3D doing wonders for Cineplex's bottom line

'Avatar 3D' adds around $74 million to co.'s Canadian receipts

TORONTO -- Premium ticket prices for "Avatar" and other 3D titles is doing wonders to the bottom line at Cineplex Galaxy Income Fund, Canada's largest cinema chain.

Despite running for only 13 days during its latest financial frame, "Avatar 3D" was Cineplex's biggest boxoffice performer during the fourth quarter to Dec. 31, and has done around $74 million in Canadian ticket receipts to date.

Having installed around 100 RealD digital projection systems in 2009 alone in anticipation of "Avatar" and other Hollywood 3D titles, Cineplex on Thursday posted record earnings of CAN$53.4 million for the year to December 31, 2009, up 84% from a year-earlier CAN$29 million, on revenue up 13.5% to CAN$964.3 million, another company record.

Cineplex CEO Ellis Jacob on Thursday said the recent Christmas break, underpinned by "Avatar" in his theatres, was his company's busiest business period ever.

But while the $3 premium ticket price paid to watch 3D titles on Cineplex's Imax and RealD systems helped the Canadian chain post record boxoffice and concession revenues in 2009, higher film rental costs for "Avatar" and a royalty due to 3D technology providers meant the margin from "Avatar 3D" fell slightly.

"That results in a lower margin, even though you're getting an additional revenue" from the 3D upcharge, Jacob said.

But the Cineplex boss added the lower margin was more than offset by considerably higher attendance at his theatres and greater frequency of visits.

After all, Canadians that anticipated sell-outs for "Avatar 3D" came earlier to the local multiplex to avoid line-ups and spent more on drinks and popcorn before going into a theatre.

Jacob sees other advantages from 3D titles.

Over 80% of the box office for "Avatar" in Cineplex theatres came on Imax and RealD 3D screens.

He argued that circuits like his own that install more 3D screens will see a greater percentage of what a movie does at the local multiplex coming from a 3D upcharge.

And while Imax can mostly only run one 3D title at a time and has had "Avatar 3D" for an extended run, Cineplex can screen a number of 3D titles concurrently for average 12-week runs.

That said, Jacob insists that, from an industry perspective, more 3D screens are required to accommodate the growing number of Hollywood 3D titles coming down the pipeline.

Here Cineplex has already invested heavily in 3D screens, but will eventually piggyback on the North American DCIP digital theatre rollout led U.S. cinema chains Regal, AMC, and Cinemark.

Another worry is uncertainty about the impact on 3D movie boxoffice if studios shrink the window between a theatrical release and a DVD release.

"If the consumer believes a title will be available in DVD or digital sell-through, they may not have a chance to see all those (3D) movies. This is a situation where the consumer may wait to see on an alternative option," Jacob warned.

Another worry is Canadians may not return for a second or third viewing of a movie title if studios shorten its theatrical window.

Still, Jacob sees no let-up in the appeal of Hollywood 3D titles post-"Avatar."

"I look at the the (2010) film slate, and on 3D it looks extremely robust," Jacob said.

Cineplex is opening this weekend "Valentine's Day," which Jacob expects to do around $50 million in North American boxoffice, and "Wolfman," where he projects another $30 million in ticket receipts.

And while the cinema chain will face uncertain competition from the Vancouver Olympics, whose opening ceremony takes place Friday evening, Jacob points to live 2010 Winter Games coverage from broadcaster CTV unspooling in 64 of his theatres nationwide in HD and surround sound