The elevator door rattles open and you step tentatively into a dimly lit maze of cardboard boxes. The door crashes shut again, so you have little option but to wend your way through the boxes, the eerie strains of a nostalgic doo-wop ballad leading you on through the darkness. Then, all of a sudden you find yourself, blinking, in the middle of a town square. The mise-en-scène and music are pure 60s Americana. Wandering through the town you pass a Rockwellian drugstore, a dressmaker's haberdashery, a saddlery, an old-fashioned toyshop. Dozens of ghostly figures, their faces obscured behind white Venetian masks, drift past the trickling fountain in the middle of the square, each of them on their own unknowable mission. In the window of an abandoned TV repair shop, you catch sight of your own reflection and remember that, in this place, you too are a ghost.

Suddenly the square is alive with activity. Two men stumble into the scene, looking battered and bruised after some unseen tussle. You and your fellow ghosts congregate around them and watch as the man in a grubby wifebeater douses himself in the fountain. Then he stands up, dripping, and looks you straight in the eye. He looks horrified. He tries to point you out to his friend, but his friend just stares at him as if he has gone insane. The man in the vest starts ranting, pacing around and around the fountain. His friend tries in vain to calm him down, tells him to wait by the fountain, then barrels off into the drugstore - and now you are faced with a choice. Do you stay with the half-crazed man at the fountain? Or follow his friend into the drugstore?

Punchdrunk's artistic director, Felix Barrett.

This decision is the first of many choices you will be asked to make during a typical evening at The Drowned Man: A Hollywood Fable, the latest show by celebrated immersive theatre company Punchdrunk. Follow William, the man at the fountain, and you will witness his descent into full-blown psychosis and, ultimately, murder. Follow his friend Andy and you will see the story of a man who can only watch, helpless, as a tragedy unfolds before his eyes. Both stories end in the stark desert sands on the edge of a vast and malevolent Hollywood film studio called Temple Pictures. They are just two of the 32 intersecting narratives Punchdrunk has concocted for your dark entertainment.

The Drowned Man is Punchdrunk's largest show yet, spanning four storeys of a disused Royal Mail sorting office next to Paddington Station in London. Fusing Georg Büchner's fragmentary 1837 play Woyzeck with elements taken from Sunset Boulevard, Mulholland Drive and Nathanael West's 1939 novel Day of the Locust, the show transports you to "a world of smoke and mirrors", a Hollywood of the fevered imagination where starlets and studio system divas brush shoulders with cowboys, factotums and cross-dressing grocers. Masked audience members are invited to wander around this enormous complex, picking up individual characters' stories as they please, or simply poking about in drawers and cupboards trying to decipher What It All Means.

***

"I want the audience to be completely in control of their evening," says Felix Barrett, Punchdrunk's founder and artistic director. "If you want 'Hardcore Forerunner of German Expressionism', then it's there. Or if you want to just watch the Drugstore Girl for an hour and get lost in the strange pathos of her situation, you can do, and it becomes almost like a durational artwork. Or if you just want to go see a good band and have a nice American beer, that's totally fine."

This concept of audience agency is crucial to Punchdrunk's work, and it's the reason why gaming makes such a ripe basis for comparison. Exploring the richly detailed virtual world of Temple Studios excites the same sense of wonder as stepping into a Rapture or a Silent Hill for the first time. Putting on that white mask liberates you from reality and, at least for a few hours, immerses you in another time and another place: a fictional world in which you are free to create your own stories.

"Our attitudes to information and access and desirables. . . it's all become so immediate, so accessible," Barrett explains, nodding towards his smartphone. "We don't have to work for anything anymore. So the idea of having something that's yours and yours alone - an experience that only you have authorship and ownership of - is a treasure, a proper commodity."

Forcing an audience out of their seats and onto their feet, allowing them to direct their own experiences within an enormous realm of possibilities, has proved an incredibly potent formula. Punchdrunk has attracted an impressive international following since Barrett founded it fourteen years ago in Exeter, and counts among its fans everyone from Matt Damon and Natalie Portman to BioShock creator Ken Levine. Its acclaimed New York City production Sleep No More - a mashup of Shakespeare's Macbeth and Hitchcock's Rebecca - continues to sell out on a nightly basis three years after it first opened.

