The year will have 28 films in 3D — down from 34 last year and a peak of 39 in 2011 — which is one reason why Morgan Stanley’s Benjamin Swinburne says today that he expects this year’s domestic ticket sales to fall as much as 2%. Another reason: The analyst predicts that audience interest in 3D will continue to cool. He foresees 3D showings to account for just 39% of the total box office for films released in 3D, the lowest ratio in seven years and down from 42% in 2013 and 53% in 2012. The exhibition companies he tracks already are hurting from these trends. Consumers’ average outlay per admission in Q1 will rise just 0.5% as price increases of about 2.5% are offset by lower sales of the premium priced tickets for 3D movies. Three of the seven 3D films this quarter are “non-superhero films targeted at kids, which have recently yielded lower 3D [percentage] take-rates,” Swinburne says. Studios also probably won’t have a 3D film in early 2014 that will match last year’s Disney release, Oz: The Great And Powerful. “In the ‘golden age of TV,’ we remain cautious on attendance” for the year. Meanwhile theater growth initiatives aren’t ready to pay off just yet. The impact of efforts to promote sales of high-priced snacks “has been small,” the analyst says. He’s optimistic about plans to offer sports, opera, ballet, and other non-movie …
There’s nothing wrong with 3D movies that can’t be fixed if directors pay more attention to details in the productions, studios do more to promote them, and theaters offer them on additional screens. At least that’s the way RealD CFO Drew Skarupa described things in his appearance today at the MKM Partners Investor Day Conference. The 3D technology company has been in Wall Street’s dog house lately as the percentage of box office sales for 3D films has declined. The format accounts for about 33% of domestic sales for films that offer the option, down from 43% last year; elsewhere the take rate has fallen to 47% from 61%. Skarupa acknowledges that some 3D films don’t take full advantage of the extra dimension, usually because they’re converted to 3D after being shot in 2D. Although “conversions have gotten better and better,” they aren’t as good as films shot in 3D. For example Warner Bros’ upcoming Gravity is “a must-see in 3D. It’s a made-for 3D movie.” But persuading filmmakers to change will be “an evolution. It’s not going to happen overnight.” RealD is trying to help by advising some directors and “giving them ideas about the shot.” Meanwhile the company wants studios to step up their marketing — it has “come down a bit.” And theaters need to “increase those [3D] show times” especially on weekend evenings. RealD’s exit surveys found that about 25% of movie-goers love 3D, and an equal number dislike it. The remaining 50% “we call the swing vote, it’s heavily influenced by showtime and marketing…It’s important for us to focus on that 50%.”
UPDATE, 1:15 PM: RealD shares closed -8.9% at $6.89, a new all-time low.
PREVIOUS, 12:10 PM: The 3D services and technology company is still in Wall Street’s dog house: Its stock is off more than 8% in mid-afternoon trading — and touched a new all-time low of $6.91 — after it reported that moviegoers spent about $165M last month at theaters it serves, with 40% from domestic screens. That’s short of the $173M that Stifel analyst Benjamin Mogil predicted. It also disappointed B. Riley’s Eric Wold, who expected $200M after he upped his stock recommendation to “buy” last month. The problem, he says, is that “overseas consumers are clearly mimicking the increased choosiness for the 3D format that we began to see with the domestic market back in May.” He just lowered his financial estimates for RealD. But he’s sticking by his stock rating. The current price “more than reflects recent weaker-than-expected 3D demand trends,” he says. It will take a while before investors will be able to see improvement. There are only two major 3D releases this month: Sony’s Battle Of The Year and Cloudy With A Chance Of Meatballs 2. The big tests will come later with Warner Bros’ Gravity and The Hobbit: The Desolation of Smaug, and Disney’s Thor: The Dark World. RealD’s shares have lost about 54.6% of their value since June 11 as Wall Streeters became nervous about the prospects for 3D, and …
The Technicolor classic will have its IMAX 3D world premiere on September 15 at Hollywood’s historic Chinese Theatre, the same movie house it first debuted in 75 years ago. The special screening will mark the reopening of the TCL Chinese Theatre IMAX, which boasts the largest number of seats in an IMAX auditorium in the world and Hollywood’s first theater equipped in the large-screen format. The Wizard Of Oz will screen in a new IMAX remastering and will then open for a special one-week run at the TCL Chinese Theatre and additional US IMAX screens on September 20. WB‘s home video release of the 5-disc The Wizard of Oz 75th Anniversary Collector’s Edition will follow on October 1.
