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Movies in 3-D Gaining Ground

4 Feb, 2008 By: Charlotte Jones

Digital 3-D has become a major driver for movie theaters to convert to digital cinema, and has potential in the home entertainment arena for the long term.

Unlike earlier versions seen in the 1950s and 1980s, this time 3-D isn't a gimmick. Advances in digital cinema technology have produced a high quality, immersive experience, without any of the previous side effects such as headaches and nausea. The difference is in the functionality of digital cinema projectors that offer a higher refresh rate between the two complementary eye images. Any (digital) screen can then add the 3-D upgrade, which consists of additional hardware, 3-D glasses and, if necessary, the installation of a silver screen at a relatively small incremental cost.

Although film distributors were the initial beneficiaries of digital cinema (through savings on film print costs and better protection against piracy), the new incremental revenue stream 3-D is generating has made the transition to digital more attractive to cinema operators. As all 100,000 modern screens worldwide ultimately will be digitized, there is potentially a large platform for this technology.

At the heart of this newfound momentum is a high-profile slate of 3-D films from U.S. studios, including several major digital 3-D-only releases plus several classics that could be converted into 3-D once there are enough screens to justify a wide release. In 2009, for the first time, a steady supply of films (about 10 3-D titles) and a large enough screen base (about 6,000 globally, with more than 4,000 in the United States alone) will combine to bring the market to relative maturity.

Despite the additional investment of up to $15 million to create a film in digital 3-D, over and above existing film budgets, studios are now fully committed to a 3-D future.

At the end of 2007, there were a total of 1,292 digital 3-D screens worldwide, a sharp increase from 258 a year earlier and up from 98 screens for the first release (Disney's Chicken Little) in November 2005.

New countries are keen to try the 3-D experience, and there are now 37 territories around the world with digital 3-D cinemas, up from only 12 at the end of 2006.

Excitement about the new technology is easy to understand. Exhibitors with digital 3-D screens are reaping strong returns on their investments, through a combination of the impressive box office performance of 3-D movies and premium ticket prices. Screen Digest's analysis of box office results from the first four titles (Disney's Chicken Little in 2005, Sony's Monster House in 2006, and in 2007, Meet the Robinsons and Beowulf from Disney and Paramount, respectively) shows that per screen revenue from 3-D screens were on average three times as high as those from the regular 2-D versions during the U.S. opening weekend.

At the heart of this revenue stream is the ability to charge more for a 3-D movie. U.S. consumers have so far demonstrated their willingness to pay an average of $2 more than the average ticket price. However, even if the revenue from premium pricing is removed, Screen Digest research shows that ticket sales for 3-D movies were more than double those of the 2-D version.

Content in 3-D isn't limited to movies. Many alternative-content, advertising and non-feature-film providers also are piggybacking onto the emerging 3-D network, which will enrich the content available for both the theatrical and, subsequently, home entertainment markets. The first of this new form of 3-D content coming to theaters in February 2008 is U23D, a live concert film from rock band U2. Later this year content providers also will be able to facilitate live 3-D streaming of major sporting events or music concerts.

3-D in the home

Not only does 3-D offer a superior experience, but more importantly for cinema, it also delivers an experience that isn't available at home. However, that could change.

In the short term, a shortage of 3-D content (movies or live broadcasts) will detract from the overall appeal of developing commercially viable 3-D home solutions. Meanwhile, some in-home 3-D systems require HDTV receivers, meaning adoption will be slower in Europe where HDTV penetration lags behind that of the United States.

Longer term, however, the more immersive experience offered by high-quality stereoscopic viewing has strong potential for mass consumer markets, including TV broadcast, DVDs and gaming. Manufacturers such as Samsung and Mitsubishi are already offering 3-D-ready HDTVs, with 3-D plasma TVs expected this year. Philips is developing an autostereoscopic (without glasses) TV solution that may have strong consumer appeal. In a move that demonstrates the massive potential for 3-D in the home, RealD, the leading provider for the theatrical 3-D market, has established a new division looking at solutions for the home entertainment market.

Although the size and quality of the cinema image and sound systems make it the ideal place to view 3-D content, as 3-D becomes a technical reality for the home consumer market, consumers can expect to see rightsholders investing in a much wider variety of content for this market alone, building on the 3-D experience in cinemas and driving the use of 3-D in the home.

Charlotte Jones is an analyst for Screen Digest.

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