In what the Los Angeles Times called “an audacious move” earlier this week, Universal Pictures announced earlier this week that it would allow the Eddie Murphy action comedy “Tower Heist” to be shown via premium-video-on-demand three weeks after its November 4th release date. Naturally, if Universal finds premium-VOD to be profitable without gutting their theatrical box office receipts, you can bet every other studio will follow their lead.

Of course, exhibitors aren’t big fans of premium-VOD or shortening the theatrical window from its current 90-day average in any form. Their big fear is that patrons will be accustomed to simply wait for a movie to be available at home rather than head to the theater not only lowering attendance but also permanently damaging concession sales.

The biggest downside of Universal’s plan, besides ticking off exhibitors, is the whopping USD $59.99 cost of screening “Tower Heist” in the comfort of your own home. During a time when news reports have the world headed toward another recession that kind of price might cripple sales. After all, USD $60 is roughly the price of six tickets on average at a movie theater.

However, it is tough economic times in the first place that is causing the movie industry to experiment with premium-VOD as they try to replace sagging DVD sales. But you probably already know that. In fact, you probably also know that theater owners will be just a angry about Universal’s current plans as they were this spring when the studio, along with three others, struck a deal with satellite television provider DirecTV to make a handful of titles available for premium-VOD 60 days after theatrical release for USD $29.99.

Those trials were viewed by many as failures due to poor sales, though some studio honchos deemed them inconclusive since films such as “Just Go With It” and “Sucker Punch” were less-than-stellar offerings. I don’t buy the argument that a lack of promotion was responsible for tepid returns because the fight between exhibitors and distributors over the issue made headlines throughout the United States and Canada.

Universal’s experiment with “Tower Heist” will no doubt benefit from the marketing campaign for the theatrical release. As well, the film features an all star cast including Alan Alda, Matthew Broderick and Ben Stiller (who was just on “Saturday Night Live” to promote the upcoming release). Not to mention, the November 4th release date of “Tower Heist” puts the three week mark right around the Thanksgiving holiday in the U.S., a time when large family gatherings could remove the USD $60 price tag hurdle.

To gauge the success of the test Universal will only be releasing “Tower Heist” on premium-VOD in two mid-size markets; Atlanta and Portland. These also happen to be two cities where Comcast, Universal’s new owner, has a decent sized digital cable subscriber base of about 500,000 homes. The thinking is that Comcast will be able to compare VOD sales from Atlanta and Portland against box office receipts in similar cities where “Tower Heist” won’t be offered on premium-VOD.

Despite Universal’s promise to compensate theater owners in test markets should ticket sales plummet during the early VOD window, Cinemark, the third-largest cinema chain in the U.S., said on Thursday that they would not be playing “Tower Heist” on any of their 3,800 screens throughout the country. That’s a bold move with serious financial consequences given the film is predicted to earn more than $100 million. In a statement the company said:

“Cinemark has urged Universal Pictures to reconsider its market test of this product… If Universal Pictures moves forward with its ‘Tower Heist’ premium video-on-demand offering as announced, Cinemark has determined, in its best business interests, that it will decline to exhibit this film in its theaters.”

One of the biggest ironies of this story is that Brett Ratner, the director of “Tower Heist”, was one of the filmmakers to speak out against premium-VOD when it was first broached last spring. According to the Hollywood Reporter, Ratner did not participate in Universal’s planning and wasn’t informed of the decision until it was announced. But, with Comcast’s controlling ownership stake in Universal it should come as no surprise that the studio is leading the charge to radically shrink the theatrical window. The Los Angeles Times agrees:

The “Tower Heist” plan would mark the most significant collaboration to date between Universal and its corporate parent since Comcast acquired media conglomerate NBCUniversal early this year. It represents a bold but risky step by Universal Pictures Chairman Adam Fogelson, NBCUniversal Chief Executive Steve Burke and Comcast Chief Executive Brian Roberts as they position their company on the leading edge of one of the most controversial issues in the entertainment business.

It was precisely these kinds of moves I feared when the Justice Department approved Comcast’s purchase of NBC Universal. It was my understanding that the 1948 Paramount Decree was meant to prevent such exclusive arrangements between content owners and content distributors.

One way exhibitors could try and deal with this latest affront to their business is to negotiate lower film rental terms when a title is offered via premium-VOD within four weeks of release. Removing all emotion from the matter, it boils down to simple business and economic practices.