Comic-Con: As Zombie Lovers Gnaw On ‘The Walking Dead,’ George Romero’s ‘Dawn Of The Dead’ Gets 3D Makeover
EXCLUSIVE: While the carnivorous corpse attention at Comic-Con is on today’s The Walking Dead panel, here’s something else for zombie lovers to chew on. It involves George Romero, who is to zombies what Stan Lee is to superheroes. Richard P. Rubenstein, who produced Dawn of the Dead and owns the rights to Romero’s 1979 classic, tells me that he is in the homestretch of a 3D conversion of Romero’s groundbreaking followup to Night Of The Living Dead. Rubenstein started this crusade in 2007, and while he’s not sure what he will do with the refashioned film, he so far has one hour and 31 minutes converted of a two-hour, six-minute film. He expects the conversion to be done by early fall.
As you might recall, Romero’s pic took the zombies from the original’s small farmhouse B&W setting, and added a burst of color as the infestation became a wide-scale apocalypse of lumbering flesh eaters. Romero focused the action on a group of survivors who seek refuge in a shopping mall — where it turns out, the zombies also turn to out of a lingering consumerism instinct.
Here’s more sign of trouble for the 3D movie business. The stock price for the 3D technology company dropped about 12% in initial trading this morning after it reported that films on its screens generated $291M at global box offices in June, with 54% from U.S. venues. That’s a much lower number than analysts expected, and means RealD’s box office results are down about 10% in the quarter vs the same period last year. The problem is that consumers are “becoming increasingly choosy about which 3D movies they will pay a premium for given the significant ramp in 3D titles available,” says B. Riley analyst Eric Wold who just lowered his stock price target for RealD to $15 from $16.25. He’s given up his belief that 3D sales were missing the mark because theaters had too few 3D screens. Wold says that he has “confirmed with 4 of the top 5 domestic exhibitors that no additional 3D screens are needed to meet demand.” And he warns that this “could be a leading indicator of international trends.” RealD’s June report also rattled Stifel analyst Benjamin Mogil. He expected to see $463M from global box offices, with 46% from the U.S. — and just lowered his stock price target to $15 from $20. He had recommended the shares in the belief that the company would see strong growth overseas while the domestic market remained stable. The latest numbers “fly in the face …
RealD ended up with a net loss, but the stock price is +5.2% after hours after the 3D technology company surprised the Street with help from its overseas expansion efforts. In the quarter that ended in March, RealD had a net loss of $4.4M, down from a $5.5M profit in the period last year, on revenues of $45.4M, -9.2%. The revenue figure topped forecasts of about $43M. And the net loss at 9 cents a share was better than the 19 cent loss analysts anticipated. The soft box office early this year contributed to the downturn. Domestic ticketbuyers spent $268M at RealD-enabled screens, -20.5%, though overseas sales were +37.3% to $346M. The company had 22,700 screens globally at the end of March, up 500 from the end of 2012. CEO Michael Lewis says that international expansion will continue to be a big part of RealD’s story this year. Its largest customer in Latin America, Cinepolis, “entered into an expanded agreement to equip at least 400 additional auditoriums with RealD 3D technology across the Cinepolis circuit in Latin America, the United States and India within the next 12 months,” he says.
Alamo Drafthouse Cinema’s Tim Reed made the observation this morning at the most refreshingly frank panel about the problems theaters face that I’ve seen so far at the industry event. He says that execs have ”done a horrible job building a fan base for the movie business over the last two decades.” That’s a problem because “we’re in a battle now…We’re brick and mortar. We’ve see a lot of brick and mortar businesses go down. We have to be nimble and find content that will sell to our base” — including young people to “make them movie-going fans.” He and others on the International Cinema Technology Association’s panel agreed that theaters need to become more aggressive about introducing alternative content including live sports and concerts. “This is the year for satellite (distribution) and that whole conversation,” Walt Disney Studios Motion Pictures VP for Strategic Planning Paul Holliman says. But movie distributors have to help by relaxing their terms. For example, Warner Bros International Cinemas President Millard Ochs says studios could just require that a film be shown six nights a week instead of seven after it’s been out three weeks. “We have to change. Everything is changing around us.” Still, Reed warns that alternative content can be expensive and execs don’t know yet what material will pay off. “What we have found is that it’s more market driven on a psychographic level,” he says.
