The footsteps behind IMAX (Nasdaq: IMAX) are getting a little louder these days as RealD (NYSE: RLD) does everything it can to expand its business into premium theaters. Last week, RealD announced its XLW Cinema System for premium large screen venues, an extension of the XL Cinema System. The system is designed for auditoriums with screens up to 82 feet wide, nearly as big as large IMAX theaters. This gives current RealD customers like Cinemark (NYSE: CNK) and Regal Entertainment (NYSE: RGC) another option for their premium product.
IMAX should keep an eye on this because RealD is trying to get a foothold in the premium theater market that IMAX dominates. The draw for RealD is better economics than its regular systems and an expansion of the RealD brand into a name that consumers can associate with a premium experience. For now, there are a few reasons IMAX won't be pushed off its premium pedestal anytime soon:
- IMAX has spent years building a brand that customers recognize and will pay a premium for. Tron: Legacy showed the power of this experience, with IMAX commanding more than 20% of the domestic box office in just 234 theaters.
- RealD still can't match the size of traditional giant screen IMAX theaters.
- IMAX has partnerships with every major studio, and the premium price at IMAX theaters makes studio box office look much better than any other 2-D or 3-D offering.
Ironically, the path to a premium showing for RealD may come through the living room. RealD is working with Freescale and Broadcom (Nasdaq: BRCM) on multiprotocol eyewear that would work with a variety of 3-D TVs. It also has a partnership with Samsung to develop passive 3-D TVs. If RealD can become a brand you associate with quality in the living room, it may extend into better recognition at the theater.
IMAX should at least pay attention to RealD trying to encroach on the premium market. If it's not careful, RealD may just catch up.
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