illustrations of a children’s book, though it’s interactive and three-dimensional. It blends elements of animated storytelling and immersive theater with game-like interactivity that flows naturally from the story. What’s compelling about this work, the first chapter of which is being screened at Sundance, is the bond it creates with Lucy. She looks you in the eyes, confides her secret and interacts with you, drawing you in as if you’re a co-conspirator.

Director Pete Billington says Lucy’s character builds on work that Oculus Story Studio did on the Emmy-winning Henry, which invited viewers to connect with an anthropomorphic hedgehog.

“In the middle of Henry we did this thing, we had the character make eye contact with the audience,” said Billington. “It gave us all the chills. ‘Wow a character just acknowledged our presence.’ It was powerful.”

At the same time, Billington said, the team knew Oculus was developing touch controllers that would give viewers the ability to use their hands in a virtual environment. A breakthrough moment came when he used the controllers for the first time in a black box studio on the campus in Menlo Park, where he remembers picking up a virtual cube off a digitally generated table, throw virtual darts, break virtual objects and interact with a virtual presence — doing fist bumps.

“I went into my parking lot, I sat in my car for about a half an hour realizing my past 20 years working in film — it was all going to change,” said Billington.

An image from Wolves in the Walls Fable Studio

The team began exploring this nexus of storytelling and game-like interactivity. They consulted with game developers and traveled to Brooklyn to watch performances by experimental theater companies Punchdrunk and Third Rail Projects.

“We walked out of that thing saying ‘OK, this is exactly what we want to do. How do we do it?’ ” said Billington. “A live actor can improvise. We have a virtual actor.”

Early prototypes of Wolves in the Walls had been heading down a more conventional game route, in which the user could pick up and interact with virtual objects. Billington described the experience as entertaining, sort like a carnival show, but nothing that forged a bond with the central character.

“We had to go through this process to understand, ‘OK, this is distracting you from wanting to connect with Lucy,” said Jessica Shamash. “We had this opportunity to build this prototype, where we learned so much. That set us in the direction of any interaction with Lucy is the most important thing.”

There’s a moment in the early minutes of the first chapter where Lucy begins to sketch out a chalk drawing on the floor, and the viewer feels compelled to squat down next to her, to watch. In another scene, Lucy hands the viewer a Polaroid — which the viewer can hardly resist the urge to accept.

“All those interactions are completely intentional,” said Billington.

Wolves in the Walls is one of five Oculus Studios-backed projects set for Sundance this year. The others: Dispatch, in which a small-town police dispatcher copes with an all-night crime-spree; Space Explorers, from VR studio Felix & Paul, which follows NASA astronauts as they prepare to travel to space; Spheres, in which Jessica Chastain narrates an episodic journey through the universe (including the experience of being pulled into a black hole); and Masters of the Sun, which explores the harsh reality of daily life in America’s urban enclaves, with a story by will.i.am and a cast including Queen Latifah, Jamie Foxx, Rakim, Ice T and more.

Yelena Rachitsky, executive producer of experience at Oculus, said the Sundance projects illustrate the breadth and depth of non-gaming content that’s being developed for virtual reality.

“When Lost first launched, there was this whole question of, ‘Can you tell a story in virtual reality?’ Now, no one’s asking that anymore,” said Rachitsky, noting that the Sundance selections are a mere sample of the projects in development. “It shows the variety of ways you can tell stories in virtual reality.”

Participant Media

New projects already are taking root. Participant Media said today it will expand its virtual reality experience Melting Ice, which was at Sundance last year, into a four-part series titled This is Climate Change. The project, from San Francisco-based production company Condition One and directors Danfung Dennis and Eric Strauss, adds three more, 10-minute, immersive experiences through which climate change is felt urgently around the globe. The series will launch later this year on the Within app, which is available on Apple and Android mobile devices and all major VR headsets. (Within is also at Park City this year to premiere its latest virtual reality experience, Chorus.)

Intel also used the high-profile festival to showcase its volumetric capture technology and other tools and technologies for immersive storytelling “everything from the moment they think of a concept to building that out, we have technology that supports them,” said Rajeev Puran, Intel’s director of VR business development.

Intel also teamed with Spheres director Eliza McNitt to unleash her virtual reality experience of traveling through space that one might only see in a planetarium.

“A camera can only do so much,” said Puran. “But taking that information and computationally creating new worlds and places that are only imagined in our heads, to become a fourth dimension of reality, that’s mind-blowing and exciting.”