To 3-D or Not to 3-D

It's been more than a year since Avatar changed everything we thought we knew about 3-D. Millions of movie patrons showed they would pay a few extra dollars for a 3-D experience at RealD (NYSE: RLD  ) theaters, and even a few more dollars to see IMAX (NYSE: IMAX  ) in 3-D.

Investors, analysts, and television manufacturers were giddy about the new technology. Some predicted the next step in television would start taking hold in the 2010 holiday season as Panasonic (NYSE: PC  ) , Sony (NYSE: SNE  ) , Samsung, and others began releasing 3-D TVs.

But consumers didn't buy into the new technology as quickly as hoped and manufacturers began to realize the 3-D revolution would take some time. Studios and movie theaters are starting to come to a similar realization about the big screen: 3-D has its place, but it won't make sense for every film.

Trading down to 2-D
Once the initial excitement wore off, 3-D's take of the box office began to become a concern. This week, RealD felt the disappointment when moviegoers enjoying Time Warner's (NYSE: TWX  ) Harry Potter and the Deathly Hallows: Part 2 decided not to trade up for 3-D in the numbers analysts expected.

The slow realization that 3-D doesn't make sense for every film will be good for the industry in the long run. Films like Avatar, Alice in Wonderland, and Tron: Legacy will show 3-D's quality, while films that shouldn't be made in 3-D will stay where they belong in 2-D. This will actually help IMAX, which can demand a premium for both 2-D and 3-D films, but will force RealD investors to focus on consumer devices.

3-D isn't dead
Just because every movie isn't made in 3-D doesn't mean that 3-D isn't going to take a significant portion of the box office. This morning, Cinemark Holdings (NYSE: CNK  ) and RealD announced they would be adding up to 1,500 more RealD 3-D-enabled screens, so there's still excitement out there.

After the mighty Harry Potter's disappointing debut in 3-D, studios and theaters will have to ask themselves: To 3-D or not to 3-D?

Keep up to date with 3-D's progress by adding these stocks to My Watchlist.

Fool contributor Travis Hoium owns shares of IMAX. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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.


Read/Post Comments (5) | Recommend This Article (4)

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  • Report this Comment On July 21, 2011, at 5:14 PM, David369 wrote:

    Also, part of it may be that Avatar was shot in an entirely different format/method. Special cameras and a totally unique method too complicated for me to even try to describe here. I don't think any other film has yet to be produced using those "new" cameras/system. I think that system kind of went beyond the typical 3-D and as such makes the average 3-D look kind of average. Maybe people got spoiled with Avatar and don't see the same WOW in the current 3-Ds.

  • Report this Comment On July 21, 2011, at 8:20 PM, Gonzhouse wrote:

    Finally! An article that articulates where 3D is going (and it's not everywhere) along with an accurate assessment of RealD and IMAX. I didn't think it would happen, given the pervasive slop that is generally written about the topic and the companies.

    For sure, 3D works for action-adventure (and sci-fi), horror, and animation but ONLY if done well (it won't make a bad movie good). Can you see 3D adding anything to romance, mysteries or drama? It doesn't, it just detracts. 3D will find some footing in TV but it won't be a revolution - don't count on seeing TyDBowl commercials in 3D.

    RealD is a one-trick pony, and I'm short that stock. IMAX, as you said, can command premium prices irrespective of 3D. IMAX is an international growth story as they will have more theatres in China by 2015 than in the US.

    Good job separating fact from fiction.

  • Report this Comment On July 21, 2011, at 9:34 PM, TMFFlushDraw wrote:

    @David369

    The special features in Avatar show what you are talking about and are phenomenal to watch. Almost more interesting than the movie itself.

    @Gonzhouse

    I agree with most of your points. As far as RealD goes, I've talked to RealD management a few times and I find that they're very aware of what their real market potential is and where they will be successful in the future.

    That is in stark contrast to what the media and some analysts were hoping for from the company. They've stated to me that consumer devices aren't likely to be common until probably 2012 holiday season but there are some really interesting products in the works. And I think the company has done a good job flooding the market with screens to build a name brand so they can become successful with consumer devices in the future.

    We'll see what exact role they play in the future but I think they are focusing in the right areas and are realistic about what 3-D can be. The stock may be a different story but operationally I like where they're headed.

    My two cents.

    Travis Hoium

  • Report this Comment On July 22, 2011, at 12:18 AM, gothspice wrote:

    Bought IMAX after the first Fool article. Even with all the other movie options, this could make a good date night with the right movie. Nice pick.

  • Report this Comment On July 22, 2011, at 10:34 AM, teviny2k wrote:

    I have a request; Is there any way to determine the percentage of 3D screens showing Harry Potter compared to the number of 2D screens? My theory is that all the 3D screens were full but the sheer volume of 2D screens attracted many more people because of demand for HP. Simple example of 5/2 ratio (2D/3D) screens nationwide (remember 3D capacity is only so high):

    Example: 5 (2D) theaters attract 100 people (500 total) @ $8 ticket. The revenue from 2D is $4500. 2 (3D) theaters attract 100 people (200 total) @ $13 ticket. The revenue from 3D is $2600. Total revenue $7,100 w/ 36% coming from 3D. Sounds bad but all 2D and 3D theaters were at capacity.

    Now 5 (2D) theaters attract 50 people (250 total) @ $8 ticket. The revenue from 2D is $2000. 2 (3D) theaters attract 100 people (200 total) @ $13 ticket. The revenue from 3D is $2600. Total revenue $4,600 w/ 56% coming from 3D. Sounds better but really its the same 3D revenue.

    IMAX said it best "the only way they could have done better is to have more seats." I would expect that the capacity of 3D screens was higher for HP than is was for Avatar. Bottom line: demand for HP was so high that after all the 3D screens were sold out people didnt go home they went to see it in 2D (which explains lower ratio of revenue from 3D).

    The current data suggest that people made a choice between 2D and 3D and that that choice left an empty seat in one of the two theaters, I think you take what you can get when it comes to Harry Potter and the sheer anticipation of a movie will skew the data based on capicity of 3D screens availabile. Remember, 3D theaters are not every where.

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