The battle over next-generation “immersive audio” is afoot, even if its top two major competitors are playing nice on the surface. For now. NATO’s pushing the theatrical innovation hard this year at CinemaCon, where industry leader Dolby scored crucial placement of its Dolby Atmos system in the main Coliseum theater for all major studio events. Today reps for Dolby and #2 rival Barco spoke in a panel discussion of how they, studios, and theater owners might work together to establish standards that would allow both Dolby Atmos and Barco’s Auro 11.1 immersive audio systems to co-exist. But some on the periphery are expecting a full-blown format war to erupt leaving a single victor dominating the field globally — and so theater owners are treading carefully. Theater upgrades to either premium audio system will involve the costly installation of additional speakers. Nobody wants to invest in a losing format. Especially after spending big cash to convert to digital.
Joe Utichi contributes to Deadline’s UK coverage
Life Of Pi helmer Ang Lee caused controversy last month when he failed to thank the film’s VFX artists – including those at the troubled Rhythm & Hues – during his acceptance speech for the Best Director Oscar. Today, the director topped the bill at the opening of the 3D Creative Summit in London, appearing via satellite to discuss the visual work done on Pi.
The film’s VFX consultant David Conley presented the audience with a breakdown of the visual effects wizardry featured in two extended Pi sequences, as it pertained to the film’s use of 3D. But Lee, who praised the detail of Conley’s presentation, stuck to discussing the third dimension alone. Speaking of the cost of visual effects, he said he had feared that the economic reality of Pi would not match the artistic demands of realizing it. “It would be like the number Pi: it keeps on going and makes no sense.” 3D, then, was a way to keep the budget manageable. It added a level of authenticity that allowed him to downplay the VFX. “It gives volume. It picks up so much information and gives realism.” He added that the film’s most famous creation, the CG tiger Richard Parker, was rendered more believable because it was presented in 3D.
The 3D version of F. Scott Fitzgerald’s classic, which was just tapped to be the opening night film at this year’s Cannes Film Festival and which Warner Bros plans to release in the U.S. on May 10, will provide an early indication of whether the extra dimension appeals to audiences who like dramas — and not just animation, action, and fantasy fans. “We’re really excited to see what the data points are,” RealD Chief Financial and Operating Officer Drew Skarupa said today of The Great Gatsby at the Piper Jaffray Technology, Media and Telecommunications Conference. The 3D technology company is also eager to see additional films that appeal to overseas audiences. When a movie is available in 2D and 3D, about 60% of international sales go to the 3D version as opposed to 45% in the U.S. That’s a problem because “the press and the Street tend to focus on the domestic numbers.” What accounts for the difference? “We’ve seen direct correlations between the number of 3D showtimes and box office,” Skarupa says. “We’d like to see in the U.S. markets a greater percentage of 3D showtimes.”
James Cameron will be addressing the 2012 NAB Show at the Las Vegas Convention Center. The session is titled, appropriately enough, “The Secrets of Making 3D Profitable”, on April 16th from 10:30 to 11:45 AM conducted by Cameron and Vincent Pace for their company Cameron | Pace Group (CPG). The decription of the session follows:
Digital cinema has overtaken film a lot sooner than many people might have predicted before Avatar was released, but it was probably inevitable. At latest count almost two-thirds of all domestic screens used digital projectors by the beginning of the year. That’s 25,570 screens out of a total 39,641 or 64.5%, according to the National Association of Theatre Owners. Roughly half — 12,620 — of those digital screens were equipped to show movies in 3D and 244 of those were IMAX installations. The total of individual theaters was almost 5,800, and 3,028 of those were partly or completely digital. And counting. Back in mid-2009 as James Cameron was preparing to unleash Avatar on the moviegoing public in December, only a few more than 1,600 screens in the US were equipped for digital 3D as of July out of a total of some 38,000 indoor screens at roughly 5,400 locations. By the time Avatar opened there were roughly 3,000 3D digital screens. In little more than two years, the number of 3D screens has quadrupled — propelled at least initially by Avatar’s success.
