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Is 3D Dying? Why Hollywood Is Putting Down the Glasses

Morgan Stanley report projects that fourth-quarter films like "Skyfall" and "The Hobbit" will bring box office roaring back

The 3D boom is leveling off, and that means that the credits may be rolling on rapidly climbing movie ticket prices.

But the good news for the movie business is that after a summer that fielded more than its fair share of box-office bombs ("Battleship," anyone?), Hollywood is poised to rebound with "The Hobbit" and a new James Bond film.

At least that's the conclusion of a report by Morgan Stanley titled "After Cool Summer, Hope for the Holidays at the Movies." Despite the optimistic title, the writing is on the wall for studios, which have become increasingly reliant on those ruby tinted spectacles for profits.

"3D attendance has been declining on a per-film basis since the release of 'Avatar,' and we expect the growth in 3D film releases to flatten out," the study's authors write.

Part of the culprit is that studios are not increasing the number of films they release in 3D like they once were, and theater chains in the United States are not doing as much to expand their network of 3D compatible theaters after a building frenzy.

"Recent 3D releases have underperformed, screen build-out has slowed and ticket premiums are unlikely to increase," the study's authors write.

Thus far, 25 3D films have been announced for 2013, the study notes. That's about equal to the number of 3D films released this year (31) and in 2010 (23).

"We believe the pricing benefit from more 3D films is largely over," the study's authors write.

Likewise, Morgan Stanley estimates that 45 percent of screens in the country are 3D capable, and does not expect that percentage to rise significantly in the next few years.

The good news is that even though Morgan Stanley projects that movie attendance will continue to face pressure from other types of media, like video games and video-on-demand, the outlook for the multiplexes over the next three months is rosy.

After two years of declines during the holiday movie season, domestic movie attendance is expected to grow 4 percent to 6 percent in the next three months thanks to films like "Skyfall" and "The Twilight Saga: Breaking Dawn — Part 2."

With many studios lining up sequels to their most popular franchises, such as "The Avengers" and "The Hangover," the box office should stabilize over the next few years, the report says. However, it acknowledges that ticket buyers have more options than ever when it comes to entertainment.

"Fragmentation in consumer media viewing habits will likely continue to erode theater attendance," the study's authors write.

"We believe that consumer viewing will continue to experience fragmentation over time driven by the increasing availability of video-on-demand (VOD) and video subscription services, such as Netflix and Amazon Prime," they add.