The long answer is also yes, but it's not as simple as one business being better than the other. IMAX owns hundreds of screens and has joint venture arrangements for many more. RealD licenses its 3-D cinema technology to theater operators, taking a chunk of the box office receipts in exchange.
Thus, while RealD is now showing on more than 20,000 screens worldwide, the IMAX network recently eclipsed 500 screens with 250 more in its backlog. Management expects to grow its footprint by more than 100 additional screens each year. Both companies are experiencing tremendous growth.
A lower barrier
If IMAX has an edge, it's that you don't have to believe in 3-D to believe in IMAX. The Hunger Games drew sellout IMAX crowds in March on 2-D screens. Next month's The Dark Knight Rises, the finale in Time Warner's (NYSE: TWX ) Batman trilogy, features several scenes shot in IMAX but not 3-D.
Director Christopher Nolan has twice wowed audiences without using 3-D. Batman Begins generated $372 million worldwide, while the 2008 sequel, The Dark Knight, earned $1 billion at the global box office. Actor Heath Ledger earned a posthumous Best Supporting Actor Oscar for The Dark Knight. And of course IMAX took home plenty of gold for its role in bringing both flicks to the big screen.
Interestingly, investors appear to be ignoring this bit of history. Shares of IMAX are off 6% since May 4, when Walt Disney's (NYSE: DIS ) The Avengers first reached U.S. audiences. RealD is up more than 22% over the same period, yet both companies will profit from the success of the superhero team-up.
3-D is still better than you think
Indeed, with so many theaters now RealD-ready, there's plenty of incentive for theater operators to take chances on 3-D hits such as The Avengers. The superhero team-up has become a blockbuster on track to generate $600 million at the U.S. box office, making it the third-highest-grossing domestic film of all time thanks to premium screenings in 3-D and IMAX. Worldwide, The Avengers has generated $1.42 billion in box office receipts.
What's more, if The Amazing Spider-Man -- which is getting good reviews for how it uses 3-D to enhance powerful action sequences -- proves to be a hit, action fans could demand more digital features shot in 3-D rather than translated later (as is usually the case now).
For the most part, RealD's riskiest days are behind it. An options overhang related to appeasing studio partners has long since been accounted for. And 3-D glasses, once a cost center that cut profits by tens of millions annually, now give a modest boost to the bottom line.
But of the two, IMAX is the more mature, more stable business. Each theater upgrade or install comes at a fixed cost so that profits multiply over time. Gross margin now stands at about 48%, up 10 percentage points since 2007. Further gains seem likely as the theater network expands and more joint venture deals get signed.
So IMAX or RealD? I'd take both, honestly. I've yet to make a real-money bet on IMAX as I have RealD, but I believe in this business enough to make an outperform CAPScall on the stock, which I did this morning.
Now playing: Rebels with a cause
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