Regal’s 1,500 screen deal with RealD for 3D comes with BIG caveat

By | May 21, 2008 10:42 pm PDT

Audience 3D horror Regal likes 3D and is showing it in a big way by promising to install no less than 1,500 of its screens with RealD’s technology, meaning that more than one in ten of all its auditoria would be stereoscopically enabled. But this big hangs on a bigger IF that most of the press seem to skip over. Here is how a fairly long article on the Financial Times starts of:

Regal Entertainment, one of the largest US cinema chains, has struck a deal to install new technology that will sharply lift the number of screens capable of showing 3-D films and give Hollywood studios a more profitable outlet for their new releases.

Regal has signed an agreement with RealD, which makes 3-D projection technology, to install more than 1,500 3-D screens. The deal will lift the number of 3-D screens operated by RealD to more than 3,500.

With cinemas able to charge higher ticket prices for 3-D titles, Hollywood studios are clamouring to release their films in the new technology. DreamWorks Animation will release all of its films in 3-D starting next year with Monsters vs Aliens . Walt Disney will also release 3-D films in 2009, as will Universal Pictures with James Cameron’s Avatar .

But what the FT confines to the fine print at the bottom of the article, Carolyn Giardina has the nous to highlight in the first paragraph of THR.com’s article about the deal:

Regal Entertainment Group and RealD have inked a deal to install 1,500 RealD 3-D systems in Regal theaters in the domestic market. Consummation, however, is contingent upon digital cinema deployment arrangements.

In order to have digital 3-D, a theater first requires a digital cinema installation. Digital cinema deployment deals generally rely on a virtual print fee model through which studios contribute an agreed fee per screen, per movie to offset exhibitors’ installation costs. However, many of these deals remain at an impasse.

So if DCIP does not get the VPF deal in place there will be no 1,500 RealD screens. And that is still a very big ‘if’. The $1bn+ deal that was supposed to have concluded by late 2007 now looks likely to miss the Q2 2008 deadline. As Pamela McClintock notes in Variety:

At one point, the consortium — Digital Cinema Implementation Partners — wanted all the major studios to agree. Now, it appears that the consortium is prepared to move ahead with only three of the studios aboard: Walt Disney, Paramount (which distributes DreamWorks Animation titles) and Fox. Insiders said they expect Sony and Universal to follow suit eventually, while Warner Bros. and DCIP are said to be far apart on terms.

Disney has been the pioneer in digital 3-D, although it is Katzenberg who has become the public ambassador of the fight to convert more.

This would be one studio less than even AccessIT’s second VPF deal. Once again it seems that Warner Bros is sitting this one out, have so far signed no VPF deal with either AccessIT, DCIP or Arts Alliance.

Moreover, no one is asking the question about how the 1,500 3D screens will get rolled out, particularly if it is to happen in time for the Monster/Avatar 3D movies of 2009. The preferred way to convert cinemas is a whole multiplex at a time, which is how Christie/AIX tackled Carmike, with swarms of engineers and installers settling on multiplexes in one town like locusts, finishing the job and moving on to the next one.

But 3D installs will be sprinkled a handful of screens (two or three per Regal multiplex by my estimate) in each site. So if the digital cinema and 3D install it s to go hand-in-hand then installers will have to return to convert all the non-3D digitla screens at a later point, which is neither cost effective or efficient, much like Arts Alliance is has converted CGR in France to-date. Remember that the upgrade of the entire DCIP circuit (Regal, AMC and Cineark is going to take at least three years if not longer.

Digital 3D will be a long time coming yet, it would seem.

UPDATE: Some of the best analysis comes once again from Screen Digest courtesy of analyst  Charlotte Jones:

Once the DCIP model is finalised, Regal could start conversion at (previously announced) rate of about 200 screens per month. There are now just 10 months before the release of Dreamworks Animation’s first 3D effort, Monsters vs Aliens in March 2009 and assuming roll-out began next month, this would give Regal, around 2,000 basic d-cinema screens of which an unspecified proportion would be 3D-enabled by this calendar benchmark. This scenario would be on top of the 134 3D screens Regal had deployed at end first quarter 2008.
While we do not believe that 3D’s incremental production costs, are a substantial issue for the US Studios, a slower take up then the 4,170 digital 3D screens we are predicting in the US market by end 2009, could result in a reduction of the premium revenues attainable from 3D screens or a further rescheduling of titles. The deal has been reported on a revenue-sharing basis with RealD, whereby initial capital costs are lowered or removed, in return for a share of premium revenues. In this respect, maintaining higher ticket pricing for 3D screenings will be essential to this arrangement.

It looks that, as with the fate of HD DVD vs. Blu Ray, the fate of DCIP, digital cinema and digital 3D currently rests with Warner Bros.

Patrick von Sychowski
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Patrick von Sychowski

Patrick was a Senior Analyst at Screen Digest, went on to launch the digital cinema operations of Unique and Deluxe Europe, then digitised Bollywood at Adlabs/RMW, and now writes, consults and appears on panels about cinema all over the world.
Patrick von Sychowski
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