LOS ANGELES (Hollywood Reporter) - A milestone was reached last week in the crossover from Internet to TV when Sci Fi Channel gave an early second-season pickup to “Sanctuary,” making it the first TV show based on an online series to accomplish the feat.

With YouTube making it easy for anyone with a video camera to get noticed, the Web was anointed as the perfect breeding ground for TV talent. But crossing that talent (and their product) over to TV has proved tricky.

There has been a slew of deals, including CBS lining up “Sex and the City” creator Darren Star to adapt the hit online series “We Need Girlfriends” as a TV series, and NBC pacting with viral video stars Luke Barats and Joe Bereta. But not much has come of any of them.

A lot has been made of the quick demise of “quarterlife,” whose made-for-Web episodes were stitched together into hourlong TV episodes that briefly aired on NBC.

Meanwhile, ABC is redeveloping the online series “In the Motherhood” for its migration to TV, bringing in sister studio ABC Studios and a team of experienced TV writer-producers to adapt it and tapping a mostly new cast.

“Sanctuary” — made by all-Canadian creators, cast and crew and backed by a private Canadian investor — took a middle road.

Similarly to “quarterlife,” which originated with a TV pilot for ABC four years ago, “Sanctuary” — the first TV series to be shot almost entirely on virtual sets in front of greenscreens — stems from a spec script by “Stargate” scribe Damian Kindler written in 2000.

In 2006, the announcement of Apple TV, Apple’s device for playing computer content on HDTVs, prompted Kindler and his “Stargate” cohorts — director Martin Wood and star Amanda Tapping — to do “Sanctuary” as the first HD online series that people could watch on their widescreen TVs.

“There was a wave of euphoria and belief at that time that a giant media revolution was coming,” Kindler says.

Their idea was bankrolled by Vancouver-based the Beedie Group, which ponied up $3 million, as well as another half a million in seed money. The trio started a company that would serve every aspect of the series, and eight 15-minute episodes were produced.

But the online “Sanctuary” quickly crashed and burned.

It wasn’t the product — 4 million watched the episodes — but instead the lack of revenue to recoup the investment. The trio opted for a subscription model that outside of the porn industry has struggled to take hold on the Internet, which is dominated by file-sharing. So while many watched the series, very few paid.

Kindler, Wood and Tapping poured hundreds of thousands of dollars of their own money to keep their company going but ultimately shut it down.

With Internet distribution a bust, they turned to TV. Sci Fi Channel, where they had relationships through the two “Stargate” series, agreed to pick up the show for a license fee one-third of what it normally pays for an original scripted series. The script and the cast stayed the same, but the visual effects and other aspects of the project had to be upgraded.

The trio decided to defer their executive producer fees and work on the 13-episode order for free. With that and tax credits from the Canadian government, they were able to get the budget down to $1.6 million an episode, still a lot more than what the licensee fee from Sci Fi covered. Without a TV studio behind it, Beedie once again stepped in with financing.  Continued…