3D at the Box Office: Down, Down, Down

Nobody is saying the format is going away, but declining ticket sales are proving that “not everything should be in 3D”

No matter how it's spun, the data on the expected 3D explosion just isn't going in the right direction.

After nearly 80 percent of those who saw "Avatar" saw it in 3D, it was assumed that the format would quickly overtake theatrical distribution.

But 3D's box-office trajectory has been pointing downward almost ever since, with moviegoers apparently growing disinterested in paying high ticket prices for uneven quality.

Only 45 percent of opening box-office revenue for Universal's hit animated family film "Despicable Me," for example, came from 3D distribution.

And the most recent 3D release, Warner's converted "Cats and Dogs: The Revenge of Kitty Galore," grossed only about $6.9 million in 3D revenue for its opening weekend — the worst performance in the format's modern era.

“I think the overall message isn't that 3D is a fad or that it’s going away, but I’m not sure we’re moving to a point where 50 percent of the box office is derived by 3D ticket sales as some of the bulls currently believe,” BTIG Research analyst Richard Greenfield told TheWrap.

With, as the New York Times noted Tuesday, nearly 60 3D releases queued up for the next two years, the “bulls” can still be found in herds back in Hollywood. In fact, the flurry will continue this weekend, when Disney releases “Step Up 3D.” (See accompanying story, "No 'Avatar' in the Next Batch of 3D.")

Studio executives stridently dispute the notion that the public is losing interest in 3D, despite data that shows, on a percentage basis, a declining amount of box-office dollars have been spent on 3D tickets of late.

“It does not show that fewer people are choosing 3D,” wrote Patrick Corcoran, spokesman for the National Association of Theater Owners, in an email to TheWrap after a chart was published late last month (see below) illustrating that trend.

(Sources: studio officials, BTIG Research.)

Grosses for 3D, Corcoran contended, can be directly correlated to the amount of 3D-capable screens that are available for a film to play on. This has been a complicated issue in recent months, with movies competing for what is still a scarce number of 3D-equipped venues.

“The audience for 3D is growing, right along with the 3D screen count,” Corcoran said.

“You can’t look at just three or four movies in a row and say it’s over,” agreed Dan Fellman, president of distribution for Warner Bros.

For his part, Fellman believes family-targeted animated movies will, proportionally, always draw fewer3D admissions than more adult-targeted films like “Avatar” and “Alice.”

“It’s just hard for kids under 6 years old to keep the glasses on,” he said.

“In total, we’re making more money than ever from 3D, but nobody is noticing because we’re all fighting for screens,” added Disney theatrical distribution chief Chuck Viane.

True, Disney’s “Alice” and “Toy Story 3,” for example, combined to gross well over $400 million in 3D ticket sales in the U.S. alone. But there's no question that movie-by-movie, the trend has clearly been downward.

Since “Alice” sold over $80 million in domestic 3D ticket sales on its opening weekend in early March, only one film, “Toy Story 3” ($66.1 million), has opened to more than $45 million.

"Six months ago, everyone was hot and bothered, and they could get 3D fast enough," added one major-theatrical-chain executive. "Now they've probably gone too far the other way. The truth is probably that not everything should be in 3D."

Analyst Greenfield agrees, adding that that big, broadly targeted 3D event films likely will continue to draw a high percentage of 3D ticket sales.

“Consumers are going to want to see ‘Transformers 3’ next summer in 3D,” he said.

What he isn’t so sure about is whether lesser-event films like “Step Up 3D” – which will command the same $11-plus premium 3D ticket price as, say, “Avatar” – will draw well in the format going forward.

During second-quarter earnings call last week, studio chief Jeffrey Katzenberg, one of 3D's most vocal proponents, continued to hammer away at the notion that quality execution of 3D films is directly related to consumption.

The percentage of of 3D-to-2D will continue to grow, he said, so long as production tools get better andfilmakers improve the way they embed the format into their storytelling.

"We believe 3D is very much here to stay and that audiences have a tremendous appetite for high-quality 3D content that can differentiate itself from the other choices in the marketplace," Katzenberg told investors.

Of course, some moviegoers are now questioning that differentiation (and Hollywood has taken note — a recent TV spot for "Step Up 3D" pointedly mentions that it was "filmed in 3D.")

“Pricing and crappy content isn’t going to permanently railroad 3D,” said an exhibition chain executive, “but it isn’t going to help it, either.” With the Digital Cinema Implementation Partners (DCIP) committing hundreds of millions of dollars to 3D-equip America’s big-chain screens this year, this executive believes “the boat has sailed” on 3D’s permanence.

But while the format will be here to stay, he believes the movie industry will become more selective about what it chooses to shoot in – and convert to – 3D.

He also thinks exhibitors will have to move away from its age-old, one-size-fits-all pricing model.

“For the first time in a long time, I think you’re going to see some adjustment on that,” he added.