Felicia Day

I danced for four hours in high heels," Felicia Day says by way of apology for her morning-after sluggishness.

Last night was the wrap party for season four of her Web series The Guild, and for once it was no set-up-the-Rock-Band-in-the-living-room shindig.

She went all out, getting a local bar to donate space and hiring a DJ who played ’80s music all night. "I was like, If we’re going to do this, I want to dance," she says between spoonfuls of fruit and yogurt at a West Hollywood café. "I’ve been working 12-hour days."

It’s not as if she needs an excuse to celebrate. In three years, The Guild, a homemade comedy series about gamers playing a World of Warcraft-like virtual role-playing game, has gone from cute one-off to full-fledged phenomenon. The show’s run so far has garnered an estimated 65 million views, and has even spawned its own comic book. And in Day’s brave holdout for ownership and creative control of her series, she devised an innovative distribution deal with Microsoft that’s a new model for the burgeoning world of Web video. In fact, she just may be the only person who has figured out how to make a living by producing, writing, and starring in an original online series.

"This year, my coproducer Kim Evey and I have been able to say, ’This is my full-time job,’ " says the Alabama native. "A little blind enthusiasm got me a long way."

Day shot the pilot for The Guild in friends’ houses with a borrowed camera. YouTube featured the third episode on its home page, garnering 1 million views. A PayPal button solicited donations and yielded a fan-driven bounty that let them produce roughly an episode a month.

As buzz built, Day and her company, Knights of Good Productions, signed with ICM new-media head George Ruiz. "At one point, there were 25 different offers on the table," Ruiz says, "including from some major studios and networks and even a director with several $100 million films."

Day turned down every one. "She said, ’George, don’t make me take this deal!’ " he says. So by the time Microsoft came calling, the agent had a new approach: The Guild is not for sale, but you can license it.

The Seattle-based behemoth bit. Microsoft pays an undisclosed fee to debut each season exclusively on the company’s Xbox Live, MSN, and Zune platforms (season four debuted in mid-July). "There is a common perception about Microsoft," says Day. "Especially when we first signed with them, the fans had reservations." But she was impressed that it got what she was doing and didn’t want to interfere. "Microsoft doesn’t even give me notes [on scripts]!"

"Felicia could be an entertainment executive," raves Ross Honey, Microsoft’s GM of content acquisition and strategy for media and entertainment. He says that The Guild is Xbox Live’s most successful original-content effort.

Day’s company shares in sponsorship revenue from Xbox Live’s "branded-destination environment." Ruiz has secured similar distribution and revenue arrangements with Amazon, iTunes, Netflix, and New Video Group, which distributes the show on DVD.

Still, Day says, "I’m turning down a lot of money. I could be much richer now. But if I have an idea, I can have it out to the world very quickly." She has spun off a comic-book series with Dark Horse Comics, and when she had the idea for a sexy promotional music video, Microsoft put up the money to make "Do You Want to Date My Avatar?" Day says the scale of working on The Guild is much different from a traditional TV show’s. "Everyone is cutting their rate to work in Web video," she says. "That’s why Kim and I always make sure the food is really good, and why we always have a really nice party. "

For years, Day got by in Los Angeles acting in commercials and the occasional TV episode, most notably an eight-week stint on Buffy the Vampire Slayer back in 2003. Frustrated by how slow Hollywood was to come around to her talents, the redhead channeled her geek love of gaming into The Guild.

Early episodes caught the eye of her former employer, Buffy creator Joss Whedon, who was inspired to cast her as the female lead in his own groundbreaking Web series, Dr. Horrible’s Sing-Along Blog.

For all of Day’s success, she’s only now starting to win over Hollywood proper. She has yet to land a regular network or feature-film gig, though Day recently wrapped the leading role in Red, a werewolf-slaying adaptation of the Little Red Riding Hood tale for the Syfy channel.

But Day seems content with her progress. "I’m used to being an outsider," she says. "I was homeschooled. I don’t think like other people do."