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Is Sony Killing 3-D?

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This isn't going to end well.

Sony (NYSE: SNE  ) is telling multiplex owners that the studio no longer plans to pay for the RealD (NYSE: RLD  ) specs distributed with purchases of tickets for its 3-D movies, according to The Hollywood Reporter.

Come May of next year, it will be exhibitors -- or moviegoers -- that are on the hook for what amounts to roughly $5 million to $10 million for major releases. It's not a coincidence that Sony is timing this ahead of the blockbuster summer season where it has Men in Black III and The Amazing Spider-Man reboot on the way.

The studios favor an ownership model, similar to what airlines do with the headphones that they used to give away. Passengers are encouraged to bring their own headsets, or pay a buck or two for a cheap one that they are encouraged to keep.

This will never work with consumers. Are folks really expected to pack a pair of 3-D glasses the next time they go on a date? How about the popcorn crunchers that were planning to see a 2-D screening that's sold out? Are they expected to pay a premium for a 3-D screening and buy glasses because they left their pair at home?

Studios will try to get theater owners to play along, approaching the specs as a profit center. They can sell a $0.50 pair of 3-D glasses for a buck or two and pocket the difference! Unfortunately, consumers are already feeling gouged in having to pay $3 to $4 more for a ticket to a 3-D or IMAX (NYSE: IMAX  ) feature. Charging for glasses will come off as greedy, and it will get confusing.

The industry can't afford to alienate audiences. Box office receipts are already down in 2011. With Sony's help, 2012 won't be any better.

If you want to see how premium cinema holds up beyond today's matinee, consider adding RealD and IMAX to My Watchlist.

Motley Fool newsletter services have recommended buying shares of IMAX. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Read/Post Comments (4) | Recommend This Article (1)

Comments from our Foolish Readers

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  • Report this Comment On September 28, 2011, at 10:48 AM, Moonwatcher2011 wrote:

    I think your logic might be a bit faulty in this one.

    Comparing 3D glasses to the "free" headset one used to get on a plane would suggest that the Sony move would strengthen the 3D market.

    When planes stopped giving away headsets several things happened:

    1- People in fact did bring their own, and preferred their own for both quality and sanitary reasons.

    2- most airlines began to offer premium content on their in-flight media systems which created new revenue streams for them and the content providers.

    If you extend that tend to the 3D world (and I'm not suggesting that it's a perfect fit. I'm just building off your analogy.) then we will likely see those who were on the fence about 3D, avoiding new 3D releases (until they give into the social pressure from...)

    Group 2 who like 3D and will surly go out and buy more than one pair of 3D glasses. (just as many have more than one set of headphones.)

    All-in-all, using your analogy, this is very good news for makers of 3D glasses, since it seems according to some past Motley Fool pieces I've read, that about 3 in 7 movie goers who have a choice to see a movie in 3D or 2D, choose 3D.

    Those statistics suggest that 3D be observed as more of a trend than a fad.

  • Report this Comment On September 28, 2011, at 1:01 PM, bbflyer wrote:

    Another interesting point that you miss is that overseas consumers have to buy their 3D glasses as a separate concession item. The model is working overseas as consumers are re-using their RealD glasses (which is one of the primary reasons that RLD took a top line revenue hit last quarter yet crushed EBIDTA and GAAP net income #s because their net license revenue, the license fee RLD earns per ticket, increased 39% y/y.

    Net-net - consumers overseas are willing to pay for their 3D glasses separately and are re-using them saving themselves more money in the long run (because domestically the glasses cost are built into the 3D up charge on every ticket).

    The reason the model is different in the U.S. is because when Disney released Chicken Little they agreed to pay for the glasses. That model stuck in the U.S. but overseas consumers have always paid for the glasses as a separate concession item. Interestingly, 3D %s have been stronger of late overseas so maybe it is a better model.

  • Report this Comment On September 28, 2011, at 1:34 PM, lykitiz wrote:

    I don't this is a big deal at all (for 3D in general). In fact it could be a good thing. I always thought it ridiculous that movie theaters gave out "free" 3D glasses at every movie and then recycled them at the end of the movie.

    The best thing cinemas could do is keep the existing 3D surcharge, but offer a $1-2 "discount" for those that bring their own glasses.

    I think this would be a benefit to the 3D industry in general, which would help other 3D players like SENSIO (SIO.V), but I'm not sure the net impact on RLD specifically.

  • Report this Comment On September 30, 2011, at 1:45 PM, kristm wrote:

    Just keep the free pair they give you now. RealD will be out of business in <2 years.

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