If a manufacturer provides a retailer with a product on an exclusive basis, even for a set period of time, the retailer usually pays a premium for the exclusivity. The retailer sometimes passes along their higher product cost to the consumer or chooses to take a lower margin hoping the exclusive product will attract new customers. If the manufacturer offers a product to a retailer with no exclusivity, then the retailer usually pays less for the product. In theory the money a retailer saves on such products should be passed along to consumers through lower prices or alternatively used for marketing to attract customers.

Yet the high price of the “Tower Heist” premium-VOD offering leads me to believe Universal’s test may not be as successful as Universal hopes and that exhibitors may simply want to voice their opposition and let the studio move ahead with their plan. As a parent I sometimes do the same thing; I watch my elementary school aged children make mistakes I could easily prevent, knowing full well that by making the mistake on their own they are less likely to repeat it.

[Update: October 11, 2011] According to the Los Angeles Times, smaller exhibition chains are joining Cinemark in boycotting “Tower Heist” over Universal’s premium-VOD test. The circuits refusing to book the film include Emagine Theatres, Galaxy Theatres, Regency Theatres and an additional 50 screens owned by independent operators.

“Release the Kraken,” Liam Neeson’s Zeus commands in the WB’s “Clash of the Titans” re-make, but Hollywood should be more concerned that the film itself might release a backlash against the 3D format. There are several indicators that point to a perfect storm brewing against what has come to be regarded as the cinema industry’s digital savior.

Amongst Hollywood filmmakers there has been unusually vociferous attacks against Warner Bros.’ decision to go for a rushed eight-week conversion of “Clash of the Titans” to 3D.  The conversion is a true test for Prime Focus whose technology is unproven on such large scale projects.  Fresh off the global success of “Avatar” James Cameron weighed in against “slapdash conversion” in a recent BBC article that re-hashed Mike Fleming’s more in-depth Deadline article, where Cameron said that after the success of his award-winning epic:

“Now, you’ve got people quickly converting movies from 2D to 3D, which is not what we did. They’re expecting the same result, when in fact they will probably work against the adoption of 3D because they’ll be putting out an inferior product.”

Micheal Bay threw more fuel on the fire in a Deadline post and even appeared to take a direct swipe at Prime Focus, an Indian based post-production company that has been doing the bulk of the work on “Clash of the Titans’” conversion from 2D-to-3D :

“I’m used to having the A-team working on my films, and I’m going to hand it over to the D-team, have it shipped to India and hope for the best? This conversion process is always going to be inferior to shooting in real 3D. Studios might be willing to sacrifice the look and use the gimmick to make $3 more a ticket, but I’m not.  “Avatar” took four years. You can’t just sh*t out a 3D movie. I’m saying, the jury is still out.”

Ouch! Interestingly neither Cameron nor Bay have directly disputed the quality of the most recent film converted from 2D-to-3D, Disney’s “Alice in Wonderland”, though the film’s director Tim Burton has taken pains to stress that there is a difference between how to use Dimensionalization.   In the same BBC article which quoted Cameron, Burton observed, “With all these tools, you can see good 3D, bad 3D, good conversion and bad conversions.”  Reading between the lines, the filmmaker was saying “Alice” falls into the camp of ‘good conversion’ while “Clash” does not.  (If you’re wondering why Dimensionalization is capitalized in this paragraph it’s because the word is a trade mark of the company In-Three which did the majority of the work on “Alice”.)

Others who have come out vocally against “slapdash conversion” are Jeffrey Katzenberg, angered that “Clash” is threatening to take away screens from DreamWorks Animation’s 3D “How To Train Your Dragon” in its second week.  Meanwhile, Jerry Bruckheimer, at ShoWest last month, said there had been some pressure to go for a fast conversion of “Prince of Persia: the Sands of Time”, but he felt the the quality wasn’t good enough.

As the media began to get an advance look at “Clash” over the past week they seem hard pressed to say anything kind about the 3D aspect of the film, at best saying that it was “okay”. But it was Kirk Honeycutt in his Hollywood Reporter review of “Clash” who put his finger on what Hollywood should find most worrisome:

The major drawback, especially now, when 3D is all the rage, is its feeble effort in that department. Added as an afterthought in post-production, the 3D barely registers. Few moviegoers will think it’s worth the extra bucks. It’s a pity the idea didn’t occur in preproduction, as the opportunities for real 3D excitement exist in virtually every frame.