Another fan of the company's work is Steve Gaynor, co-founder of The Fullbright Company and writer/designer of last year's much-lauded indie adventure Gone Home - a game which Gaynor says "was directly influenced by Sleep No More". Just as in a Punchdrunk production, players in Gone Home are let loose in a beautifully-realised world - in this case, a suburban family home in the mid-1990s - and tasked with discovering its stories and secrets for themselves. And, just as in a Punchdrunk production, players are unable to influence the story, but are instead given a great deal of freedom over how they choose to unearth it.

"Level design is more like theatre design than anything." Steve Gaynor

There is a whole world on the other side of these gates.

"I have often described the player's role in Gone Home as that of an 'active observer', and I think it's really interesting to put the player in that role in the physical world," says Gaynor, who - along with the rest of his four-strong team - made a pilgrimage to Temple Studios during a recent visit to London. "I think there is a lot of interesting potential in saying that these events are predestined and you are an observer of them, but what you actually do and how you engage with the space and the experience is totally under your control, and those two things run in parallel with each other."

Indeed, the considerable emotional power of a game like Gone Home derives from the fact that you have to proactively find the story, rather than having it served up to you on a platter. The same is true for The Drowned Man. "We don't ever spoon-feed the audience," says Barrett. "My idea of a nightmare is saying, 'Here you go audience, here's a mask, here's a map, at five-past-eight you'll be able to pick up Wendy'. Because it wouldn't work. I know from experience, because I've taken audience to the action, that if they don't find it themselves, they don't have ownership of it and it doesn't work."

This type of self-directed storytelling can, however, pose challenges for the audience. "If it's your first time it can be quite difficult," agrees Barrett, admitting that The Drowned Man is "arguably too big". While there might be 12-hours' worth of narrative content packed into every three-hour show, it is not uncommon to find yourself wandering around alone in the semi-darkness, wondering where everyone's gone. It is at times like these that Punchdrunk's techniques for gently drawing audiences back towards the action most closely resemble the tools of game design.

"Level design is more like theatre design than anything," notes Steve Gaynor. "Because when you're designing a space to be playable, you have to design it in the same way that someone designs a stage, where there could be someone on the balcony, there could be someone up front on the left, or on the right. Especially something like [The Drowned Man]. I mean, this entire experience is level design. Lighting directs you to stuff that's important, there are main thoroughfares, etc. This is a videogame level, period."

For Barrett, though, a feeling of disorientation is an essential part of the experience. "That sense of an audience not knowing, not understanding, seeing this puzzle in front of them, cracking it, and that sense of achievement when they solve the theatrical riddle is probably what I'm most excited about," he says.

"Now we're aware of games, and the similarities, we've literally started to break down game mechanics and just take them out." Felix Barrett

Sex, murder, intrigue - and interpretive dance.

But how does anyone solve a 12-hour, four-storey theatrical riddle? Attempting to understand the show in its entirety is perhaps something of a losing battle - but that hasn't stopped people from trying. The Drowned Man has spawned online communities on Facebook and Tumblr numbering thousands of individuals, all working towards a greater understanding of its many mysteries.

But Barrett is content to let each audience member draw their own conclusions. You would feel disappointed, he says, if the show was solvable after a single viewing. Besides, he says, "ambiguity is such a powerful tool. There's nothing worse than a resolution at the end of an evening."

It's a philosophy shared by Gaynor. "I think that the story is the puzzle in Gone Home - it's just we never tell you whether you solved it or not. And I think that's a good thing for stories. I would much rather a story be open-ended, personally. I'm much more interested in stuff that I have to actively work to build an interpretation of and that doesn't spell it all out for me. It's just more interesting that way."

