Auds embrace 3D but ticket fees turn heads

photos/_storypics/Page-One-Hand-2.jpg” vspace=”3″ hspace=”3″ align=”center”>

Surely there can never be too much of a good thing in Hollywood. Right?

For years, a hot-button topic was the conversion of movie screens to digital projection, an innovation heralded to bring about the revival of 3D on a grander, more immersive and more lucrative scale.

Now that the revival is in full blush — with three consecutive years of record box office bolstered by 3D, especially in 2009 — the economics of such eye-popping filmmaking are playing an increasingly major factor in Hollywood planning.

They’re also raising questions as to how long the boom will reverberate and how deep auds’ appetites for 3D are, especially as the ticket upcharge rises dramatically. Some studios are worried that exhibs might price people right out of the theater.

As evidenced by “Alice in Wonderland” and “Avatar,” 3D can increase a movie’s gross by as much as one-third. In just 17 days, “Alice” grossed $265 million domestically and $300 million internationally for a total of $565.8 million. “Avatar” is the highest-grossing pic, at $736.9 million domestically and $1.94 billion overseas through March 21.

It’s found money. Nobody ever dared increase the tickets by as much as 50%,” one studio exec says. “Now, they have something to do it with: 3D. And guess what — the public is buying it. Let’s say ‘Alice’ cumes $300 million domestically. At least $70 million comes from 3D.”

3D revenues also help to offset the dramatic downturn in the DVD market. “It’s a new revenue stream for content creators,” one veteran exec says.

Generally speaking, the box office split between studios and exhibs is 50-50 domestically and 45-55 overseas. And while the same splits hold true for 3D titles, those revenues are offset by the costs associated with creating the 3D experience.

For the studios, shooting a film in 3D from inception begins at a base cost of $20 million above a film’s core budget. Opting to convert a 2D film to 3D after shooting comes with a lower pricetag, averaging about $10 million, but the figure also can be higher.

Warner Bros.’ late decision to convert “Clash of the Titans” to 3D raised eyebrows across Hollywood. Some say the conversion cost $5 million; others put it much higher. Warners won’t say, but points out that it successfully converted Polar Express.”

If “Clash” works in 3D, other studios are sure to follow suit and begin converting some of their event titles with the after-production conversion process, too.

As part of their deals with exhibs, studios also have to pay for 3D glasses, whether disposable or reusable. That bill can average $5 million to $7 million per picture domestically.

And, of course, theater owners are still paying to convert more screens to digital 3D. The cost of converting a screen to digital — a prerequisite for showing 3D — can be more than $100,000. Studios are helping to defray some of these costs by paying a “virtual” print fee, at least for the time being. The amount of virtual print fees are something of a secret, but insiders say they are usually capped at around $1,000 per print.

For theater owners, the lure of 3D — much as it was in the 1950s and ’60s — is in providing a unique experience that can’t be replicated at home. Getting auds into theaters is primarily a gateway to selling them pricey treats at the snack bar.

As a result, theater owners have been loath to raise ticket prices much. Increases typically ranged from 20¢ to 30¢ a year; a 40¢ rise would have been frowned upon.

However, exhibs are savoring the added gravy of the 3D ticket upcharge.

The profits for exhibs come from concessions,” says one studio exec. “If a person comes in with a $20 bill, he pays $7 for the ticket and $13 on food. They’re making 75¢ on the dollar off concessions, but only 50¢ on the dollar at the box office, if they’re lucky.”

Now, all of a sudden, they are getting a bigger percentage of (their revenues from) the box office,” says another exec.

The Motion Picture Assn. of America and the National Assn. of Theater Owners have long touted moviegoing as the least expensive form of entertainment, since sports, live theater and theme parks cost much more.

But on a percentage basis, the escalation of ticket prices driven by 3D represents an enormous jump in a short span of time. The exhibition biz is unique in being able to get away with such increases in tough economic times.

In the year since pics like DreamWorks Animation’s “Monsters vs. Aliens,” Disney’s “Up” and 20th Century Fox’s “Ice Age: Dawn of the Dinosaurs” helped pioneer higher prices for digital 3D — with a typical $2 to $3 extra premium on every ticket — the cost of getting a 3D eyeful is growing downright eye-popping in some markets.

