Reports Of The Death of 3D Are Premature

There was a very good article a few days ago in The Wrap about the downward trend in 3D box office revenues. (By the way, The Wrap is a favorite publication of mine on the entertainment business.  If you don't read it, you should.)  While the author (Daniel Frankel) gives fair coverage to the topic, I think the article misses the big picture.

An underlying assumption seems to be that tracking 3D statistics independent of all other factors is meaningful.  I'm not sure that's true.

While 3D versions of films currently command a higher ticket price, it is not a separate genre of entertainment.  3D is a production technique, just like Dolby or DTS sound, IMAX, or any number of past innovations like 70mm film or Panavision lenses.  3D is certainly a more dramatic departure than many innovations, but it isn't anything separate and apart from the underlying film.

Films attract audiences because of a combination of good stories, good acting, good editing, and all of the other factors that go into making a captivating entertainment experience.  Put a bad film in 3D, and it is still bad (if not worse because the shortcomings are literally jumping off the screen at you).

The assumption that audiences will go see anything just because it's in 3D has never been true.  The current numbers are bearing that out.  Bad 3D films are performing badly, and good 3D films are performing well.  This is not a surprise to anyone.

3D is another wonderful tool in the bag of filmmakers.  When it is used well on a good film, it will enhance the quality of the film and probably produce increased revenues.  When it is used poorly and/or the underlying film is not well-made, then the use of 3D just means they spent more money to make a bad movie.  It won't do anything to increase the audience for the picture.

So the overall decrease in 3D revenues results not from a fading of the attractiveness of the technology, but from the broader use of the technology across a wide spectrum of films -- many of them being pretty bad films.  That pulls down the average, but it has nothing to do with 3D.

3D Glasses - An Emerging Business Opportunity

There is an opportunity quickly emerging for consumer electronics companies.  Most of the new 3D televisions  (other than the Vizio TV that was just announced) use glasses with active electronics.  The television manufacturers are supplying one or two pairs of these glasses with each TV, and then selling extra pairs for about $200 each.

In reality, these glasses can probably be sold for under $100 a pair and still yield a healthy profit.  I guarantee that there will be several companies offering a full line of active-electronics 3D glasses at discount prices by next year's CES.  This is a product category that currently doesn't even exist and it will become significant within a year or less.

Things are moving fast, and that means new opportunities for entrepreneurs to make money. If you want to get rich, watch new developments and figure out what new products and services will become useful as a result.

Digital Cinema Funding Comes Out Of A Coma

This week's big news on the business side of the film industry has to be JP Morgan's announcement of its return to the digital cinema funding business. The Wall Street survivor announced a $525M fund that is targeted to roll out about 500 new digital screens per month, almost doubling the North American penetration by the end of 2010 to as many as 13,000 screens. The fund will ultimately underwrite up to 15,000 conversions, and will also support 3D equipment in many of the new locations.

If you have followed this story for the past few years, you know that there was over a billion dollars of funding headed for the digital and 3D theater markets when the economy collapsed last year. A lot of studios had already launched their 3D plans in anticipation of the new screens, but then the funding evaporated (with the rest of the lending market). This slowed the D-Cinema roll out to a crawl and left the studios fighting for domestic screens on which to release the 3D projects they already had in production.

This announcement by JP Morgan is good news on many levels. First, it means that the theaters will not be hamstrung in their quest to offer the ultimate 3D experience in a theatrical environment. With Sony and other consumer electronics makers rushing the development of 3D home theaters, it is critical for theater chains to go as fast as possible to capitalize on that market before it gets diluted.

Second, this means that studios will be able to keep their 3D films in theaters longer, thus making more money. That means that development of additional 3D productions should pick up.

Third, the development of more digital screens means that the ultimate cost of theatrical distribution should trend downward. (With the payment of virtual print fees, this won't be immediately apparent, but it will still happen.) That means that more films will theoretically have the financial strength to reach big screens. Of course, a lot of other factors have an impact on small film distribution, but independent distributors (such as the new venture from Rich Wolff and Richard Ross) should benefit.

Finally, participants in the 3D business such as In-Three and, most obviously, Real D, will enjoy the benefits of a market that will expand much faster than it has to date.

This is good news all the way around. And perhaps most important, for the entertainment industry, this is a strong sign that the economic climate is indeed moving in a more positive direction.