Globally, digital projection was predicted to overtake film early in 2012 — if it hasn’t already — and by the end of the year 63% of all cinema screens around the world will be digital, according to IHS Screen Digest Cinema Intelligence Service. By 2015 IHS predicts that 35mm theatrical film will amount to a niche format with just 17% of global movie screens. Art houses and independent theaters will struggle to cope with the cost of conversion. According to NATO, Canada has 1,848 digital screens, and the rest of the world has 38,874. That makes a global total of 66,292 digital screens. Texas Instruments, which licenses DLP technology used in most digital cinema projectors, in early December boasted installation of more than 51,000 DLP branded digital screens worldwide — nearly double the previous year. Slightly more aggressive than IHS Screen Digest, the company predicts a full global transition to digital by the end of 2015. Conversion to digital has accelerated in Europe, China, Russia, Latin America, India, Africa, Australia and the Asia Pacific region.
Last week saw the unveiling of the trailer for James Cameron’s Titanic 3D which opens April 6. On Monday Disney released the new trailer for Beauty and the Beast 3D, the first of a handful of Disney/Pixar classics to be retrofitted for 3D. Alas, the trailer here is only 2D, and wearing special glasses won’t help. Beauty and the Beast 3D opens January 13.
Here’s the latest of the occasional behind-the-scenes videos that Peter Jackson makes for fans while he has been in New Zealand shooting The Hobbit. In this installment, he discusses the switch from the 2D The Lord of the Rings to a 3D shoot for both installments of The Hobbit. Jackson said that he wished he could have done the trilogy in 3D, but I still believe that Warner Bros will probably sponsor a conversion of the original three films to 3D, so that the five-film adaptation of the JRR Tolkien book series matches up.
The after-hours trades gave up the 9.5% gain in RealD shares on Wednesday before the market closed. And the strange thing is that earnings for fiscal 2Q were way ahead of forecasts: The 3D movie technology company had net income of $19.2M, up from a $4.2M loss in the period last year, on revenues of $88M, up 34.7%. The earnings, at 33 cents a share, compare to the Street’s forecast of 22 cents. But investors also expected revenues to come in at $94.4M. Fiscal 3Q could be worse: RealD says that only eight 3D films will be out in the quarter vs nine last year, including six that had domestic box office sales of more than $100M. Samsung’s decision not to make LCD screens for RealD’s 3D TV technology could be a big blow to its home entertainment ambitions. CEO Michael Lewis says that RealD now is ”pursuing other potential partners.” Samsung ”had a recent management change, reviewed all their projects and decided not to go forward with the RealD technology at the moment,” Lewis said. “We’re still bullish on the technology… despite the headwinds we encountered recently.”
RealD isn’t taking sides in the fight between Sony and exhibitors over who should pay for 3D glasses. “We are confident that the industry will reach a resolution” that benefits everyone, Lewis says. Meanwhile he defended RealD’s technology, saying that it offered “twice the brightness of our competitors.” He says that some studios including DreamWorks Animation and Relativity are …
Are you ready to go back to Titanic?
That is not just a famous line from the 1997 Oscar-winning box office phenomenon, they are also the words producer Jon Landau used this morning in front of a packed theater of journalists at Paramount to introduce 18 minutes of the film’s new 3D conversion. Paramount and 20th Century Fox — which holds international rights after bringing in Paramount to be domestic distributor when the film was sailing way over budget — will open the new 3D-converted Titanic on April 6, 2012. That’s just days before the 100th anniversary of the ship’s maiden launch on April 10, 1912.
“We didn’t want to release it on the day of the sinking, we wanted it to be about the ship itself, but obviously it sank,” said the film’s writer/director/co-producer/co-editor and all-around King of the World James Cameron, who explained that with the 100th anniversary of the fabled ship’s sailing the time was right not only for 3D but to bring the movie back for a new theatrical experience — even though it has been out in various video formats for years. “It has to do with the psychology of going to a theater. We make a committment to spend those two or three hours in a shared experience with others … and there is a whole generation that hasn’t seen it at all,” Cameron said, adding that in the modern world of cell phones, texting, emailing and other distractions, it is hard to get the full intended impact of a film like this at home.
