3D's future focus of Gabelli conference

'Alternative content' also waiting to be explored, says CFO

NEW YORK -- The future of 3D and digital theaters, as well as release windows, were in focus here Thursday at the second annual Gabelli & Co. Digital Cinema & Movie Conference.

Exhibitor executives argued that 3D has over the past proven its value with the success of "Avatar," "Alice in Wonderland" and other films. That along with this week's agreement that will finance the rollout of digital cinema technology for sector biggies led many to promise a swift expansion of digital and 3D screens.

Regal Entertainment CEO Amy Miles said her company had more than 400 screens with 3D capability as of the end of 2009. By the end of 2010, about 1,100-1,200 of Regal's screens will have 3D. She said this will boost the revenue share coming from 3D above the 2009 level of 10%. The Regal CEO also vowed to add more Imax screens.

Cinemark CFO Robert Copple said that the company should have about 900 U.S. screens 3D-ready by year-end. Including theaters abroad, it will expand from about 400 screens with 3D currently to 1,100-1,300 by year's end. "Everyone's boat will go up this year" with the new digital cinema funding, he predicted.

"Everybody understands 3D now," said Gabelli analyst Brett Harriss. "This year is about executing on 3D and the digital transition, which will be huge."

Carmike Cinemas president and CEO David Passman said the benefit of "Avatar" was that it "brought first-time 3D viewers to theaters. It expanded the viewing market for 3D."

He also said consumers clearly notice and demand the quality difference between digital and traditional film. For example, without naming names, he said a big-name director had asked that his recent movie, which starred Brad Pitt and had a title that includes a swear word (a veiled hint at Quentin Tarantino's "Inglourious Basterds"), be shown on film instead of digital. "I got hate mail" from consumers accusing Carmike of falsely advertising its status as a fully digital circuit, Passman said, hinting that the movie could have grossed more in digital.

Importantly, premium pricing hasn't come up as consumer concern in any survey on the 3D film experience so far, Miles emphasized. Regal charges 3D premiums of $3-$4 across the U.S., and there is a possible upside to that, she said.

Meanwhile, Imax Corp. CEO Rich Gelfond said at the conference that while there is indeed likely room to further boost the Imax and 3D ticket premiums, there is no need to make them "too ridiculous" and test consumer loyalty.

While 3D is exciting, "alternative content is the real big apple" still waiting to be bitten into, Cinemark's Copple argued. For example, his firm's circuit in Latin America will this summer show games from the soccer World Cup, he mentioned.

Speaking of alternative content and revenue opportunities, Carmike's Passman said his team has been exploring the possibility of helping a select group of small filmmakers screen their films to let them test consumer interest. He said the exhibitor would not pay for such films, but instead collect a fee.

Harriss told THR that an expansion of digital screens indeed means that "the seeds are being sown" for new revenue opportunities for theater operators with alternative content, which should become more prevalent next year and in 2012, he predicted.

Recent debates over theatrical windows also came up Thursday. Regal CEO Miles said her team met with all major studios in recent months, and all expressed a commitment to the theatrical window. Disney simply said it will at select times move up the start of DVD sales as it will do with "Alice," she added.

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