Honeycutt was not the last to have a few choice words regarding “Clash’s” 3D conversion.  Besides influential film critics such as Roger Ebert weighing in on the topic by calling it a ‘juvenile abomination’, so too are popular bloggers like Anne Thomnpson of indieWIRE, who in a recent post weighed in with her thoughts:

When designed in advance and shot in 3-D, a movie can work really well. But turning movies into 3-D after the fact looks awful…”Clash of the Titans” throws you out of reality, blurs and muddies the action, makes the movie look even worse than it probably is. That good old-fashioned feeling of getting lost inside a fantasy space is GONE.”

Added to this is what appears to be a festering resentment amongst the general public about the higher ticket prices that have been imposed by theatre owners for 3D titles.

Take this provocatively titled post on TechDirt “Hollywood Seeks To Kill Off 3D Golden Goose With Much Higher Prices “.  It’s not so interesting for what the post says (there’s nothing new to the argument that nobody likes higher prices for anything, whether food, fuel, cinema tickets or e-books), but it attracted far more comments than any other recent item on TechDirt; 119 at the time of writing.  These following comments are representative missives:

by Anonymous Coward

Another dumb, greedy move on Hollywood’s part. The last time I sat in a movie theater the ticket price was $7.50, and that WILL forever be the last time.

by sehlat

3D is the industry’s “highest quality product”?

That line really needed a spewage warning. Movie prices are already high enough that it’s about $30 for me, my wife, and my pact brother to go for one showing. When we went to see UP in 3D, they tacked on $3 per ticket for the glasses and asked us to return them after the show. That’s one hell of a price for an hour-and-a-half rental.

Should audiences feel the 2D-to-3D conversion of “Clash” is not on par with previous 3D titles, it could serve as a troubling precedent and trigger a public backlash against being overcharged for what is perceived as an inferior cinematic experience.  In fact, we have a recent industry example of a similar scenario.

Less than a year ago television actor Aziz Ansari went to see the “Star Trek” reboot on an Imax screen, only to come out fuming that he had been ripped off by paying for a big screen experience which was only marginally bigger than a regular multiplex screen. His blog post was quickly picked up by online publications such as Slashdot (Why You Probably Shouldn’t Waste $5 More For Digital IMAX) as well as Celluloid Junkie and put Imax’s executives on the defensive over the big screen screen experience offered by multiplex Imax screens.  While Imax screens have performed nicely with titles such as “Avatar”, an increasing number of major exhibitors have set up their own brand of big screen experiences, which could serve to undermine Imax’s long-term business.

Audiences growing skeptical of 3D titles is a serious threat which some in Hollywood have taken notice of.  Cameron spoke about it directly in a USA Today interview stating, “If people put bad 3-D in the marketplace they’re going to hold back or even threaten the emerging of 3D. People will be confused by differences in quality.”  Cameron himself is considering converting his blockbuster “Titanic” to 3D, though he has major reservations about the process and technology under which “Clash of the Titans” was converted.  “It’s never going to be as good as if you shot it in 3D, but think of it as sort of 2.8D.”

Celluloid Junkie contributors have been labeling converted titles 2.3D when speaking with one another.  No matter what you call it, if after this Friday’s opening of “Clash of the Titans” audiences revolt against “slapdash” 3D at an inflated price, Hollywood might rue that it released the monster of 2.3D.

Apparently the stars are to blame for not delivering more hits this summer, which appropriately enough finished this past weekend with the star-less sci fi film District 9 taking the top spot. Not that it was a bad summer, since early reports indicate that there is a year-on-year increase for 2009 so far. It is just that the hits were not delivered by the actors with $20m pay packets, according to the New York Times:

The gradual trend away from big-star vehicles in the summer has been under way for years.

At the start of the decade, summer still belonged to names: Cruise (“Mission Impossible II”), Crowe (“Gladiator”) and Clooney (“The Perfect Storm”) were the top three in 2000. But the three biggest films of this summer season, a crucial period from May 1 to Labor Day that typically accounts for 40 percent of annual ticket sales, have been “Transformers: Revenge of the Fallen,” “Up” and “Harry Potter and the Half-Blood Prince.”

The fading ability of Hollywood stars to command box-office attention, and why that is happening, has been a perennial topic in Hollywood. And economists and academics have long argued that marquee names are not worth their expense.

The biggest names attached to those films: Shia LaBoeuf, Ed Asner and Daniel Radcliffe.

So are the studios going to stop using stars? No, they will simply ask them to take a pay cut as they always have. And further into the article the blame falls on social networking and Twitter – as discussed below.

This very good article from the New York Times does not dicsuss cinema or cinema advertising explicitly. But the implications are writ large for the two about the growing importance of the aging US (and European) population in terms of impact it will have on spending habits.

