Biz loves depth of 3-D potential

'Tremendous' opportunity seen

Every major studio is working on big-budget 3-D movie releases, and the technology will be a boon to studios and exhibitors alike, Jeffrey Katzenberg told Wall Street analysts Wednesday during a Bank of America conference.

Katzenberg, CEO of DreamWorks Animation, which is readying two 3-D films for 2009, predicted that moviegoers will some day own their own glasses for 3-D viewing much like they own sunglasses today.

He said that moviegoers will gladly pay up to a 50% premium to watch 3-D films in a theater and that such a scenario will make the debate over collapsing distribution windows largely irrelevant. He noted that the exhibition industry hasn't used variable pricing strategies to boost it fortunes nearly to the extent that other industries have.

And one more added benefit: 3-D movies can't be easily pirated.

Directors Robert Zemeckis, James Cameron, Steven Spielberg and Peter Jackson are embracing 3-D, and George Lucas is giving "Star Wars" the 3-D treatment, he said.

"Once the alphas start to move, the herd gets restless and others start to follow," Katzenberg said.

Disney-Pixar also is planning "Toy Story 3" in 3-D, Katzenberg said. "That's kind of the gossip inside. That will be their first authored in 3-D."

"We're not ready to talk about it," a Disney spokeswoman said Wednesday.

Katzenberg said he studied all major recent releases and came up with his list of 45 films that would have benefited immensely from 3-D, including "Casino Royale" and "The Departed." He suggested that rereleases of 3-D versions of such classics as "The Godfather," "The Bridge on the River Kwai" and "Lawrence of Arabia" would be profitable.

Katzenberg's enthusiasm almost was matched by that of Michael Campbell, chairman and CEO of Regal Entertainment, who also spoke at the conference.

Boxoffice results from the few 3-D movies Regal has shown, plus other data, indicates that audiences prefer 3-D movies over traditional ones by a 2-to-1 margin, Campbell said.

Even if exhibitors get just a 10% premium for 3-D movies, "that is a needle mover," Campbell said.

Katzenberg said that if a significant number of theaters can handle digital 3-D by 2009, he would consider releasing "Monsters vs. Aliens" to theaters in 3-D only and save the 2-D version for DVD.

While Katzenberg said he finds the discussion of other new animation moviemaking technologies nowadays "boring," he called 3-D "a transformation, the single biggest thing" and a "tremendous business opportunity."

Next-generation DVDs, on the other hand, might not perform as well as some expect because the difference between the old and the new is not significant enough.

"It is not the next platform," he said. "We will not go from VHS to DVD to HD or Blu-ray."

Katzenberg, meanwhile, has high hopes for digital distribution but said it will make up less than 1% of the industry's business this year and will be small next year as well.

He also said that repeat business is key to which movie is the biggest this summer, seemingly downplaying worries that too many competing blockbusters could harm the bottom line at his studio and others.

DWA's "Shrek the Third" is due in May, along with Disney's "Pirates of the Caribbean: At World's End" and Sony's "Spider-Man 3."

"Everyone is going to see 'Shrek.' Everyone is going to see 'Pirates.' Everyone is going to see 'Spider-Man,' " he said. "The difference is which of these movies are going to get multiple viewings."

He predicted a "Shrek" victory because it's a family film that is only 81 minutes long. "That pretty much means we are going to tend to get one-and-a-half to two shows for every one of theirs because they are longer films."

The conference Wednesday also featured cable and satellite TV executives.

DirecTV Group CFO Mike Palkovic told analysts that Liberty Media will add value to DirecTV once it takes control from News Corp., with distribution and technology key areas of Liberty expertise, even though its content strength is below that of News Corp.

He also signaled that the Liberty deal might only close in the third quarter, with an earlier close a more optimistic expectation.

Palkovic also received questions about the possible merger of XM Satellite Radio and Sirius Satellite Radio and its potential effect on DirecTV and its main peer.

"There have been no discussions internally to gear up for a merger" with EchoStar Communications because of the proposed satellite radio combination, he said, signaling that for now management's focus is on getting the Liberty deal done and making it work.

Earlier, asked about possible future acquisitions, like a much-rumored potential play for Cablevision Systems, Time Warner Cable CFO John Martin said any opportunistic deal "could make sense," but there is no strategic imperative for his firm.

He cited the acquisition of parts of Adelphia Communications as the ideal case where undermanaged assets with upside were available for an attractive price.

Martin also shrugged off competitive threats from satellite TV firms rolling out high-definition channels and AT&T's U-verse video service.

In San Antonio, where AT&T is based and has pushed out the video product most aggressively, "things are going fine" for TWC, he said, pointing out it was his company's market with the highest basic subscriber growth last year.

AT&T wireline group president Ralph de la Vega said his company has tripled to 10,000 video subscribers the reach of its U-verse TV service during the past three months.

Meanwhile, cable operator Cablevision touted its small and medium business strategy.

The company has begun an aggressive push to win small business customers over from telephone firms, COO Tom Rutledge said. "We're in full battle mode," he said. Other cable firms also are looking to prepare a push into this segment this year.

The COO also touted interactive advertising as a potential $12 billion-$15 billion market for Cablevision. The company gets about $250 million, or only about 6% of its revenue, from advertising.

Rutledge also shrugged off the competitive threat from Verizon's FiOS video service, saying it is advertising to many people who can't yet get the full FiOS service.

"Ninety-two% of their ad dollars are falling in places where they can't provide the service," he said.

Paul Bond reported from Los Angeles; Georg Szalai reported from New York.
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