Analysts predict $25 bil 3-D market by 2012

Exhibitors first to benefit from the technology, report says

NEW YORK -- The 3-D market could be valued at more than $25 billion by 2012, with the boxoffice and movie exhibitors set to benefit from its growth spurt first, according to a new report from Piper Jaffray analysts.

The projected growth amounts to a compound annual growth rate of about 50%, with the analysts forecasting a $5.5 billion 3-D market this year.

The technology could mean a boon for the U.S. boxoffice, which the Piper Jaffray team expects to go from flat in 2008 and 2009 to an average gain of 12% year-over-year in 2010 and 2011.

"We expect the theatrical entertainment window will be the first to benefit from this technology," Piper Jaffray media and entertainment analyst James Marsh and online content analyst Michael Olsen said in their new 3-D White Paper. "We expect the technology will become more widespread over time, moving from theaters to high-end home theater solutions and eventually to the average living room."

The duo suggest that exhibitors are best positioned to benefit from this trend thanks to higher 3-D admission prices that could come at a 30%-40% premium and likely attendance gains, projecting that cash flow growth rates for major players will be at least 10% higher in 2010 and 2011.

The Piper Jaffray team sees Regal Entertainment Group as best positioned to take advantage of the 3-D trend, along with Carmike Cinemas and Cinemark. They called Regal the purest 3-D play, forecasting an attendance improvement of 5% by 2011.

Meanwhile, Carmike is well positioned due to its industry leading digital screen buildout, which already has brought 3-D capability to 18% of its screens. And Cinemark is poised to benefit as its theaters "are located in higher-growth U.S. markets, are modern and updated, and run efficiently, resulting in industry leading metrics," the report said.

Marsh also likes the prospects for DreamWorks Animation, given that its management team was among the first to focus on the 3-D opportunity.

Entertainment companies with big libraries also will have a chance to exploit library titles in 3-D, but this process will take more time as 3-D conversion costs must come down further, he argued.

Technology companies that stand to benefit from the upgrade cycle to 3-D include Dolby and RealD.

In a conference call Tuesday, Marsh predicted that, following 3-D success in theaters, "3-D will become the new HD," bringing the technology to TV sets, video game consoles and other devices.

Real D CEO Michael Lewis said Tuesday that his company is approaching installations on 1,700 screens, with many more already on backlog. Given that a majority of planned 3-D releases are large tentpole movies, he predicted that over a 3-5 year period, 3-D could close in on a 30%-50% share of U.S. -- and, ultimately, worldwide -- boxoffice.
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