Of course, Cameron has publicly stated he isn’t a fan of 3D conversions for films that have a choice. But he makes an exception for those “20 or 30 classic films out there” that can find a new audience with the format, and Titanic fit the bill. “I love 3D; if I had the 3D cameras at the time, I certainly would have loved to have shot the film with them,” he said. When I spoke with him afterwards in the lobby, his enthusiasm was infectious for the film and the new technologies he now has at his disposal to give it new life. He said the whole movie would have been shot differently today than in 1997: Rather than building those massive ship sets, he would have relied much more heavily on CGI and other techniques than the not-so-cost-effective way they did it then. He said that fortunately for him the film made money (that’s an understatement), but it could have had a very different outcome. In other words, a lot of dice were rolled on Titanic, which of course went on to become the highest-grossing movie of all time until Cameron’s own Avatar usurped it a couple of years ago. It would now take another billion or so for it to come back from the video bins and topple Avatar — an unlikely outcome — but one informed source working on the new re-release told me another “4 or 5″ (hundred million) could be in play. Certainly Disney’s success with The Lion King’s 3D conversion is whetting appetities all over Hollywood for the boxoffice possibilities of library titles.
The battle lines are starting to harden around who’ll pay for those lame-looking 3D glasses. I’ve learned that other studios might line up behind Sony’s decision to stop paying the average 50-cents a pair fee beginning in May. Rival studios tell me Fox is on board. “We’re studying our options, but haven’t made any decisions yet,” denied Fox Filmed Entertainment spokesman Chris Petrikin. Remember, Fox was first in line to try to stop paying for glasses back in 2009 when it released Ice Age. But then had to abandon that effort after theaters rebelled. Sony was technically correct today when it said in a statement that “there never has been” a formal agreement stipulating that studios would shoulder the cost of 3D glasses. But it’s easy to understand why exhibitors are stunned by Sony’s stoppage. Because it changes an understanding that’s been in place since 2005 when Disney’s Chicken Little kicked off the 3D movie phenom.
“It is a radical departure from what the practice has been,” National Association of Theater Owners President John Fithian tells me. Now Regal CEO Amy Miles warns that if studios end the practice then it could “result in fewer screens exhibiting 3D films”. That’s bad news for Hollywood, which plans to release 39 films in 3D next year, vs. 36 in 2011. Exhibitors might encourage consumers to bring their own 3D glasses. That may be the future anyway. But BTIG analyst Rich Greenfield says if theaters require payment for 3D specs on top of the typical 3D surcharge ($3.25 to $4 a ticket), then “the U.S. moviegoer will reject this as another way for exhibitors to milk them and further decrease their interest in 3D (and perhaps going to the movies in general)”.
The fight is over glasses manufactured for RealD which it, in turn, supplies them to theaters. RealD’s stock price was down -14.7% today on the Sony news. The 3D tech company won’t disclose
UPDATE, 1:30 PM: A Sony spokesman has just responded to NATO’s letter from this morning, essentially saying there has never been an agreement about who bears what costs for in the 3D biz — but we can talk about it anyway.
NATO’s statement that it has been “understood” that distributors would always bear the cost of 3D glasses is incorrect, because there never has been any such agreement. In fact, we have been speaking with people in the industry for a long time about the need to move to a new model, so this certainly comes as a surprise to no one in the business.
We invite theater owners to engage in a collegial dialogue with us about this issue, including at ShowEast next month. By working together on a business-to-business basis, we are confident a reasonable solution can be reached that brings benefits to consumers, the entertainment industry and the environment.
PREVIOUS, 10:36 AM: The National Association of Theatre Owners has lashed back at Sony for the studio’s recent decision to stop providing 3D glasses to moviegoers. It’s not sitting well with the exhibitors’ group, which contends that there is an understanding that theaters would pay for the tech upgrades to their facilities and distributors would provide the glasses — NATO says any shift to that model is at least worth a phone call to discuss. Not to mention that if exhibition won’t absorb the cost, those who already have to cough up for premium-priced tickets to 3D movies will have to. Here’s the group’s statement; expect Sony to have a reply shortly.