Last week, ahead of the high-profile releases of “How to Train Your Dragon” and “Clash of the Titans,” Wall Street media analyst Richard Greenfield released a survey of 3D ticket prices at 10 theaters. It revealed that the average upcharge on a 3D admission had risen 8.3%. One theater instituted a 26% jump.

But Greenfield’s report was just a general barometer of the dramatic boost in 3D premium charges. An informal survey by Variety finds that circuits, including AMC Entertainment, Cinemark and Regal Entertainment, are starting to charge at least $3.50 to $4 more for 3D titles, with a handful of theaters in marquee markets such as New York and Los Angeles pushing added fees even higher. The previous upcharge average was $2 to $3.

At AMC Century City 15 in Southern California, for example, the upcharge for a 3D ticket is $5 — meaning adults could pay $18.50 on the weekend to see a 3D title; children, $14.50.

Prices are going up even in smaller markets. The Regal Edwards Bakersfield 14 in Bakersfield, Calif., charges $3.50 more for a 3D ticket. Usual prices are $10 for adult ($10.50 on the weekend) and $7 for a child. A 3D ticket for a kid is $10.50, a 50% increase over a regular ticket price; an adult would pay $14, a 33% jump.

The questions now are how much audiences are willing to pay for the 3D experience, and how long will the experience be enticing enough to warrant those extra fees?

A year ago, there was much discussion over whether the marketplace would even have enough 3D screens to cover “Avatar.” The gap in screen count has narrowed since then, and distribs and exhibs now predict there will be enough 3D locations by December to support two 3D pics releasing on the same date. But there’s still a crunch, with the March 26 debut of “How to Train Your Dragon” sharing the landscape with “Alice” and a fading-but-still-around “Avatar” as Warner Bros.’ “Titans” looms on April 9.

But once it’s routinely possible to have multiple 3D titles on screens and competing for attention at the same time, some in the biz wonder if auds will grow weary of the experience and the higher ticket cost.

We run the risk of losing the value movies once were and becoming a luxury item,” says a Fox exec. “This industry has touted itself as the most cost-effective form of entertainment. But we are rapidly moving out of that arena.”

History suggests that Hollywood ought to tread carefully in its aggressive push of 3D. The novelty of all sorts of film innovations — talkies, all-color films and, more recently, CGI animated features — eventually diminished for auds. After Hollywood saw some major hits in the CGI toon biz, expectations were brought back down following a handful of pricey CGI toons that disappointed, including “The Ant Bully” and “Surf’s Up.”

In other words, once the novelty factor plays out, the movie itself better be good. Technology can only keep the audience occupied for so long. “The floodgates have opened,” one studio topper says. “But there’s no way of knowing what will happen when 3D becomes commonplace. When the first CGI animated movies were made, they were a big deal, they were events. And then there were a bunch that didn’t work.”

Imax, after years of struggle, is a big beneficiary of 3D. Imax has always charged a premium, since it offered a “bigger” experience even before 3D. Imax 3D has built an avid fanbase, sending the company into the black. Its domestic gross on “Avatar” was north of $200 million, the best in the company’s history.

Imax, however, is insulated to a degree that regular exhib chains are not: With a relatively small number of screens, it can play only so many movies, and its deals with the studios have grown from only a few titles a year to eight in 2010. So the experience retains a uniqueness-factor for auds.

The challenge for all sides is to keep up pic quality and not fall into gimmickry.

Early 3D adopters James Cameron and Jeffrey Katzenberg are urging Hollywood to slow down when it comes to converting pics to 3D after production. Michael Bay has been outspoken about his reluctance to shoot the next “Transformers” film in 3D, questioning whether the heavy cameras and production demands are flexible enough for his helming style.

In an industry often keen to follow a hit with more of same, it’s telling that these high-profile creatives are urging caution. Maybe there can be too much of a good thing.

Follow @Variety on Twitter for breaking news, reviews and more