Overseas 3-D market has yet to pop

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Special report: 3-D Cinema
3-D push ups the ante for Imax

If the 3-D movie revolution is going to be the shot in the arm hoped for by filmmakers, distributors and exhibitors, it will need to be a global injection.

At the moment, while more Americans are seeing movies in three dimensions, the international theatrical market seems rather flat.

As Jeffrey Katzenberg continues his worldwide pilgrimage playing pitchman for "Monsters vs. Aliens" and the revolution of 3-D cinema, the jury is out on how ready international markets are for the transition.

"The difference between normal cinema and 3-D is like the difference between a horse and buggy and a Ferrari," Katzenberg recently told a group of skeptical journalists in Berlin, sounding more like a telemarketer than one of Hollywood's top producers.

The world is starting to catch up. Paramount Pictures International plans to push "Monsters" onto about 10,000 screens internationally, of which about 1,600 will be 3-D, according to PPI president Andrew Cripps. That compares with about 2,000 3-D screens for the film's U.S. release.

"I think the world is ready (for 3-D digital), but whether exhibition is ready or not, I don't know," Cripps said. "But we are going out on more (3-D screens) than I thought we would, so it's getting there."

The credit crunch has brought the domestic digital rollout to a screaming halt, but international expansion has not been affected as severely. Europe, led by the U.K., has shown slow but steady progress.

Britain's three largest cinema operators are biting the bullet for the costs of installing state-of-the-art equipment in their multiplexes. Odeon UCI plans to have 30 sites 3-D ready by month's end, Cineworld aims to have 3-D operational on 144 of its 148 digital screens by next month, and Vue Entertainment struck a deal with RealD in February to have 200 screens kitted out by the 3-D equipment giant.

The credit crunch also could slow the Brit rollout -- the U.K. economy has been among Europe's hardest-hit -- but that does not change the positive overseas trend.

Private-equity-backed groups including Arts Alliance Media and Belgium-based XDC are providing financing and equipment to exhibitors, as well as a virtual-print-fee model that ensures distributors will share the costs of new equipment with the cinemas. XDC has VPF deals with all six Hollywood majors for a maximum of 8,000 screens in Europe, and Arts Alliance is right behind with VPF deals with five majors (excluding Warner Bros.) for a maximum of 7,000 screens.

"Being in the digital exhibition business means it will never happen fast enough for me, but I feel there is evidence that (the 3-D rollout) is really starting to pick up," Arts Alliance CEO Howard Kiedaisch said. "The number of digital screens changes on a weekly basis, with more and more machines rolling out. I liken it to a snowball rolling down a hill: It is gathering momentum and size."



Europe is outpacing Asia, where exhibitors were among the first to adopt 3-D technology but where the digital rollout has stalled during recent months. Japan, facing another major recession, could fall further behind. Things are different in China, though, where exhibitors are pushing 3-D rollouts throughout the vast countryside.

"China wants to be the largest 3-D market outside the U.S.A.," said Jimmy Wu, chairman and CEO of Beijing-based exhibitor ChinaPlex, which will open its first 3-D screens in May in Hangzhou and plans to have 22-25 extra-dimensional screens in its Chinese cinemas by year's end.

"Monsters" will go out in China exclusively in 3-D, bowing Tuesday on more than 200 screens. The move cleverly sidesteps the piracy problems DreamWorks experienced in the territory with "Kung Fu Panda" and "Madagascar."

"The international rollout has actually gone a little better than I anticipated," Katzenberg said. "When we started 'Monsters vs. Aliens' (five years ago), I thought we would have about 600-800 3-D venues internationally -- now it's closer to 1,600. That's compared to the U.S., which, with 2,000 3-D screens for the 'Monsters' release, is about half of what I predicted."

But the worldwide 3-D rollout still faces major hurdles.

"The international market is very different than the American one," said Fabrice Testa, vp sales and business development at XDC. "America is one market with one language. Here in Europe, we have a very fragmented market with a lot of different exhibitors, particularly a lot of small exhibitors. Progress will be a lot slower."

Added Kemal Gorgulu, a partner at Berlin-based consultants Flying Eye, which has studied the European d-cinema market extensively, "I think it's great that Katzenberg is so positive about the 3-D market internationally, but I can't say I share his optimism."

Worried that the free-market models followed by Arts Alliance and XDC could leave out smaller players and favor studio distributors, the governments of Germany and France have proposed state-backed funds to drive digital upgrades. Exhibitors and distributors would contribute to the funds, which would buy 3-D equipment for local cinemas.

But this being Europe, those processes are long, complicated and cumbersome. Germany's Model 100, which would provide €100 million ($136 million) to facilitate that nation's 3-D rollout, is in the negotiating stage, and the situation is similar in France. Until locals work it out, the 3-D rollout in Europe is unlikely to catch fire.

"At the moment, we have the chicken-and-egg problem," Gorgulu said. "Because we don't have the 3-D exhibition space yet, there isn't the kind of distribution commitment from the studios."

With 13 movies scheduled for 3-D release this year in Europe -- including Disney's "Bolt," Disney/Pixar's "Toy Story 3-D" and Fox's "Ice Age: Dawn of the Dinosaurs" -- studios' commitment to the format no longer is in doubt.

While the international rollout is moving at different speeds in different territories, the economic benefits of going 3-D are undeniable. XDC estimates that European cinemas can charge an additional $1.50-$4 per ticket for 3-D screenings.

"It is hard to make a prediction as to when the 3-D revolution will happen (internationally), but it will happen," Testa said. "In four to five years, we should have close to 15,000 digital screens in Europe -- half of all movie screens -- and many will be 3-D."

Scott Roxborough reported from Cologne, Germany; Stuart Kemp reported from London.
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