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Memorial Day Weekend Lays 3D Theatrical Egg

31 May, 2011 By: Erik Gruenwedel

'Pirates of the Caribbean: On Stranger Tides'

Poor 3D attendance lost amid overall record holiday box office

U.S. moviegoers’ fascination with 3D appears to be waning following disappointing weekend results for the top movies offered in the new high-definition format.

Lost in the glow of the Memorial Day weekend’s record $208 million box office was the fact 3D attendance (36%) and box office (45%) for Dreamworks Animation’s Kung Fu Panda 2 was the lowest 3D tally since the July 9, 2010, launch of Despicable Me (Universal) in the format.

Panda 2’s $68 million box office estimate (through May 31) was below analysts’ $80 million to $100 million expectations and sent some revising downward forward revenue projections for the film. Indeed, Panda 2’s 3D box office approximated DWA’s launch of Shrek Forever After a year ago — despite being available on nearly 500 more screens.

The Memorial Day weekend’s top grossing film, The Hangover Part II ($137.4 million including May 26 launch) from Warner Bros., was not released in 3D. Other movies underperforming in 3D (not 2D) were Pirates of the Caribbean: On Stranger Tides (Disney) and Thor (Paramount).

Analyst Richard Greenfield with BTIG Research in New York said Panda 2’s national average 3D ticket price ($10.85) was a tough sell to the film’s family demographic compared with $7.60 for the 2D screening.

“3D is priced too high and even more importantly, consumers are simply tiring of seeing movies in 3D,” Greenfield wrote in a blog post. “Exhibitors need to begin reducing the 3D screen count for movies that do not really need 3D.”

Greenfield believes the lone 3D exception will be Transformers: Dark of the Moon, which launches June 29 from Paramount.

Domestic moviegoers' increasing indifference toward 3D also suggests continued challenges for consumer electronics manufacturers and retailers trying to sell more expensive 3DTVs and related 3D Blu-ray Disc players compared with standard HDTVs.

Ralph Schackart, analyst with William Blair & Co. in Chicago, attributed lower marketing spend by Dreamworks and family budgets being stretched from a string of recent animated movies — and not 3D — as primary “headwinds” affecting Panda 2’s underperformance.

“We remind investors fiscal 2012 (March) will be the strongest year-to-date for 3D movies, with an estimated 42 3D movies to be released, up 55% versus 27 3D movies in fiscal 2011,” Schackart wrote in a note.

Michael Pachter, analyst with Wedbush Morgan Securities in Los Angeles, counters that Panda 2’s strong reviews and lack of animated competition until Disney’s Cars 2 June 24 should keep the film near the top of the box office until then.

“We expect it to remain in the top three films for at least three more weekends,” Pachter wrote in a note. “Also, we believe international box office will be helped by the film’s Imax release.”

That said, Pachter expects Dreamworks Animation to struggle to generate significant long-term growth due to declining DVD sales and a limited number of releases.

Regardless, Eric Wold, research director with Merriman Capital in San Francisco, said scuttlebutt regarding the demise of 3D at the box office is premature. He said that despite the fact that the opening weekend 3D box office tallies for Panda 2 and Pirates 4 fell 20% below projections, the format remains viable.

“We continue to believe 3D results will always vary by title, genre and even quarterly,” Wold wrote in a note. “We do not think 3D strength of ‘fatigue’ should be judged by short-term trends, and the longer-term trends continue to point towards consumer acceptance and overall desire.”

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