For decades, older consumers were largely shunned by marketers because they were deemed less wealthy, less likely to try new products and less willing to change brands. Campaigns directed at them were described dismissively as made for the “Geritol generation.” As much as older consumers were to be shunned, young consumers — ages 18 to 34, or 18 to 49 — were desired for what were deemed their free-spending ways, eagerness to sample new products and brand-switching proclivities. The idea that they were starting in life with a proverbial blank slate of marketing wants and needs was catnip to product peddlers.

…

Those attitudes have been changing, for a couple of reasons. One is the recession, which makes older consumers who may have paid off mortgages seem a safer bet than younger ones who may get laid off in last-hired, first-fired downsizings.

The hard numbers bear out this thinking.

Although “18 to 49 is going to remain the predominant buying demographic,” Mr. Donchin said, “this country is aging, and the boomers are an attractive demographic.”

That appeal is because of the size of the boomer market and because, as Mr. Donchin put it, “50 isn’t what it used to be.”

Older consumers today “are not as resistant to change” as older consumers previously may have been, Mr. Donchin said, summarizing their attitude as “Show me something better, and I’ll try it.”

And the boomers are even “comfortable with digital media,” he added.

Hollywood studios are slowly waking up to this as well, with films like “The Queen” having significantly higher investment return ratios than even big hits like “The Dark Knight”.

But cinemas are only slowly embracing this fact. UK exhibitor Vue spoke on a panel at ShoWest about how it has introduced screenings aimed at an older clientele where they don’t have to sit next to youngsters chatting on mobile phones. Vue may soon want to consider targeting 45-65s with wine and cheese in the evening, rather than just the 65+ tea-and-biscuit crowd.

There is a standing joke in the industry that to make a small fortune in digital cinema you need to start with a large fortune. Sadly, this sentiment seems to be vindicated by the latest quarterly figures from Cinedigm (formerly AccessIT). The company’s scorecard is impressive enough:

And the revenue has been going up year-on-year and quarter-on-quarter, as the press release proudly trumpets:

Access Integrated Technologies, now doing business as Cinedigm Digital Cinema Corp. (“Cinedigm” or the “Company”) (NASDAQ: CIDM), reported a 10% increase in year-to-date revenue to $65.1 million, and a 6% increase in revenues, to $22.7 million for the fiscal 2009 third quarter ended December 31, 2008, versus the year-ago periods. The Company posted an Adjusted EBITDA (defined below) of $11.0 million or $0.40 per share, an improvement from the fiscal 2008 third quarter of $8.4 million.

But is there any profit? No, the company is still burning through money. $17.4m in losses in the most recent quarter to be precise. What are the implications of this? The 10-Q transcript makes for grim reading;

We have incurred net losses historically and through the current period, and until recently, have used cash in operating activities, and have an accumulated deficit of $128.7 million as of December 31, 2008. We also have significant contractual obligations related to our debt for the remainder of fiscal year 2009 and beyond. We expect to continue generating net losses for the foreseeable future. Certain of our costs could be reduced if our working capital requirements increased. Based on our cash position at December 31, 2008, and expected cash flows from operations, we believe that we have the ability to meet our obligations through December 31, 2009. We are seeking to raise additional capital to refinance certain outstanding debt, to meet equipment requirements related to the Access Digital Cinema Phase 2 Corp. (“Phase 2 DC”) second digital cinema deployment (the “Phase II Deployment”) and for working capital as necessary. [emphasis added]

So the company can keep going to the end of this year, but what is the outlook after that?

Although we recently entered into certain agreements related to the Phase II Deployment, there is no assurance that financing for the Phase II Deployment will be completed as contemplated or under terms acceptable to us or our existing shareholders. Failure to generate additional revenues, raise additional capital or manage discretionary spending could have a material adverse effect on our ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not reflect any adjustments which may result from our inability to continue as a going concern. [emphasis added]

Don’t think that things are any easier for the European brethren of Cinedigm, as both Arts Alliance Media and XDC are likely to be feeling the pain, though as neither are listed companies, that pain is not public.

To underscore the difficulties of this market, Technicolor is recently said to have pulled out of the digital cinema integration and deployment market to focus on core businesses, such as print and mastering services (although the company’s digital cinema website still lists ‘Exhibitor Services’ and talks about its TMS and other features).

