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No ‘Potter’ 3D Throws Theaters for a Loop

11 Oct, 2010 By: Erik Gruenwedel


Warner Bros.’ unexpected announcement Nov. 19 that it would release Harry Potter and the Deathly Hollows Part I in 2D – not 3D – represents a significant blow to theater operators mired in a revenue lull, analysts said.

Warner late Oct. 8 said the newest installment of its lucrative “Potter” franchise would only be available in 2D, including screenings at Imax theaters. The studio said it wasn’t able to properly convert the film into the new format in time for its release. Converting 2D films to 3D is a technically challenging process, which some directors have indicated can take up to a year to do at a high-quality level.

“Despite everyone’s best efforts, we were unable to convert the film in its entirety and meet the highest standards of quality,” Warner said in a statement.

The studio is perhaps reluctant to force a 3D release of the newest Potter film after the backlash it received rushing Clash of the Titans to theaters in the format. The poor post-production 3D version of the film prompted criticism from many corners and underscored the reality that unfettered zeal to mine incremental revenue from 3D could kill the goose that laid the golden egg, according to one studio executive.

“Given the amount of criticism that Warner received for the poor 3D conversion quality of Titans, we can understand why it might be more careful with the ‘Harry Potter’ franchise,” Eric Wold, analyst with Merriman Curhan Ford in New York, wrote in a note.

Indeed, the “Potter” franchise is not only a box office juggernaut to Warner, the movies have generated millions in operating income for Warner Home Video.

Regardless, the news is a setback to theater operators who have realized significant margins through the popularity of 3D. Indeed, the lack of a ‘Potter’ 3D release could negatively impact theatrical revenue as much as $3 per ticket and $1 in profit, according to the analyst.

“We estimate the lost premium could represent as much as 3% of [Regal and Cinemark] box office revenues during [the fourth quarter],” Wold wrote. “We estimate that Harry Potter 7 being released in 2D only could negatively impact Imax average ticket prices by at least 5-10%.”

The projections don’t auger well for the key revenue fourth quarter despite successive top box office weekends for Sony Pictures’ The Social Network. The weekend’s top 10 films declined 16% in revenue, compared with the top 10 films in release a year ago. Overall theatrical revenue was the lowest since 2005, according to Eric Handler, managing director, media, entertainment and video games, with MKM Partners in Connecticut.

“We look for a 7% year-over-year over box office decline for [the fourth quarter], as comparables remain tough throughout the quarter,” Handler said in a note. “This outlook appears to be below the flattish consensus forecast.”

Ralph Schackart, analyst with William Blair & Co. in Chicago, cautioned that the lack of a Potter 3D release represents an isolated event and should not be confused with consumer backlash against the format.

“We would argue that it would be worse for … 3D longer term if Warner rushed a bad Harry Potter 3D movie through the system — as we think this would have longer-term fundamental problems for the industry — versus it passing on this series of ‘Potter’ in 3D,” Schackart wrote in a note.

Indeed, Warner said Harry Potter and the Deathly Hallows – Part 2 would be available in 3D in time for the film’s July 15, 2011 release.


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