Earlier this year, a number of analysts and insiders spooked the film industry by predicting that the 3-D bubble had burst -- at least domestically. Audiences had finally wised up to the fact they didn't need to pay huge upcharges to watch a movie that oftentimes wasn't a fit for the extra dimension in the first place. Now comes a new experience that looks to get people back into theaters. Can "4DX" succeed where 3-D failed?
Seoul-based 4-D company CJ 4DPlex has slowly begun bringing its "4DX" theaters to the U.S., and with it an enhanced way to watch a movie. In addition to taking place in a "RealD 3D" theater, each seat is able to tilt, shake, and vibrate to match what is happening onscreen. Every one of the 100-plus seats is also equipped with "4D" effects such as spraying audiences with water, pelting them with air and other immersive elements.
Essentially, it's marrying a theme-park ride with the regular theater experience. The format has its charms, but also has its costs. These cinemas carry a price tag of $26.80 per seat, which is a $8 upcharge, on average. For now, audiences are willing to pay for the technology, as it is still a novelty. In fact, all 15 performances at the inaugural theater in Los Angeles' famed L.A. Live complex sold out, and many future showings are expected to do the same.
Domestic vs. international
Overall, the company has 16,000 of these unique seats in 109 theaters across 26 countries including China, Korea, and Mexico. The Los Angeles theater is the first foray into American cities, and there are eyes on opening more, based on what executives hope are positive results.
This could be a risky business model, given the preferences of U.S. audiences.
International moviegoers are the ones who love 3-D, and those foreign receipts have often bailed out studios that have released underperforming films. Stateside, it's still a question for executives to wrestle with. Many feel that not going the 3-D route is leaving money on table, even if a large share of audiences balk at the finished product.
Many factors have to be considered, especially in the 4DX conversation. First, look at the price and imagine a family of four going to a theater. They could probably go every few months, but any more frequent and it would get very expensive, very fast. Parents are not likely going to be in a rush to spend that kind of money, and other typical moviegoers may be just as hesitant.
In addition to cost, U.S. audiences have soured on the format because of quality concerns. Some studios shoot films in 2-D and then pay to convert it. This saves money, but it also dulls the appearance and oftentimes doesn't truly add anything to the movie or the experience.
According to a report posted by Deadline.com back in the beginning of the year, 3-D showings of movies are expected to account for just 39% of the total box office in 2014 (for films released in 3-D). The data pulled together by Morgan Stanley's Benjamin Swinburne shows that number is a seven-year low, as it was previously estimated at 42% in 2013 and as high as 53% in 2012.
That could be a challenge the company may not be able to overcome, but in an interview with The Hollywood Reporter, CJ Chief Marketing Officer Brandon Choi defended its strategy by reminding people the model works for a wide variety of films. He told the reporter that "it doesn't have to been action-oriented; it's about immersion." For something like last year's Oscar-winning film Gravity, he's completely right, but Gravity is a outlier, as most 3-D films are popcorn flicks, not soul-searching dramas with eyes set on a date with Oscar.
As for CJ's business plan, the $8 premium is split between the company, the studio distributing the picture, and AEG, which owns the L.A. Live complex. On top of that, the installation costs, which are split with the client, come into play. Those could range from fairly low to as high as $2 million, based on the theater. It seems like a lot of work for not as much profit, at least on CJ's end, as it also has to create the specialized experiences to match up with the specific movie.
It's easy to see why studios are participating, as it is an added revenue that takes little additional effort. At this point, executives have proven they are up for almost anything. Recently, distributors like Sony (NYSE:SNE) and Warner Brothers, a subsidiary of Time Warner (NYSE:TWX), even tested releasing 3-D versions of 2-D films like RoboCop and Transcendence exclusively for overseas markets to turn more of a profit.
On paper, adding a 4-D option to more successful movies like Paramount's Transformers: Age of Extinction and Noah can only help their financial bottom line and possibly help lure audiences away from their fancy home entertainment centers. But realistically, it could also be just a small fix to a bigger problem. We'll know which one it is soon enough.
The battle for the big screen pales to the fight for your living room TV
Movie studios are looking to target alternative forms of entertainment even more now than before. The simple fact is those companies are losing market share to cable TV but that could change...soon. There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.
Brett Gold has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.