While governments are busy bailing out high profile industries such as banks and automobile makers, they are unlikely to be sparing a thought (let alone a dime or Euro cent) for third party digital cinema integrators. They are also unlikely to contribute generously to conversions funds, as had previously been proposed in Germany, France, Poland and elsewhere (only Norway might see such plans through). This means that digital cinema is likely to be delayed by several more years and film is safe for some time yet.

The one company benefitting from this delay is ironically also trying to position itself as a third party integrator; Eastman Kodak. In an article headlined ‘Recession helping Kodak on motion pictures‘ we can read:

The recession is causing economic turmoil worldwide and costing millions of people their jobs. But it’s also helping extend the life of Eastman Kodak Co.’s entertainment film business.

Motion picture industry experts had expected that close to 12,000 motion picture screens worldwide would have been converted to digital by the end of 2008, according to Kodak. Instead, the recession slowed the pace of replacing film projectors with digital ones, and fewer than 8,000 screens have gone digital, said Mary Jane Hellyar, president of Kodak’s film, photofinishing and entertainment group.

“The move to digital adoption essentially stalled out,” Hellyar told a crowd of Wall Street analysts during Kodak’s annual investors conference in New York City last week. “The impact of digital on film … continues to be relatively small.”

This isn’t exactly true as Kodak has had to lower its prices on raw stock, but suffice to say it looks like we won’t be changing our name to Digital Junkie just yet.

The always readable Andreas Fuchs has an excelent piece in the latest issue of Film Journal International on the difference that the UK Film Council‘s Digital Screen Network has made. It was never intended to help the Hollywood blockbusters, though arguably it got the ball rolling in UK for digital cinema, but the benefits have been tangible where they were intended. From the article:

Last year, “The Summer of British Film” used the Digital Screen Network to bring back classic British films. Seven films from Goldfinger to Withnail & I were shown digitally in 136 cinemas each Tuesday over a period of as many weeks. “We tied in with the BBC’s ‘British Film Forever’ series of documentaries, which looked at seven different film genres the preceding Saturday,” Stolz explains. “Each program genre under discussion was then illustrated [with] a classic British film in cinemas.” This initiative was “a great success and demonstrated the possibilities of digital programming, attracting cinema audiences of over 62,000. We received extremely enthusiastic responses from members of the public who were delighted to see these classic films back on the big screen. This summer we are supporting two distributors in releasing classics from the legendary British filmmaker David Lean.”

Although any one of Sir David’s films certainly more than matters, it was Warner Bros. which had already opened its vaults on that particular note. From mid-May onwards, the first “Movies That Matter” festival brought 15 marvelous titles for one-week engagements into 30 Vue Cinemas across the U.K. (www.warnermtm.co.uk). Starting in Casablanca and bloody well ending for Bonnie and Clyde, with highlights like The Wizard of Oz in between and East of Eden and North by Northwest further pointing in the right directions, the press notes promised them all to be “remastered to flawless, crystal-clear 2K-resolution digital cinema, the highest quality standard in cinemas today.”

Sadly the UKFC’s example has not been adopted very widely. With the exception of the anyways exceptional Norway, only Canada and Australia has adopted something similar, though these went arguably wrong by going for lower end e-cinema networks.

Recession is now a fact, but cinemas appear fairly nonplussed. Is this wishful thinking or actually born out by past experience? The UK’s The Guardian seems to think the latter, pointing out that box office takings rose in five out of the last seven recessions in the US:

“Hollywood gets bump from slump” was the trade bible Variety’s front-page headline, and industry analysts believe the relatively low cost of going to the cinema and the prospect of offering an escape from financial concerns for two hours will give cinema chains some resilience.

In Britain, box office revenues and cinema attendances continued to rise throughout the late 1980s and early 90s as the multiplex revolution swept through the country and going to see a movie again became a viable, low-cost leisure option for millions.

“Box office revenues definitely came up in the early 90s. As far as I can see there’s very little evidence to show cinema attendance suffers in a recession. If anything, it does quite well,” said David Hancock, head of film and cinema at Screen Digest.

This sentiment was echoed by the heads of both NATO and Regal cinemas in a recent interview in THR.com:

THR: Exhibition tends to be recession-resistant, but wouldn’t a spreading recession hurt concession sales?

Campbell: This is the most affordable out-of-home entertainment option that consumers have available, but at some point, do people stop buying concessions? I don’t think so. At some point, people may be a little more selective in some of their purchases, but at this point in time we haven’t seen that.

THR: Do hard times hurt smaller chains and mom-and-pop exhibitors more?

