Baby Steps

September 16, 2011

Why do some people want to kill 3D in the crib?

By Patrick Corcoran

A year ago, Wall Street analysts (particularly BTIG Research's Richard Greenfield), trade press and the occasional blogger were arguing that 3D was in the midst of a serious decline. They are still arguing it today and using the same shaky evidence.

For Greenfield, the key metric is the 3D percentage of the gross. A lower percentage for a movie than a previous one shows that audience interest in 3D is waning. In my earlier column, I showed that 3D box office demonstrated a much stronger correlation to the number of screens on which 3D showings were available. More screens meant a higher 3D gross.

Greenfield continues to use the metric and sees an alarming trend:

Opening weekend 3D percentage of the gross (movies chosen by Greenfield to illustrate his point and listed in chronological order)

How to Train Your Dragon - 68%
Shrek Forever After - 61%
Thor - 60%
Pirates of the Caribbean 4 - 46%
Kung Fu Panda 2 - 45%
Green Lantern - 45%
Cars 2 - 40%
Transformers 3 - 59%
Harry Potter 7.2 - 43%

Noting the Harry Potter percentage in an investors note, Greenfield flatly states, "3D has collapsed in the United States." Has it?

Opening weekend 3D gross

How to Train Your Dragon - $29.7 mil
Shrek Forever After - $43.3 mil
Thor - $39.6 mil
Pirates of the Caribbean 4 - $42.6 mil
Kung Fu Panda 2 - $30.6 mil
Green Lantern - $23.7 mil
Cars 2 - $27.1 mil
Transformers 3 - $57.6 mil
Harry Potter 7.2 - $72.67 mil

Clearly, the percentage of a movie's gross coming from 3D does not tell us anything useful about whether or not there is "weakening demand" for 3D movies. The seven point slide from How to Train Your Dragon to Shrek Forever After might seem alarming; the 16 point dip from Transformers 3 to Harry Potter 7.2 even more soaudiences are losing interest in 3D! Yet Shrek's 3D box office was 45 percent higher than Dragon's; Potter's was 26 percent higher than Transformers' and 144 percent higher than Dragon's. Also note that Potter and Transformers opened on roughly the same number of 3D screens (4,250 and 4,146, respectively). Twenty-six percent more people going to a 3D movie on only 2.5 percent more screens seems to me to be a pretty strong indicator of increasing demand.

If 3D percentage of the gross is the controlling metric, then Drive Angrywith 96 percent of its opening weekend gross from 3Dis the most successful 3D movie in history. It made $5.2 million in its opening weekend and $10.7 million in its theatrical run.

This single-minded focus on 3D percentage of the gross obscures more than it illuminates. The high percentage of 3D grosses on some of the early movies released on a large number of screens led to an expectation that 3D will over-deliver compared to the percentage of locations offering a particular movie in 3D. But there was no reason to think so, other than over-enthusiasm.

3D is not a genre. It is a moviemaker's tool, much as color and surround sound are tools. In its earliest iterations, it was a novelty, seemingly driving attendance just because it was part of the movie. That novelty wore off fast and we are seeing 3D settling down into a broad range of performance as a percentage of the gross-somewhere between 40 percent and 60percent, depending on the movie.

But again, that shouldn't be the metric that drives your thinking on 3D. Does 3D add to your bottom line? Does it drive people away from the theater? Harry Potter suggests not. Every theater owner is going to have to make the same sort of calculations they had to make when I wrote on this topic a year ago. How many auditoriums should I convert to 3D? Which ones? If I book this movie in 3D, how big an auditorium do I put it in? How many? How much can-or should-I charge for it? Do I sell more, or less, popcorn with a 3D movie?

However you answer those questions, there are some answers that are clear. If you offer 3D, it is essential that you offer the 2D version as well. One thing that seems obvious looking at the widely differing performance of movies in 3D, is that just like in the 2D world, we don't have one audience, but many. They overlap and recombine in different ways every week and for every movie. Some are driven by the story, others the stars, or the genre, or, yes, the price. 3D adds another variable to your calculations. Some movies will call for a greater number of screens to be assigned to 3D, some less. Your market research and your film buyer's gut will have to guide you, but it is important that your customers have options.

It is also important, as 3D capacity expands (there are 11,618 3D-capable screens in the U.S. as I write, 802 in Canada and 19,620 in the rest of the world), that we master the new technology. Another element of the media's 3D Deathwatch, was a report from the Boston Globe in May about the projection problems some theaters were having in the Boston area projecting 2D movies through 3D projectors. The theaters involved acted quickly to address these reported problems and, following the initial media frenzy, the story has died down.

The speed and breadth of the digital roll-out made it inevitable that there would be teething pains. From April 2009, when there were 1,833 digital screens, to July 2011, the number of digital screens has increased 987 percent. This is simply the most massive technological transformation the theater industry has ever undertaken.While we learn the ins and outs of digital projection, we have added the additional challenge of 3D.

One of those challengesmaybe the most important oneis light. Compounding the darker cinematography fashionable in recent movies, 3D projection splits the light output into two alternating images, dimming the output further. It is essential that projector bulbs be maintained and recommended light output for 3D be set. This has become a minor media fuss in recent months, partly fueled by directors like Michael Bay releasing letters to the press telling projectionists how their movies ought to be projected. There is much that theater owners do not control about the making and marketing of 3D movies, but they surely have control of their presentation. Presentation quality is a bottom-line issue.

Indeed, when 3D evangelist Jeffrey Katzenberg is decrying the current state of 3D movies, there may be more than just a PR problem. In a Brainstorm Technology interview, hosted by Fortune magazine, Katzenberg had this to say when asked if the bloom was off the 3D rose:

I mean, well, for sure it came, and for sure the bloom is off the rose for a moment in time, driven by a singular and unique characteristic that only exists in Hollywood, greed. And, you know, so I think there were, unfortunately, a number of people who thought that they could capitalize on what was a great, genuine excitement by movie goers for a new premium experience, and thought they could just deliver a kind of low-end crappy version of it, and people wouldn't care, or wouldn't know the difference. And anything-you know, nothing could have been further from the truth.

So, I think that it's aI think Hollywood has managed to grasp defeat from the jaws of victory here.

That's fairly damning, and it's a sentiment that I think a lot of people in and out of the industry would agree with. But, I think it comes, in part, from the same sort of excess expectations that seem to be as much a part of 3D as the glasses. Katzenberg tempers his negativity with a more upbeat assessment of 3D's future in the movie business:

And with time we'll get back there again, but it's only going to come by understanding and embracing this as a creative, storytelling tool, and a way of giving an enhanced movie theater experience, premium experience. So, our great film makers that are using these tools today, Marty Scorsese, Steven Spielberg, Peter Jackson, more and more of the really, I think, great users of both technology and great storytelling are now starting to get at it, and they will deliver good experiences to people, and I think it will take us a while, but we'll earn it back.

3D cinema is in its infancy, and like all infants, it will delight and astound us with the things it can do that it couldn't the day before. It will also occasionally drool and babble, need to be cleaned up, and embarrass us in public. 3D has barely started to crawl. Why do we get upset that it hasn't run the marathon yet?


Tags: 3D, Patrick Corcoran, NATO, Jeffrey Katzenberg


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