***

If it takes multiple "playthroughs" to get something close to the full Drowned Man experience, there is one element of the show that can remain stubbornly out of reach to all but the privileged few. At certain moments, an actor will reach out to an audience member and lead them into a locked room for a private performance. If you're lucky enough to be picked, you will be treated to one of Punchdrunk's trademark "one-on-ones": startlingly intense moments of theatre in which secrets are imparted and intimacies shared. Miss out, though, and you are left staring at a locked door, wondering what to do next. These potential disparities of experience can lead to an uncomfortably competitive edge amongst Punchdrunk fans.

The one-on-ones are designed as a "reward for curious audience members," says Barrett, but he acknowledges that there is some degree of skill involved in being chosen for them. He describes visiting Sleep No More in New York for the first time in over a year, during which period the entire cast had changed. "What I found was, watching it, I could still get in the right place for a one-on-one and tune myself to the right tempo so they'd pick me. It still worked! I thought, oh my gosh, this is like a game where I've never met these people before, and yet the mechanics still function as they did the year before."

Barrett and his team are currently looking closely at how they can exploit more explicit game mechanics in future productions. Earlier shows like The Masque of the Red Death and Sleep No More experimented with puzzle solving and treasure hunts, but Barrett feels these game-like elements disturbed the balance of the show too much. "I think we've learned that one discipline has to be your lead - so with The Drowned Man, The Masque of the Red Death, it's theatre. We started putting game mechanics into it, putting a square peg into a round hole, and it didn't quite fit. So I think if we were to do a project using game mechanics now, it would be a game primarily."

Spoiler alert: Wendy and Marshall's story doesn't have an especially happy ending.

In fact, he says, "we were brainstorming about it last week. Now we're aware of games, and the similarities, and the similar aspirations, we've literally started to break down game mechanics and just take them out." He is interested in how casual games like Clash of Clans or Candy Crush Saga balance accessibility with a "level of difficulty that stays just attainable. How do you do that theatrically?"

"What I'm fascinated by is: what happens when you level up? What happens when you know that you can only access this room and this one-on-one when you're a level five player?"

Barrett is especially keen to explore the mechanics of survival horror, a genre Punchdrunk first dabbled in when they produced a brief - but by all accounts terrifying - interactive experience for Sony PlayStation, a promotional tie-in for the launch of Resistance 3. "I don't like shooting games, unless it's survival horror where you have to fire blindly to stay alive," says Barrett, whose earliest gaming memories are of watching his friend play Resident Evil. "I really wanted to do a full-scale 'survival theatre' show. In fact, we're in conversations now about doing something whereby, to see the whole show, you've got to stay alive."

But, Barrett says, "there are loads of different strands for how we're going to explore game mechanics in future shows. I genuinely think there's a place where shows can self-propagate, where audiences can help influence and structure and build stuff to make the overall experience larger."

As for the Drowned Man, Punchdrunk indicated on Friday that the show will finally be closing on the 6th of July, a year after first opening. This in fact represents a six month stay of execution: bulldozers were originally set to move in and tear the whole building down at the start of the year. Nothing illustrates the fragile impermanence of the whole enterprise better than the fact that Temple Studios' entire intricately crafted universe will cease to exist forever come summer.

"I'd love to do Drowned Man again in a different building," Barrett says. "It would evolve hugely due to the findings we've made this iteration. It's a funny thing, it's almost like conventional theatre shows can go on tour, go anywhere in the world, and it's always the same. But I don't think it would be possible for us to replicate a show somewhere else. In fact, it's not. Physically, there's always going to be different buildings, different flows, different tempos, different atmosphere."

Perhaps this is the main advantage a traditional game world has over a Punchdrunk show: a game world can be easily propagated, but a site-specific piece of theatre only exists in a certain place for a certain period of time. Barrett concedes the point. "There's the rub. That is the big thing, is scalability. Games, anyone can play them anywhere."

So would Punchdrunk ever consider bringing its talents to bear on an actual video game? "Hot diggity. Yes," replies Barrett. "I mean, if I'm honest, that's what we'll do. I actively want to do something where the first word is game, not theatre. And as we look ahead over the next five years, it's working out how we do that."