Fithian: I don’t believe there is a different impact on smaller chains in hard economic times. In fact, it is often the consumers in smaller markets who are most challenged during recessions. So they don’t take the vacation. Higher gas prices mean they don’t go for long drives to theme parks or other places. They stay closer to home, and when people stay closer to home, they tend to go to the cinema more often.

The optimism seems to be backed up by numbers from screen advertising in the US, again from THR.com:

CAC president and chairman Stu Ballatt predicted that the industry’s double-digit percentage growth path would continue “for the next few years at least.”

He said a sluggish U.S. economy does not seem to slow marketers’ willingness to put money into cinema promotions. For example, Ballatt cited increased activity across many sectors, with cinema ad spending by packaged goods and retail companies showing particularly strong growth during the past six to 12 months.

Cinemas and Hollywood are ‘fortunate’ in the sense that the past couple of years stagnation and even slump (once you look at actual attendance, as opposed to BO growth) could be blamed on poor films, whereas this summer’s crop has performed better – and this is before the fantastic Dark Knight opens (we’ve seen it and we know it is going to make Iron Man look like Tin Man when it comes to both critical and audience acclaim).

But there are those that doubt that cinemas will escape the brunt of the recession unscathed. Foremost amongst them The Guardian’s resident Hollywood contrarian Jon Patterson:

As for the benighted ticket-buyers, I wonder this time if they’ll display the same bovine sense of product loyalty the moguls depend on when times are tight. During the Depression, a movie ticket bought you a cartoon, a newsreel, a B feature and a marquee-topper – something like four hours of entertainment for a nickel (the price of a gallon of gas or a pack of smokes back then). A bargain if you needed to escape your troubles or just eat up dead unemployment time – and the movies were good enough that around 5bn tickets were sold between 1934 and Pearl Harbor. It was hard to feel Greatly Depressed when Astaire and Rogers, Gary Cooper, the Marx Brothers or Eddie Cantor were living it up on screen.

But things are different now, and films aren’t nearly the draw they were then. In 1938, the movies competed only with such distractions as booze, sex, God, the radio or political agitation; there was no streaming online video, no computer games, no 60in plasma TVs, no home-movie market whatsoever. If the economy collapsed tomorrow, would seeing Transformers 2 alleviate your misery or simply compound it? Dear viewer, you have options!

In the insurgent spirit of that turbulent decade, let’s call for a Netflix Revolution: we just stay home and watch as many movies as we like for 13 bucks a month. Those moguls could use a little sojourn in Hooverville – it might improve their movies, too.

Cineflix or Netflix – the choice is yours. Let’s see where the tally stands at the end of the summer.

An interesting difference between perceptions of cinema in Europe and US is that the success of a film or cinema year is that admissions are counted by number of admissions in most European countries but in the US bucks at the box office is the only measure. Hence, 2007 was recently hailed as a growth year in the US, even though admissions plateaued after years of stagnation or static. But fewer bums on the seats is bad business, even if ticket price inflation masks that fact.

Belgian/European multiplex major Kinepolis has just posted their 2007 numbers, which are down by 3.4 per cent in terms of admissions. Kinepolis “said the drop was ‘due mainly to the comparison with the very strong results recorded in 2006, the warm spring and the mediocre range of international films’.” There’s no mentioning of digital cinema plans with Technicolor stalling, though in fairness cinema goers come to see films, not projectors.

I’ve yet to meet an exhibitor who was not upbeat about the prospects of the films in the coming year and Kinepolis is no exception. “‘The range of films on offer over the next few months looks very promising,’ said the group, citing ‘Asterix and Obelix’, the 3D film ‘Fly Me to the Moon’, the next Bond film and Indiana Jones 4.”

All stereoscopic cinema technologies are not created equal, or rather, the presentations are not identical. But it is not just, say, the size difference between, say Imax and a RealD presentation that is noticeable, but even differences between different types of digital 3D presentations stand out (if you pardon the pun). cNet’s Stephen Shankland (NB: NOT the man in the picture above – that’s scary looking CrunchGear Guy sporting Dolby 3D specs) sat through three of the four different types of 3D cinema solutions available commercially today (NuVision/XpanD‘s active glasses screenings appear not to have been available to him in the US).

It turns out that it was not so much an apples, apples and oranges as Granny Smith, Golden Delicious and clementines type of experience. It is worth reading the whole article (Who shows the best view of 3D ‘Beowulf’?) for many interesting insights. For those who want to cut to the chase (and missed the headline of this item), the winner was the newest kid on the stereoscopic technology block:

Based on watching the movie start to finish three times, the 3D winner is Dolby 3D–and not just by a nose.

