Industry hopeful on meeting 3D demand

3D uptick has exhibitors scrambling for suitable screens

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The industry should soon know if it has solved the Rubik's Cube called 3D cinema.

Exhibitors and their studio partners have been puzzling over how to wedge an increasing number of 3D features into a theatrical 3D footprint tighter than King Kong in dance slippers. Even a major release like Universal's "Despicable Me" had to settle for less than 2,000 domestic locations for the 3D family comedy.

Throughout last year, the global credit crunch prevented the industry from financing the rollout of digital and 3D projection systems in notable numbers, and once funds started flowing, a manufacturing backlog prevented hardware from shipping to theaters quickly enough. Combined with an uptick in the number of 3D releases, distributors have struggled to identify more than 2,000 or so 3D-equipped theaters for all but the most well-situated films.

But hope is on the horizon.

Exhibitors have been getting 3D equipment in place as quickly as they can get their hands on the hardware, but digital projectors and other components seem finally to be flowing more easily into the marketplace. Also helping out, silver-screen provider Ballantyne will boost output at its Joliette, Quebec, plant by 35% in the next few months and increase shipments to about 110 screens per week.

The National Association of Theatre Owners expects to reach an installed footprint of 8,000-plus 3D screens in the U.S. and Canada by Dec. 17. That's when -- for the first time -- studios will open a pair of major 3D features on the same weekend, as family patrons picnic with Warner Bros.' "Yogi Bear" while adventure-minded moviegoers travel to the virtual reality of Disney's "Tron: Legacy."

"We will see if that's enough screens to handle both of the 3D pictures," NATO spokesman Patrick Corcoran says. "It will definitely test the market's capacity and so it will be an interesting test."

"Tron: Legacy"

"We definitely have enough screens to open, and the strong will survive," says Warner Bros. distribution topper Dan Fellman.

That could mean as few as 2,000 3D locations apiece for "Yogi" and the "Tron" sequel, but the industry will have shown significant growth simply by handling a pair of such films simultaneously. Eventually, distributors hope to have up to 3,000 3D-capable theaters available for individual film releases.

Sipping from a glass half full, Corcoran says the 3D experience has been positive to date, though not without its cautionary moments.

"It's something we're still learning about," he says. "There have been so few 3D movies that it's really tough to draw conclusions. We've certainly seen what the heights of it can be with 'Avatar.' What remains to be seen is how intelligently studios and filmmakers continue to make use of 3D. And that's going to be the key."

Noting that theater operators have been enjoying premium ticket prices for 3D movies, he adds that the industry must be on guard not to kill its golden revenue goose.

"Because 3D is being positioned as a premium experience, audiences are going to be all the more sensitive to any lack of quality -- whether technical or creative -- than they would in a typical 2D movie," Corcoran warns.

The remark hints at a handful of 3D releases whose producers seemed to over-estimate audience appetite for material such as Dimension's "Piranha" and Disney's "Step Up 3D." Still, not every movie can succeed, a fact of life underscoring the need for a 3D capacity of enough girth to allow the occasional film failure.

So the push is on for a bigger 3D footprint.

"We're adding more digital projectors and 3D equipment every day, and by year's end we hope to have about 1,300 3D screens," Cinemark chief Alan Stock says. "That would be about 30% of our total number of screens. Our eventual goal as a company is to eventually get that number to 40% to 50%. But that's because we know even more 3D movies are coming and that doesn't mean we can't handle the December releases."

Collectively, domestic exhibitors are adding more than 500 screens a month, with at least 450 of them boasting 3D capability. Those numbers should increase once NATO's Cinema Buying Group buttons up its master licensing agreement with distributors.

As of September, the industry trade group counted 5,823 3D screens in the U.S. and 526 in Canada, among 1,215 domestic digital screens. Industry expansion has increased the number of total domestic screens by 2% to roughly 43,700.

"Step Up 3D"

Just a decade ago, NATO was decrying excessive expansion for struggling industry fortunes. But the group is sanguine about more recent modest upticks.

"We're not building auditoriums to the same size that we used to have and are topping out at about 350 seats in the biggest auditoriums," Corcoran says. "So you don't have an over-supply of seats."

The so-called theatrical window is another area of occasional controversy where peace has suddenly broken out.

Exhibitors tend to fight studio efforts to accelerate the movement of films from theaters to home entertainment. But NATO says the average theatrical window actually has grown by two days during the past 12 months, to an average 130 days.

Also squarely in the good-vibes category, Carmike Cinemas chairman and CEO David Packman says he's "very excited" about the Columbus, Ga.-based circuit's limited experience to date with larger screen sizes and upgraded seat and concession amenities.

"Both of those areas are picking up steam in the industry," Packman says. "But with VIP auditoriums, it's unlikely that they will increase traffic so much as increase profitability at individual locations."

Exhibition faces a tough year-over-year comparison in the fourth quarter. Fox's pair of December blockbusters -- "Avatar" and "Alvin and the Chipmunks: The Squeakquel" -- produced the first $500 million week ever in the last week of 2009.

One saving grace: Warners unspools "Harry Potter and the Deathly Hallows, Part I" on Nov. 19.

" 'Harry Potter' is going to be big," Corcoran assures. "And it will be interesting to see what some of the other films can do."