Latest Recession Victim: “Monsters vs. Aliens” 3D

Latest Recession Victim: "Monsters vs. Aliens" 3D

Economic woes have further delayed the already-long-delayed conversion of movie theaters to digital projection.

DreamWorks’ big-budget bet, “Monsters vs. Aliens,” has faced one hurdle after another — including a whipping from the blogosphere over its extravagant Superbowl ad in January. But now comes the worst news yet: Fewer than half of the theaters that were supposed to be ready for digital 3D projection will be ready by the movie’s release on March 27.

DreamWorks announced a year ago that it expected 5,000 theaters to be 3D-ready for a wide 3D opening of “Monsters.”  But the economic recession has further delayed the already-long-delayed conversion of movie theaters to digital projection.

Expectations have been revised downward. 

Last week DreamWorks Animation CEO Jeffrey Katzenberg told investors that “Monsters,” with an estimated budget of $165 million, would be able to be seen on “in excess of 2,000 3D screens,” out of the 7,000 screens planned for opening weekend.

“We believe this number will be more than enough to allow our film to serve as a proof of concept and to propel the new format forward,” he said on the investor call. 

But that’s a far cry from what DreamWorks had anticipated, and will be a blow to its ability to maximize the moviegoing experience and ticket sales on the movie.

Enthusiasm for 3D remains high with studios, theater owners and filmmakers, especially as another way to entice moviegoers. 

But the question now is whether enough screens will ever be ready in time not only for “Monsters” but for the ever-lengthening slate of 3D movies already in production over the next couple of years — including major releases by directors like Tim Burton, James Cameron and projects like “Tr2n” and “Toy Story 3” (see accompanying story.)

Here’s the key reason for the slowdown: Installing digital cinema installation required for 3D can cost $100,000 per screen. These installations are typically financed using a virtual print fee (VPF) model — meaning that the studios pay an agreed fee per screen, per movie, to offset exhibitors’ costs.

The studios have been covering their part of the cost. The theater-owners’ portion of the financing has needed to come through venture capital financing, which has dried up since the catastrophic news on Wall Street.

The funding is being implemented through companies acting as middlemen in the process, such as Cinedigm (formerly AccessIT) and Digital Cinema Integration Partners, a joint venture owned by AMC Entertainment, Cinemark and Regal Entertainment Group, which represents over 14,000 screens in North America.

Cinedigm has already converted roughly 4,000 screens, the majority of those currently in use. It had begun funding a "Phase 2" program for 10,000 screens, but the economic crisis, which essentially has stalled those efforts.

Adding 3D technology is yet another layer of sophistication — and cost. The latest figures suggest that there are roughly 2,000 3D-ready screens in 1,320 theaters.

The delay is particularly frustrating, since studios and exhibitors have been seeing increased traffic at 3D movies, as well as audiences demonstrating a willingness to pay a premium at the box office, in some cases 20 percent over 2D.

“Theater owners understand the value of 3D, and many are doing installations on their own while they wait for the capital market to open and for DCIP and Cinedigm to start their rollout,” said Chuck Viane, Disney’s president of domestic distribution. “Then they will expand really quickly. Rumor has it we might seen this expansion start over the summer.”

Stakeholders will be closely watching activity with an eye toward two end-of-year releases as the next key benchmarks: Fox’s James Cameron-directed “Avatar,” slated to open Dec. 18, and Disney’s Robert Zemeckis-helmed “A Christmas Carol,” opening Nov. 9.

The summer months will bring 3D titles including Disney/Pixar Animation Studios’ “Up” and Disney’s “G-Force.”

Though it is only March, this year’s releases have demonstrated 3D promise.

Lionsgate recently released Patrick Lussier’s “My Bloody Valentine 3D,” which opened wide and included 1,033 3D -eady screens, resulted in box office topping $50 million — and the ratio of the 3D versus 2D revenue was 6:1.

The film’s budget was $16 million, which also demonstrated that 3D is becoming more accessible to a wider range of filmmakers.

Recent 3D openings underscore that scheduling will be an issue until more screens become available.

“My Bloody Valentine 3D” was actually pushed forward one week in order to gain an extra week before relinquishing the screens for the opening of Focus’ “Coraline,” followed by Disney’s Jonas Bros. 3D concert film that opened in 3D in 1,271 locations. This weekend, the Jonas Bros. film will continue to play in 980 locations and may stay in theaters until the “Monsters” opening.

 “Scheduling is definitely a challenge in that probably 13 movies are opening in 3D this year,” Viane said. “If you break that into 52 weeks, that gives you the average running time before it has completion. That’s a single channel distribution system. Until the number of screen locations increase dramatically it will be very difficult to have multiple 3D pictures in the marketplace at the same time.”

In the challenging economic climate, opinions vary as to when a transition can truly take off. Viane hopes to see the expansion leapfrog during the second half of the year.