Dolby’s technology gave a sharp image that showed every beard bristle, the colors were relatively rich, flicker from moving objects was nonexistent, but most significantly, the sense of depth was strong. Even the subtle differences between a character’s facial features were perceptible, and group shots with a host of characters showed as true depth, not as a number of gradually more distant two-dimensional layers. I was truly impressed.

Now there are several things t be said about this comparison. The first is that it was a ‘comparison’ and not a ‘test’, let alone a ‘shoot out’. I cannot voucher for Mr Shankland’s vision, but chances are that he is not what Hollywood considers a pair of ‘Golden Eyes’. He is a knowledgeable and perceptive writer. So while I don’t doubt his judgment – and not having seen ‘Beowulf’ in ANY 3D form I’m in even less of a position to comment – it is important to remember that this was not a controlled experiment but an assessment of the average viewer’s experience.

As such, it is in some ways more important than a test in the old Pacific Theater that was the ETC’s Digital Cinema Lab. The writer says as much himself, so with all these caveats in mind it is interesting to dig deeper into his findings. The first is that artistic interventions have obviously been made in calibrating the 3D experience, particularly between Imax and digital 3D. This is an area that is just beginning to be understood and discussed Disney’s Howard Lukk has given several excellent presentations on this, talking about the ‘plane’ of the stereoscopic image.

Imax is ‘in your face’, whereas RealD is more the type of 3D that has been described as ‘surround sound for your eyes’, ‘box’ or ‘Doll House’ type of stereoscopics. Yet Dolby appears to have won out on the strength of the three ‘C’s (coherence, colour, clarity). This is surprising to industry observers, as the colour separation that underpins the Dolby (it was licensed from Germany’s Infitec) was long thought to cause it problems with accurate colour separation. Now the talk is instead that the struggle is to make the glasses that employ 16 or more layers of colour-separating film, cheap enough to manufacture in volume to compete with the disposable RealD circular polarized glasses.

Ultimately ‘Beowulf’ is not the best films to judge the merits of all three technologies (or even four or five, if you add active glasses and the Korean system under development) because it is CG-animation and mostly takes places in dark and dim caves, so the light-loss that all 3D systems suffer is masked. But this article is not just the first but a very, very good comparison that will hopefully stimulate more discussion and research around the subject.

‘Beowulf’, the first ‘grown-up’ digital 3D release, is out and while it conquered the box office and heaps were praised on the 3D animation, the underlying numbers spell bad news for digital 3D.

There’s been an avalanche of press releases, news, announcements and comment pieces on the digital 3D aspects of ‘Beowulf’ in the run up to the films US and international release. Everything from the number of Russian screens showing it in digital and digital 3D (24, in case you can’t be bothered to click on the link) to how many countries will be showing it using the Dolby system (12) – though at 75 screens in total it is less than the 86 screens in the US that Dolby screened the first digital 3D films on two years ago, then using the RealD system. One of the best overviews is provided by the always-worth-reading Carolyn Giardina in The Hollywood Reporter (‘Beowulf’s’ bow takes 3-D to the next level). There we learn amongst other things that:

Real D was the first 3-D system out of the gate and represents the lion’s share of current installations. At press time, it was expected that there would be about 620 Real D-equipped auditoriums showing “Beowulf” in 3-D this weekend. Real D’s technique requires the use of a “silver screen” and “circular polarized” glasses. It enables 3-D on screens maxing out around 47 feet high. For any system, screen size comes down to how much light can get to the screen from the projector.

Dolby recently completed its beta phase, and deployment has started. It expects to have about 30 screens domestically and 75 worldwide for the “Beowulf” opening. Installed systems support on average 40-foot-high screens. Dolby’s system doesn’t require a special type of screen, using those that are standard in today’s theaters, but audiences would use special Dolby glasses.

NuVision also recently began U.S. deployment of its 3-D system, and the company estimated it would have six screens showing “Beowulf” in the U.S. and about 100 in Europe. It doesn’t require a special screen.

So while RealD leads the digital 3D race in North America by some marging, it is a more closely fought battle between the three leading contenders RealD, NuVision/ExpanD and Dolby in Europe, with NuVision/ExpanD ahead. But the implications of this will have to wait for a future post. What is more interesting right now is the box office data and the implications that this has for the future of digital 3D.

