One of the most powerful styles of virtual reality is something I call the diorama technique. Instead of attempting to make a photorealistic environment, the creator shrinks a virtual one down to the size of your immediate surroundings. The world becomes a dollhouse, every piece available in its entirety. This is especially beautiful when the VR headset supports positional tracking — the ability to move around the scene, crouching to examine the ground or peering through windows to see what's going on inside.

This is the very first thing I do in a trailer for Allumette, the second work from VR animation studio Penrose. The experience — an increasingly stilted and inadequate word for virtual reality that falls between film and game — opens in darkness. Then, as if someone has just woken up and noticed an audience, the outline of a window appears. A tiny silhouette appears inside, set against a warm yellow light. Another window appears, and then another, until I'm in the center of a city made invisible by the night.

"It took what I thought was going to take 10 years and condensed it down to one."

Penrose Studios is the creation of Eugene Chung, a former venture capitalist who worked briefly in production at Pixar. When we meet at Sundance, he gives me a description not of Allumette, but of its place in the entire history of film, from the decline of opera to the rise of 1960s cinematic auteurs. It's a fairly high bar to set for a demo, but his confidence isn't unfounded. In 2014, Oculus hired Chung as its first head of film and media, tasking him with shaping the experiences that would show people what VR could do. A month after he started, the company was acquired by Facebook for $2 billion. "It took what I thought was going to take 10 years and condensed it down to one," he says.

The first piece to come out of Chung and Oculus' efforts was the short film Lost, which premiered during last year's Sundance festival. Not long after, Chung left to found his own virtual reality animation studio. Penrose debuted its first short, Rosebud, late last year on the Gear VR. (A more immersive HTC Vive version, called The Rose and I, is being shown at Sundance.) Allumette is a much larger project that takes advantage of the cutting edge of consumer VR tech. I tried it on the Vive, but it also supports the Oculus Rift and PlayStation VR.

Like Rosebud, a loose adaptation of The Little Prince, Allumette is a children's story that's by turn whimsical and melancholy. Once the trailer's opening sequence fades, it takes me to a surrealist floating city, home of the titular orphan girl Allumette. In a nod to the dollhouse feel, Allumette carries a box of what look like life-sized matchsticks, which look like majorette batons in her tiny hands. The city doesn't feel "real," but it feels solid, from the fluffy clouds to the stone bridge where she huddles to escape the snow and wind that skim along its sides.

Allumette makes tentative steps into interactivity. As the story flashes back to happier times, when Allumette and her mother sailed on a wooden ship powered by clockwork, part of the hull cuts away to reveal the scene. When I slide my face through the still-covered section, it reveals a fully furnished little room that would otherwise have remained obscured. The same goes for the city's houses — there's no story there, but it makes the story fuller and evokes the feeling of discovering something hidden.

"If you give people too much ability to interact with things, it's harder for us to tell a story."

At the very end of the demo, the Penrose team gives me a Vive controller. I pass it over the edge of the bridge and feel the gentle rumble of its feedback system, as if I'm running my hands over something rough. I move through the bridge itself, and the feeling stops. Most of the scene has been rigged with this, like a permeable haptic membrane that outlines the world. It's uncanny, but it also seems unlikely to be a large part of the experience. "If you give people too much ability to interact with things, it's often harder for us to tell a story," says Chung, explaining Penrose's decision to limit participants mostly to looking around. Allumette's trailer is a traditionally linear story told in a new and unusual medium, an attempt to port the sensibility of flatscreen animation into a virtual landscape.

But it promises to be a major leap over what we've seen so far in the genre. The two best-known VR animated shorts, Oculus Story Studio's Lost and Henry, are indeed very short, somewhere between five and 10 minutes. That's about the length of Allumette's trailer alone, although the trailer is supposed to be somewhere between a third and a half of the whole experience, which will last somewhere over 20 minutes. Other than the 2016 premiere date, we don't know much else — how much it will cost, for example, or when a version of it might come to the lower-tech Gear VR, something Penrose is apparently still working on.

Chung says that Penrose itself is trying to figure out VR animation, abandoning at least one large project along the path from The Rose and I to Allumette. One of the harder parts of development, he says, is approaching a medium he and others at Penrose have worked in for years as if they're just starting to learn it. "Because the reality is, we know very little," he says. "The best filmmakers weren't stage play or opera directors. It took completely new minds to make things like the close-up." It's time, in other words, for a generation of VR auteur experiments — and Chung hopes Allumette will be one of the first.