The reporting on the weekend’s box office statistics from the Hollywood Reporter (‘Beowulf’ beheads weekend boxoffice) and Variety (‘Beowulf’ slays competition) is in agreement on most points but differs in once crucial regard that makes all the difference between ‘bad’ and ‘much worse’ news for digital 3D. What they both agree is that ‘Beowulf’ took $28.1m in total and that out of this Imax took a staggering $13.6m from just 84 screens, giving it a whooping $42,619 screen average. But then the counting diverges.

The THR article above put the North American digital 3D breakdown as follows: ReaD (620), Dolby (30) and NuVision (6) for a total of 653. But as this was written pre-release, this number was always likely to go up. Post-release THR puts the numbers at 850 3D screens in 742 locations, which includes the 84 Imax screens, so 766 pure digital 3D screens. But Variety claims that “Of the 740 3-D screens on which “Beowulf” played, 648 were Real D systems. Imax showed the film on 84 of its 3-D screens, while Dolby Digital 3-D made up the rest [i.e. eight],” meaning that 656 screens were digital 3D, though Variety appears to have overlooked NuVision’s six (?) screens and they differ by 110 screens. Whom to trust? But it gets more complicated.

According to Variety ‘Beowulf “grabbed roughly 40% of its estimated $28.1 million haul from digital 3-D screens.” Add to this the 13 per cent from the non-digital Imax 3D screens and it means that digital and analogue 3D accounted for 53 per cent or more than half of the BO takings, which would truly mark a watershed moment in the redemption of stereoscopic film production and cinema exhibition. However THR claims that ” [t]he pic’s 3-D theaters represented 20% of its overall engagements but contributed 40% to its weekend gross, execs said.” This would still be impressive, but not in the same way that Variety claims, because it would mean that digital 3D accounted for around 27 per cent or a quarter of all takings. Let us take each of these figures in turn.

Variety’s 656 digital 3D screens accounting for 40 per cent of the $28.1m BO works out to $11.24m or $17,134 per screen, compared to $13.2m for digital 2D and analogue 35mm screens for an average of $5,470, with digital 3D screens taking 3.12 times what 2D screens took. Impressive, but I suspect that Variety conflated the Imax and the digital 3D screens figure of 40 per cent and that the Hollywood Reporter is correct in its figures.

According to the THR figures of 766 digital 3D screens accounting for 27 per cent of the box office works out to $7.58m or $9,904 per screen, compared to $16.86m for digital 2D and analogue 35mm screens for an average of $7,239m. This would mean that digital 3D screens took 1.36 times what their 2D counterparts did. Still enough reason to crack open the celebratory mead? Not quite.

First of all we need to look at ticket pricing. There is no uniform count of this, but Regal charged a typical $2.50 premium on digital 3D, so with an average ticket price of $10 this would be a 25 per cent bonus on digital 3D takings. With digital 3D taking a 36 per cent premium on 2D this means that on a matched basis, this is a difference of just 11 per cent.

But if we look at what ‘Beowulf’ took at the box office from a historical perspective, things look a lot worse. The above table is from a presentation given by Charlotte Jones, the digital 3D expert of Screen Digest, comparing the takings of the first three digital 3D films released in parallel to 2D (‘Tim Burton’s Nightmare Before Christmas’ is not included as it was an exclusive ‘Disney Digital 3D’ re-release). We see that the first title ‘Chicken Little’ took 3.6 times the revenue in digital 3D as it did on analogue 35mm and digital 2D. However this figure fell to 2.8 for ‘Monster House’ and 2.6 for ‘Meet the Robinsons’.

If Variety is correct and ‘Beowulf’ took 3.12 on 3D what it took on 2D it represents a small reverse, but if Hollywood Reporter got it right, then the downward digital 3D spiral continues and what we are seeing is the routinization of charisma that digital 3D exerts over the box office. It becomes the norm and ceases to attract authority due to its novelty. When ‘Avatar’ becomes a monster hit in 2008 it will not be because it is a saturated digital 3D release but primarily because it is a spectacular James Cameron film.

The only one to come out of this is looking good is Imax, with its astronomical BO takings, but this is from a very small base that is unlikely to be expanded as significantly as digital 3D has, because it will never piggy back ride on the wider digital cinema conversion. Even if/when Imax goes digital, it will still face physical and structural-economic constraints in the multiplex environment that will always limit its reach.

I will wait for Screen Digest to crunch these numbers definitively but I’m sure that Paramount, RealD and others have already poured over them and this was not what they were hoping for – unless Variety is right, Hollywood Reporter is wrong or my maths are completely off.